Exhibit 4.5
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated October 6,
2004, is entered into by and among China Nepstar Chain Drugstore Ltd., an
exempted company organized and existing in the Cayman Islands (the "COMPANY"),
each of the parties set forth in Schedule A (the "COMPANY WARRANTORS"), GS
Capital Partners 2000, L.P., a limited partnership organized and existing under
the laws of the State of Delaware (the "LEAD INVESTOR"), and each of the parties
set forth in Schedule B (together with the Lead Investor, the "INVESTORS").
RECITALS
WHEREAS the Company and its subsidiaries operate one of the leading
pharmaceutical retail chains in the PRC (as defined below);
WHEREAS the Company seeks expansion capital to grow its business and the
business of its subsidiaries and, correspondingly, seeks to secure investment
from the Investors on the terms and conditions set forth herein;
WHEREAS the Investors seek to invest in the Company on the terms and
conditions set forth herein;
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual covenants and agreements set forth herein and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1 INTERPRETATION
1.1 Definitions. Unless otherwise defined in this Agreement, capitalized
terms used herein shall have the following meanings:
"ACCOUNTING PRINCIPLES" shall mean International Financial Reporting
Standards as promulgated from time to time by the IASB (including, without
limitation, standards and interpretations approved by the IASB and
International Accounting Principles issued under previous constitutions
thereof), together with the IASB's pronouncements thereon from time to
time.
"ACT" has the meaning ascribed thereto in Section 6.5.
"AFFILIATE" means, with respect to any given Person, a Person that
Controls, is Controlled by, or is under common Control with the given
Person.
"AGREEMENT" has the meaning ascribed thereto in the preamble hereto.
"AMENDED MEMORANDUM AND ARTICLES" has the meaning ascribed thereto in
Section 8.1(n).
"ANCILLARY DOCUMENTS" means each Earnout Warrant and the NeptunusBVI
Clawback Rights Agreement, ManagerCo Clawback Rights Agreement, Share
Restriction Agreement, Investors' Rights Agreement, Voting Agreement and
Redemption Agreement.
"ANKEEN" means Ankeen Enterprises Limited, a company organized and
existing under the laws of Hong Kong.
"APPLICABLE LAW" means, with respect to any Person, any and all
provisions of any constitution, treaty, statute, law, regulation,
ordinance, code, rule, judgment, rule of common law, order, decree, award,
injunction, governmental approval, concession, grant, franchise, license,
agreement, directive, requirement, or other governmental restriction or any
similar form of decision of, or determination by, or any interpretation or
administration of any of the foregoing by, any Government Entity, whether
in effect as of the date hereof or thereafter and in each case as amended,
applicable to such Person or its subsidiaries or their respective assets.
"AUDITORS" means Ernst & Young, or such successor thereto as may be
from time to time duly appointed by the Company's Board of Directors to
audit the Company's annual financial statements.
"BUSINESS DAY" means any weekday that the banks in Hong Kong and the
United States of America are generally open for business.
"CENTRE" has the meaning ascribed thereto in Section 12.3(c).
"COMMON SHARES" has the meaning ascribed thereto in Section 5.5(a).
"COMPANY" has the meaning ascribed thereto in the preamble hereto.
"COMPANY WARRANTORS" has the meaning ascribed thereto in the preamble
hereto.
"CONSENT" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice
to, any Person, including any Government Entity.
"CONSTITUTIONAL DOCUMENTS" means, with respect to any Person, the
Certificate of Incorporation, Memorandum of Association, Articles of
Association, Joint Venture Agreement, or similar constitutive documents for
such Person.
"CONTRACT" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or binding
understanding, whether or not in writing.
"CONTROL" means, when used with respect to any Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise, and the terms "Controlling" and "Controlled" have meanings
correlative to the foregoing.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule dated of even date
herewith and delivered by the Company to the Investors.
"DISPUTE" has the meaning ascribed thereto in Section 12.3(a).
"EARNOUT WARRANT" has the meaning ascribed thereto in Section 2.1.
"EBIT" means, with reference to any year, net income (or net loss) for
such year, less any amount credited in arriving at such net income amount
in respect of any extraordinary gain, plus the sum of all amounts deducted
in arriving at such net income amount in respect of (i) interest charges
(net of interest income) accrued on any indebtedness for borrowed money at
the rates applicable to such indebtedness for such year and (ii) Taxes
accrued for such year, all as computed for the Company and the Group
Companies on a consolidated basis in accordance with the Accounting
Principles and as certified by the Auditors.
"EBITDA" means, with reference to any year, net income (or net loss)
for such year, less any amount credited in arriving at such net income
amount in respect of any extraordinary gain, plus the sum of all amounts
deducted in arriving at such net income amount in respect of (i) interest
charges (net of interest income) accrued on any indebtedness for borrowed
money at the rates applicable to such indebtedness for such year, (ii)
depreciation of fixed assets and amortization of intangible assets for such
year, and (iii) Taxes accrued for such year, all as computed for the
Company and the Group Companies on a consolidated basis in accordance with
the Accounting Principles and as certified by the Auditors.
"ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise.
"GOVERNMENT ENTITY" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government.
"GOVERNMENT OFFICIAL" means any officer or employee of a Government
Entity (including, for purposes of this definition, any entity or
enterprise owned or controlled by a government), or any Person acting in an
official capacity for or on behalf of any such Government Entity.
"GUARANTY AGREEMENT" has the meaning ascribed thereto in Section
8.1(w).
"GROUP COMPANY" means any Person that is not a natural person and that
is Controlled by the Company.
"HONG KONG" means the Hong Kong Special Administrative Region.
"HQCO" means Shenzhen Nepstar Commercial Development Co., Ltd.
(CHINESE CHARACTERS), a wholly foreign-owned enterprise organized and
existing under the laws of the PRC.
"IASB" means the International Accounting Standards Board.
"IMPROVEMENTS" has the meaning ascribed thereto in Section 5.15(c).
"INDEMNIFIABLE LOSS" means, with respect to any Person, any action,
cost, damage, disbursement, expense, liability, loss, deficiency,
diminution in value, obligation, penalty or settlement of any kind or
nature, other than consequential damages that a party in breach does not,
and did not, have reason to foresee as a probable result of such breach.
Notwithstanding anything to the contrary provided in the preceding
sentence, "Indemnifiable Loss" shall include, but shall not be limited to,
(i) interest or other carrying costs, penalties, legal, accounting and
other professional fees and expenses reasonably incurred in the
investigation, collection, prosecution and defense of claims and amounts
paid in settlement, that may be imposed or otherwise incurred or suffered
by such Person and (ii) any Taxes that may be paya onble by such Person by
reason of the indemnification of any Indemnifiable Loss hereunder, other
than Taxes that would have been payable notwithstanding the event giving
rise to indemnification.
"INDEMNIFIED PARTY" has the meaning ascribed thereto in Section 10.2.
"INDEMNIFYING PARTY" has the meaning ascribed thereto in Section 10.2.
"INDEMNITY AGREEMENT" has the meaning ascribed thereto in Section
8.1(u).
"INTANGIBLE PROPERTY" means any trade secret, secret process or other
confidential information or know-how and any and all Intellectual Property.
"INTELLECTUAL PROPERTY" means any brand name, domain name, copyright,
patent, service xxxx, trademark or tradename, and all registrations or
applications for registration of any of the foregoing.
"INVESTOR" has the meaning ascribed thereto in the preamble hereto.
"INVESTORS' RIGHTS AGREEMENT" has the meaning ascribed thereto in
Section 8.1(o).
"LAND USE RIGHTS" has the meaning ascribed thereto in Section 5.15(a).
"LEAD INVESTOR" has the meaning ascribed thereto in the preamble
hereto.
"LEASE" has the meaning ascribed thereto in Section 5.15(b).
"LIABILITIES" means, with respect to any Person, liabilities owing by
such Person of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due.
"MANAGERCO" means China Star Chain Ltd., an international business
company organized and existing under the laws of the British Virgin
Islands.
"MATERIAL CONTRACT" means, with respect to any Person, any outstanding
Contract material to the business of such Person as of or after the date
hereof and includes, but is not limited to, those Contracts deemed material
by Section 5.11(e).
"MINVAL" means the amount determined pursuant to Section 4.3.
"MOFCOM" means the Ministry of Commerce or, with respect to any matter
to be submitted for examination and approval by the Ministry of Commerce,
any Government Entity which is similarly competent to examine and approve
such matter under the laws of the PRC.
"MORTGAGE" has the meaning ascribed thereto in Section 5.15(d).
"NEPSTAR" means Shenzhen Nepstar Medical Co., Ltd., a limited
liability company organized and existing under the laws of the PRC.
"NEPTUNUS CHAIN STORE" means Shenzhen Neptunus Health Chain Store Co.,
Ltd. (CHINESE CHARACTERS), a limited liability company organized and
existing under the laws of the PRC.
"NEPTUNUS GROUP" means Shenzhen Neptunus Group Corporation (CHINESE
CHARACTERS), a foreign invested company limited by shares organized and
existing under the laws of the PRC.
"NEPTUNUSBVI" China Neptunus Drugstore Holding Ltd., an international
business company organized and existing under the laws of the British
Virgin Islands.
"NEPTUNUSBVI CLAWBACK RIGHTS AGREEMENT" has the meaning ascribed
thereto in Section 8.1(r).
"NET REVENUE" means, with respect to any year, revenues for such year,
exclusive of any value-added Tax, less any returns, discounts or allowances
for such year, all as computed for the Company and the Group Companies on a
consolidated basis in accordance with the Accounting Principles and as
certified by the Auditors.
"PERSON" means any natural person, limited liability company, joint
stock company, joint venture, partnership, enterprise, trust,
unincorporated organization or any other entity or organization.
"PRC" means the People's Republic of China, solely for purposes of
this Agreement, excluding Hong Kong, the Macau Special Administrative
Region and the islands of Taiwan.
"REDEMPTION AGREEMENT" has the meaning ascribed thereto in Section
8.1(v).
"RELATED PARTIES" has the meaning ascribed thereto in Section 5.12.
"SAIC" means the State Administration of Industry and Commerce or,
with respect to the issuance of any business license or filing or
registration to be effected with or by the State Administration of Industry
and Commerce, any Government Entity which is similarly competent to issue
such business license or accept such filing or registration under the laws
of the PRC.
"SEC" has the meaning ascribed thereto in Section 6.5.
"SECURITIES" has the meaning ascribed thereto in Section 6.2.
"SERIES A SHARES" has the meaning ascribed thereto in Section 4.1.
"SERIES A-1 SHARES" has the meaning ascribed thereto in Section 2.1.
"SERIES A-2 SHARES" has the meaning ascribed thereto in Section 4.1.
"SERVICECo" means Shenzhen Neptunus Medical & Pharmaceutical
Electronic Technology Co., Ltd. (CHINESE CHARACTERS), a wholly
foreign-owned enterprise organized and existing under the laws of the PRC.
"SHARE RESTRICTION AGREEMENT" has the meaning ascribed thereto in
Section 8.1(p).
"SPONSOR AGREEMENT" has the meaning ascribed thereto in Section
8.1(t). "Subsidiary" means, with respect to any given Person, any other
Person that is not a natural person and that is Controlled by such given
Person.
"T2ADJ" means the amount determined pursuant to Section 3.3.
"T2ADJA" means the amount determined pursuant to Section 3.3.
"T2ADJB" means the amount determined pursuant to Section 3.3.
"T2ADJC" means the amount determined pursuant to Section 3.3.
"T3ADJ" means the amount determined pursuant to Section 4.3.
"T3ADJA" means the amount determined pursuant to Section 4.3.
"T3ADJB" means the amount determined pursuant to Section 4.3.
"T3ADJC" means the amount determined pursuant to Section 4.3.
"T3ADJD" means the amount determined pursuant to Section 4.3.
"T3ADJE" means the amount determined pursuant to Section 4.3.
"T3ADJF" means the amount determined pursuant to Section 4.3.
"TAXES" means any national, provincial or local income, sales and use,
excise, franchise, real and personal property, gross receipt, capital
stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or any other type of tax, levy,
assessment, custom duty or charge imposed by any Government Entity, any
interest and penalties (civil or criminal) related thereto or to the
nonpayment thereof, and any loss or Tax Liability incurred in connection
with the determination, settlement or litigation of any Liability arising
therefrom.
"TAX RETURN" means any tax return, declaration, reports, estimates,
claim for refund, claim for extension, information returns, or statements
relating to Taxes, including any schedule or attachment thereto.
"TRANCHE 1 ALLOCATION" means, with respect to each Investor, such
number of Series A-1 Shares as is equal to the aggregate consideration to
be paid by such Investor in the Tranche 1 Closing, as indicated opposite
such Investor's name in Schedule C, divided by the Tranche 1 Per Share
Price.
"TRANCHE 1 CLOSING" has the meaning ascribed thereto in Section 2.2.
"TRANCHE 1 PER SHARE PRICE" means an amount equal to US$0.50.
"TRANCHE 2 ALLOCATION" means, with respect to each Investor, such
number of Series A-1 Shares as is equal to the aggregate consideration to
be paid by such Investor in the Tranche 2 Closing, as indicated opposite
such Investor's name in Schedule C, divided by the Tranche 2 Per Share
Price.
"TRANCHE 2 CLOSING" has the meaning ascribed thereto in Section 3.4.
"TRANCHE 2 FUNDING NOTICE" shall mean written notice delivered to the
Company in substantially the form set forth in Exhibit A.
"TRANCHE 2 PER SHARE PRICE" means the amount determined pursuant to
Section 3.3.
"TRANCHE 3 CLOSING" has the meaning ascribed thereto in Section 4.3.
"TRANCHE 3 ALLOCATION" means, with respect to each Investor, such
number of Series A-2 Shares as is equal to the aggregate consideration to
be paid by such Investor in the Tranche 3 Closing, as indicated opposite
such Investor's name in Schedule C, divided by the Tranche 3 Per Share
Price.
"TRANCHE 3 FUNDING NOTICE" shall mean written notice delivered to the
Company in substantially the form set forth in Exhibit B.
"TRANCHE 3 PER SHARE PRICE" means the amount determined pursuant to
Section 4.3.
"VOTING AGREEMENT" has the meaning ascribed thereto in Section 8.1(q).
"YUNNAN ROC" means Yunnan Jianzhijia Chain Health Drugstore Co., Ltd.
(CHINESE CHARACTERS), a limited liability company organized and existing
under the laws of the PRC.
1.2 Interpretation. For all purposes of this Agreement, except otherwise
expressly provided, (i) the terms defined in the Section 1 shall have the
meanings aasssigned to them in this Section 1 and include the plural as well as
the singular, (ii) all accounting terms not otherwise defined herein have the
meanings assigned under the Accounting Principles consistently applied, (iii)
all references in this Agreement to designated "Sections" and other subdivisions
are to the designated Sections and other subdivisions of the body of this
Agreement, (iv) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms, (v) the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Section or other subdivision, (vi) all references in
this Agreement to designated
Schedules, Exhibits and Annexes are to the Schedules, Exhibits and Annexes
attached to this Agreement unless explicitly stated otherwise, and (vii) any
formula that purports to calculate the excess of one value over another shall be
deemed to yield a value equal to zero if there is no excess.
SECTION 2 SALE AND PURCHASE OF THE TRANCHE 1 SHARES
2.1 Sale and Purchase. Subject to the terms and conditions of this
Agreement, at the Tranche 1 Closing, the Company agrees to sell and issue to
each Investor, and each Investor (severally and not jointly) agrees to purchase,
for the aggregate consideration indicated opposite such Investor's name in
Schedule C, (i) the number of Series A-1 Preferred Shares, par value US$0.0001
per share (the "SERIES A-1 SHARES"), of the Company equal to such Investor's
Tranche 1 Allocation and (ii) a warrant, issued by the Company in favor of the
Investor in substantially the form attached hereto as Exhibit C (an "EARNOUT
WARRANT").
2.2 Tranche 1 Closing. The consummation of the transactions described in
Section 2.1 (the "TRANCHE 1 CLOSING") shall take place in the offices of
O'Melveny & Xxxxx, Suite 1905, Tower Two, Lippo Center, 00 Xxxxxxxxx, Xxxxxxx,
Xxxx Xxxx at 10:00am on the date thirty (30) days after the satisfaction or
waiver of each of the conditions precedent set forth in Section 8.1(i), Section
8.1(j), Section 8.1(k), Section 8.1(l), Section 8.1(m), Section 8.1(x), Section
8.1(y) and Section 7.10 (or in the event that such date is not a Business Day,
the following Business Day) or at such other place or at such other time and
date as the Investors and the Company may otherwise mutually agree.
2.3 Company Deliveries at Tranche 1 Closing. At the Tranche 1 Closing, the
Company shall cause to be delivered to each Investor:
(i) a certificate or certificates, in form reasonably satisfactory to
such Investor, evidencing such number of Series A-1 Shares as is equal to
such Investor's Tranche 1 Allocation;
(ii) a duly executed Earnout Warrant issued in such Investor's name;
(iii) the Investors' Rights Agreement, duly executed by the Company,
NeptunusBVI and ManagerCo;
(iv) the Share Restriction Agreement, duly executed by each of the
Company, NeptunusBVI and ManagerCo;
(v) the Voting Agreement, duly executed by each of the Company,
ManagerCo and NeptunusBVI;
(vi) the NeptunusBVI Clawback Rights Agreement, duly executed by the
Company, NeptunusBVI and Xxxxx Xxxxx;
(vii) the ManagerCo Clawback Rights Agreement, duly executed by the
Company, ManagerCo and Xxx Xxx;
(viii) the Sponsor Agreement, duly executed by Neptunus Group;
(ix) the Indemnity Agreement, duly executed by the Company, Neptunus
Group and each Group Company;
(x) the Redemption Agreement, duly executed by the Company, Ankeen,
ManagerCo and NeptunusBVI; and
(xi) the Guarantee Agreement, duly executed by the Neptunus Group.
2.4 Investor Deliveries at Tranche 1 Closing. At the Tranche 1 Closing,
each Investor shall cause to be delivered to the Company:
(i) the purchase price for the Series A-1 Shares to be purchased
thereby at the Tranche 1 Closing;
(ii) the Investors' Rights Agreement, duly executed by such Investor;
and
(iii) the Share Restriction Agreement, duly executed by such Investor.
SECTION 3 SALE AND PURCHASE OF THE TRANCHE 2 SHARES
3.1 Tranche 2. Subject to the terms and conditions of this Agreement, at
the Tranche 2 Closing, the Company agrees to sell and issue to each Investor,
and each Investor (severally and not jointly) agrees to purchase, for the
aggregate consideration indicated opposite such Investor's name in Schedule C,
the number of Series A-1 Shares equal to such Investor's Tranche 2 Allocation.
3.2 Tranche 2 Funding Notice. Any right or obligation on the part of the
Investors' to acquire any Series A-1 Shares under this Section 3 is conditional
on the Lead Investor timely delivering a Tranche 2 Funding Notice to the
Company. The Lead Investor, in its sole discretion, may deliver a Tranche 2
Funding Notice at any time after December 31, 2004 and not later than the date
270 days after date of the Tranche 1 Closing.
3.3 Tranche 2 Per Share Price. The Tranche 2 Per Share Price shall be
determined according to the following formula:
(US$40,000,000 + T2adj) x Tranche 1 Per Share Price
Tranche 2 Per Share Price = ---------------------------------------------------
US$60,000,000
where:
T2adj = the product of US$20,000,000 and the average of T2adjA, T2adjB
and T2adjC;
T2adjA = the lesser of (i) 1 and (ii) a fraction, where (x) the
numerator is equal to the excess, if any, of Net Revenue for
the year ending December 31, 2004, over RMBY540,000,000 and
(y) the denominator is RMBY225,000,000;
T2adjB = the lesser of (i) 1 and (ii) a fraction, where (x) the
numerator is equal to the excess, if any, of EBITDA for the
year ending December 31, 2004, over RMBY18,600,000 and (y)
the denominator is RMBY7,750,000; and
T2adjC = the lesser of (i) 1 and (ii) a fraction, where (x) the
numerator is equal to the excess, if any, of EBIT for the
year ending December 31, 2004, over
RMBY5,100,000 and (y) the denominator is RMBY2,125,000.
The Company shall cause the Auditors to certify Net Revenue, EBITDA and EBIT for
the year ending December 31, 2004 within ninety (90) days after the end of such
year.
3.4 Tranche 2 Closing. The consummation of the transactions described in
Section 3.1 (the "TRANCHE 2 CLOSING") shall take place in the offices of
O'Melveny & Xxxxx, Suite 1905, Tower Two, Xxxxx Xxxxxx, 00 Xxxxxxxxx, Xxxxxxx,
Xxxx Xxxx at 10:00am on the date fifteen (15) days after timely delivery by the
Lead Investor to the Company of a Tranche 2 Funding Notice (or in the event that
such date is not a Business Day, the following Business Day) or at such other
place or at such other time and date as the Investors and the Company may
otherwise mutually agree.
3.5 Company Deliveries at Tranche 2 Closing. At the Tranche 2 Closing, the
Company shall cause to be delivered to each Investor a certificate or
certificates, in form reasonably satisfactory to such Investor, evidencing such
number of Series A-1 Shares as is equal to such Investor's Tranche 2 Allocation.
3.6 Investor Deliveries at Tranche 2 Closing. At the Tranche 2 Closing,
each Investor shall cause to be delivered to the Company the purchase price for
the Series A-1 Shares to be purchased thereby at the Tranche 2 Closing.
SECTION 4 SALE AND PURCHASE OF THE TRANCHE 3 SHARES
4.1 Tranche 3. Subject to the terms and conditions of this Agreement, at
the Tranche 3 Closing, the Company agrees to sell and issue to each Investor,
and each Investor (severally and not jointly) agrees to purchase, for the
aggregate consideration indicated opposite such Investor's name in Schedule C,
such number of Series A-2 Preferred Shares, par value US$0.0001 per share (the
"SERIES A-2 SHARES", together with the Series A-1 Shares, the "SERIES A
SHARES"), of the Company as is equal to such Investor's Tranche 3 Allocation.
4.2 Tranche 3 Funding Notice. Any right or obligation on the part of the
Investors' to acquire any Series A-2 Shares under this Section 4 is conditional
on the Lead Investor timely delivering a Tranche 3 Funding Notice to the
Company. The Lead Investor, in its sole discretion, may deliver a Tranche 3
Funding Notice at any time after December 31, 2005 and not later than June 30,
2006.
4.3 Tranche 3 Per Share Price. The Tranche 3 Per Share Price shall be
determined according to the following formula:
(MinVal + T3adj) x Tranche 2 Per Share Price
Tranche 3 Per Share Price = --------------------------------------------
MinVal
where:
MinVal = the sum of US$65,000,000 and T2adj;
T3adj = the sum of (i) the product of US$10,000,000 and the average of
T3adjA, T3adjB and T3adjC and (ii) the product of
US$30,000,000 and the average of T3adjD, T3adjE and X0xxxX.
X0xxxX = the lesser of (i) 1 and (ii) a fraction, where (x) the
numerator is equal to the excess, if any, of Net Revenue for
the year ending December 31, 2005, over RMBY1,056,000,000 and
(y) the denominator is RMBY264,000,000;
T3adjB = the lesser of (i) 1 and (ii) a fraction, where (x) the
numerator is equal to the excess, if any, of EBITDA for the
year ending December 31, 2005, over RMBY64,000,000 and (y)
the denominator is RMBY16,000,000;
T3adjC = the lesser of (i) 1 and (ii) a fraction, where (x) the
numerator is equal to the excess, if any, of EBIT for the
year ending December 31, 2005, over RMBY24,000,000 and (y)
the denominator is RMBY6,000,000;
T3adjD = the lesser of (i) 1 and (ii) a fraction, where (x) the
numerator is equal to the excess, if any, of Net Revenue for
the year ending December 31, 2005, over RMBY1,320,000,000 and
(y) the denominator is RMBY330,000,000;
T3adjE = the lesser of (i) 1 and (ii) a fraction, where (x) the
numerator is equal to the excess, if any, of EBITDA for the
year ending December 31, 2005, over RMBY80,000,000 and (y)
the denominator is RMBY20,000,000; and
T3adjF = the lesser of (i) 1 and (ii) a fraction, where (x) the
numerator is equal to the excess, if any, of EBIT for the
year ending December 31, 2005, over RMBY30,000,000 and (y)
the denominator is RMBY7,500,000.
The Company shall cause the Auditors to certify Net Revenue, EBITDA and EBIT for
the year ending December 31, 2005 within ninety (90) days after the end of such
year.
4.4 Tranche 3 Closing. The consummation of the transactions described in
Section 4.1 (the "TRANCHE 3 CLOSING") shall take place in the offices of
O'Melveny & Xxxxx, Suite 1905, Tower Two, Xxxxx Xxxxxx, 00 Xxxxxxxxx, Xxxxxxx,
Xxxx Xxxx at 10:00am on the date fifteen (15) days after timely delivery by the
Lead Investor to the Company of a Tranche 3 Funding Notice (or in the event that
such date is not a Business Day, the following Business Day) or at such other
place or at such other time and date as the Investors and the Company may
otherwise mutually agree.
4.5 Company Deliveries at Tranche 3 Closing. At the Tranche 3 Closing, the
Company shall cause to be delivered to each Investor a certificate or
certificates, in form reasonably satisfactory to such Investor, evidencing such
number of Series A-2 Shares as is equal to such Investor's Tranche 3 Allocation.
4.6 Investor Deliveries at Tranche 3 Closing. At the Tranche 3 Closing,
each Investor shall cause to be delivered to the Company the purchase price for
the Series A-2 Shares to be purchased thereby at the Tranche 3 Closing.
SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY WARRANTORS
The Company and each of the Company Warrantors jointly and severally
represent, warrant and covenant to each of the Investors that, other than as set
forth in the Disclosure Schedule with specific reference to the Section to which
exception is being taken:
5.1 Organization, Good Standing and Qualification.
(a) The Company is an exempted company, duly organized, validly
existing and in
good standing under the laws of the Cayman Islands. The Company has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now conducted and as proposed to be conducted and to
perform each of its obligations hereunder and under any Ancillary Document which
it may enter into pursuant to the terms hereof. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which such
qualification is required. Since its establishment, the Company has carried on
its business in compliance with Applicable Law.
(b) The Company is a holding company and has no business activities
other than the ownership of HQCo and ServiceCo. The Company has no Liabilities
or obligations and is not party to any agreement, contract or commitment, other
than (i) this Agreement and certain Ancillary Documents and (ii) any Liabilities
or obligations relating solely to the transactions contemplated by this
Agreement or by the Ancillary Documents.
(c) Each Group Company is duly organized and validly existing under
the laws of the PRC. Each of the HQCo and ServiceCo has secured all Consents
required from any Government Entity for the formation and establishment thereof,
including, without limitation, MOFCOM approval for such formation and
establishment. Each Group Company has a valid business license issued by the
SAIC and has the corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted and to perform each of its obligations under any Ancillary Document
which it may enter into as contemplated hereunder. Each Group Company has, since
its establishment, carried on its business in compliance with Applicable Law and
within the business scope set forth in its business license. Each Group Company
has passed its statutory annual inspection in the year 2003, as evidenced by an
appropriate seal affixed to its current business license.
(d) Each Corporate Warrantor (other than the Group Companies) is duly
organized and validly existing under the laws of the jurisdiction where it was
purportedly established. Each such Corporate Warrantor has all requisite
corporate power and authority to own and operate its properties, to carry on its
business as now conducted and as proposed to be conducted and to perform each of
its obligations hereunder and under any Ancillary Document which it may enter
into pursuant to the terms hereof. Such Corporate Warrantor is duly qualified to
transact business and is in good standing in each jurisdiction in which such
qualification is required.
(e) The minute books for the Company and each Group Company contain
complete and accurate records of all meetings conducted, resolutions adopted,
and written consents entered into by the Company's or such Group Company's
shareholders and board of directors (or committees thereof) since the date of
its incorporation. A true and complete copy of the minute books for the Company
and each Group Company have been provided to the Investors.
5.2 Authorization.
(a) All corporate action necessary on the part of the Company and its
officers, directors and shareholders has been taken for the authorization,
execution, and delivery by the Company of this Agreement and the performance by
the Company of its obligations hereunder. As of the Tranche 1 Closing, all
corporate action necessary on the part of the Company and its officers,
directors and shareholders will have been taken for the authorization, execution
and delivery by the Company of any Ancillary Document and any other agreements
and/or instruments which it may execute or enter into pursuant to the terms
hereof, for the performance by the Company of its obligations thereunder, and
for the authorization, issuance (or reservation for issuance), sale and
delivery of all Series A Shares to be sold hereunder or under any Earnout
Warrant and of all Conversion Shares. This Agreement constitutes, and any
Ancillary Document or other agreement and/or instrument, which the Company may
become party to pursuant to the terms hereof will constitute, the valid and
legally binding obligation of the Company, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other remedies
in the nature of equitable remedies.
(b) All corporate action necessary on the part of any Group Company
which is party hereto and its officers, directors and shareholders has been
taken for the authorization, execution and delivery by such Group Company of
this Agreement and the performance by such Group Company of its obligations
hereunder. As of the Tranche 1 Closing, all corporate action necessary on the
part of any Group Company and its officers, directors and shareholders will have
been taken for the authorization, execution and delivery by such Group Company
of any Ancillary Document and any other agreements and/or instruments which it
may execute or enter into as contemplated hereunder and for the performance by
such Group Company of its obligations thereunder. Any Ancillary Document or
other agreement and/or instrument which any Group Company may become party to
pursuant to the terms hereof will constitute the valid and legally binding
obligation of such Group Company, enforceable in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other remedies in the
nature of equitable remedies.
(c) All corporate action necessary on the part of any Corporate
Warrantor (other than the Group Companies) and its officers, directors and
shareholders has been taken for the authorization, execution and delivery by
such Company Warrantor of this Agreement and the performance by such Company
Warrantor of its obligations hereunder. As of the Closing, all corporate action
necessary on the part of any such Company Warrantor and its officers, directors
and shareholders will have been taken for the authorization, execution and
delivery by such Company Warrantor of any Ancillary Document and any other
agreements and/or instruments which it may execute or enter into as contemplated
hereunder and for the performance by such Company Warrantor of its obligations
thereunder. Any Ancillary Document or other agreement and/or instrument which
any such Company Warrantor may become party to pursuant to the terms hereof will
constitute the valid and legally binding obligation of such Company Warrantor,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other remedies in the nature of equitable remedies.
5.3 Valid issuance of Securities. The Series A Shares being purchased by
each Investor hereunder, when issued, sold and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, will be duly and
validly issued, fully-paid and non-assessable, and will be free of restrictions
on transfer and other Encumbrances, other than such restrictions on transfer or
other Encumbrances as may be imposed by this Agreement, the Ancillary Documents
or the Amended Memorandum and Articles. The Earnout Warrants being purchased
by the Investors hereunder, when issued, sold and delivered in accordance with
the terms of this Agreement for the consideration expressed herein, will be duly
and validly issued and will be free of restrictions on transfer and other
Encumbrances, other than such restrictions on transfer or other Encumbrances as
may be imposed by the terms thereof or the Ancillary Documents. On and after the
Tranche 1 Closing, the Series A-1 Shares issuable upon exercise of any Earnout
Warrant will have been duly and validly reserved for issuance and, upon issuance
in accordance with the terms of such Earnout Warrant and the Amended Memorandum
and Articles of the Company, will be duly and validly issued, fully-paid, and
non-assessable and will be free of restrictions on transfer and other
Encumbrances, other than such restrictions on transfer or other Encumbrances as
may be imposed by the Earnout Warrant, the Ancillary Documents or the Amended
Memorandum and Articles. On and after the Tranche 1 Closing, the Conversion
Shares will have been duly and validly reserved for issuance and, upon issuance
in accordance with the terms of the Amended Memorandum and Articles of the
Company, will be duly and validly issued, fully-paid, and non-assessable and
will be free of restrictions on transfer and other Encumbrances, other than such
restrictions on transfer or other Encumbrances as may be imposed by this
Agreement, the Earnout Warrants, the Ancillary Documents or the Amended
Memorandum and Articles.
5.4 Compliance; No Violations.
(a) No Consent is required of any Government Entity on the part of the
Company or any Group Company in connection with the consummation of the
transactions contemplated by this Agreement or by the Ancillary Documents.
Except such Consents as have been secured and as are described in Schedule
5.4(a) of the Disclosure Schedule, none of the Company or the Group Companies is
required to obtain any Consent from any Government Entity or other Person in
respect of its business as now conducted or as proposed to be conducted. All
Consents described in Schedule 5.4(a) of the Disclosure Schedule have been duly
secured and are in full force and effect, and the Company and each Group Company
is in compliance with the terms of each such Consent. None of the Company or the
Group Companies is in violation of any term or provision of its Constitutional
Documents.
(b) None of the Company or the Group Companies is in violation of any
term or provision of any indebtedness, mortgage, Contract, or any Applicable
Law, the violation of which could, whether individually or in the aggregate,
have an adverse effect.
(c) The execution, delivery, and performance by any of the Company or
the Group Companies of this Agreement and any Ancillary Documents which it may
enter into pursuant to the terms hereof requires no Consent of any third party
and (i) will not result in any violation of, be in conflict with, or constitute
a default under, with or without the passage of time or the giving of notice,
any provision of its Constitutional Documents as in effect at the date hereof,
any Applicable Law, or any material Contract or obligation to which it is a
party or by which it is bound or (ii) accelerate or constitute an event
entitling the holder of any indebtedness of the Company or any Group Company to
accelerate the maturity of any such indebtedness or to increase the rate of
interest presently in effect with respect to such indebtedness, or (iii) result
in the creation of any Encumbrance upon any of the properties or assets of any
of the Company or the Group Companies.
5.5 Capitalization and Voting Rights.
(a) As of the date hereof, the authorized capital of the Company
consists of 150,000,000 common shares, par value US$0.0001 per share (the
"COMMON SHARES"), of which
93,400,000 Common Shares are issued and outstanding. Immediately prior to the
Tranche 1 Closing, the authorized capital of the Company will consist of
240,000,000 Common Shares, 93,400,000 of which will be issued and outstanding,
75,000,000 Series A-1 Shares, none of which will be issued and outstanding, and
45,000,000 Series A-2 Shares, none of which will be issued and outstanding. As
of the Tranche 1 Closing, the Company shall have reserved 120,000,000 Common
Shares for issuance upon the conversion of the Series A Shares and 15,000,000
Series A-1 Shares for issuance upon exercise of the Earnout Warrants.
(b) Schedule 5.5(b) of the Disclosure Schedule shows an accurate and
true list of all outstanding securities of the Company and their holders to be
in effect on and immediately following the Tranche 1 Closing. All such
securities will have been duly authorized and validly issued as of the Tranche 1
Closing, will be fully paid, non-assessable and free of preemptive rights (other
than those preemptive rights imposed under the Ancillary Documents or the
Amended Memorandum and Articles) and other Encumbrances, and will have been
issued in compliance with all Applicable Laws, including those regulating the
offer, sale or issuance of securities. Except as shown in Schedule 5.5(b) of the
Disclosure Schedule, immediately following the Tranche 1 Closing there will be
no securities of the Company outstanding or issued.
(c) As of the date hereof, except for this Agreement, there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or shareholders agreements or agreements of
any kind for the purchase or acquisition from the Company of any of its
securities. As of the Tranche 1 Closing, except for (i) this Agreement, (ii) the
Ancillary Documents, and (iii) the rights and privileges of the Series A Shares
under the Amended Memorandum and Articles, there will be no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or shareholders agreements or agreements of any kind for the
purchase or acquisition from the Company of any of its securities.
(d) Except as may be provided by the terms of the Series A Shares, the
Company is not subject to any obligation (contingent or otherwise) to purchase
or otherwise acquire or retire any equity interest held therein by its
shareholders or to purchase or otherwise acquire or retire any of its other
outstanding securities.
5.6 Group Structure.
(a) Schedule 5.6(a) of the Disclosure Schedule lists each Group
Company, and correctly sets forth the capitalization of such Group Company, the
Company's ownership interest therein, the interest of any other Person therein,
the nature of legal entity which the Group Company constitutes, the jurisdiction
in which the Group Company was organized, each jurisdiction in which the Group
Company is required to be qualified or licensed to do business as a foreign
Person and a brief summary of the Group Company's business.
(b) Except in respect of any interest held in any Group Company, none
of the Company or the Group Companies has any Subsidiaries or owns or controls,
directly or indirectly, any interest in any other corporation, partnership,
trust, joint venture, association or other entity. Except as set forth in
Schedule 5.6(b) of the Disclosure Schedule, none of the Company or the Group
Companies maintains any offices or any branches.
(c) In respect of any ownership interest held in a Group Company by
the Company or another Group Company described in Schedule 5.6(a) of the
Disclosure Schedule, (i) the Company or such other Group Company holds good and
valid title to such ownership interest
free and clear of all restrictions on transfer or other Encumbrances, other than
those restrictions on transfer or other Encumbrances created by the Ancillary
Documents or the Constitutional Documents, (ii) such ownership interest was
acquired in compliance with all Applicable Laws, including those regulating the
offer, sale or issuance of securities, and (iii) there are no outstanding
options or rights for the purchase or acquisition from the Company or such other
Group Company of such ownership interest. There are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or shareholders agreements or agreements of any kind for the
purchase or acquisition from any Group Company of any of its equity. None of the
Group Companies is subject to any obligation (contingent or otherwise) to
purchase or otherwise acquire or retire any interest held therein by its
equityholders or to purchase or otherwise acquire or retire any of its
securities.
(d) In respect of each Group Company that is organized and existing
under the laws of the PRC, the full amount of the registered capital thereof has
been contributed, such contribution has been duly verified by a certified
accountant registered in the PRC and the accounting firm employing such
accountant, and the report of the certified accountant evidencing such
verification has been registered with the SAIC.
5.7 Offering. Subject in part to the truth and accuracy of each Investor's
representations set forth in Section 6, the offer, sale and issuance pursuant
hereto or any Ancillary Document of any Earnout Warrant or Series A Share and
the issuance of Conversion Shares upon conversion of any Series A Share is
exempt from the registration requirements of any applicable securities laws, and
neither the Company nor any authorized agent acting on its behalf will take any
action that would cause the loss of such exemption.
5.8 Financial Statements.
(a) Each of the Investors has received consolidated balance sheets for
Neptunus Chain Store and the Group Companies as at December 31, 2001, December
31, 2002 and August 31, 2003 and the related consolidated income statements and
statements of changes in cash flow for the periods then ended. All such
financial statements have been examined by Ernst & Young, whose reports thereon
are included with such financial statements. All such financial statements have
been prepared in conformity with the Accounting Principles applied on a
consistent basis. Such income statements and statements of cash flows present
fairly the results of operations and cash flows of Neptunus Chain Store and the
Group Companies for the periods covered, and the balance sheets present fairly
the financial condition of Neptunus Chain Store and the Group Companies as of
their respective dates. Since December 31, 2001, there has been no change in any
of the significant accounting policies, practices or procedures of Neptunus
Chain Store and/or any of the Group Companies.
(b) Each of the Investors has received the unconsolidated balance
sheets for each of the Company and the Group Companies as at August 31, 2004 and
the related unconsolidated income statements then ended. Such interim financial
statements have been certified by the chief financial officer of the Person to
which they relate. All such interim financial statements have been prepared in
conformity with generally accepted accounting principles in the PRC applied on a
consistent basis. Such income statement presents fairly the results of
operations of the Company and the Group Companies for the period covered, and
the balance sheet presents fairly the financial condition of the Company and the
Group Companies as of its date. All such interim financial statements reflect
all adjustments (which consist only of normal recurring adjustments not material
in amount and include, but are not limited to, estimated provisions for year-end
adjustments) necessary for a fair presentation.
(c) None of the Company or the Group Companies has any outstanding
Liabilities, except Liabilities that (i) are reflected or disclosed in the most
recent balance sheet therefor delivered to the Investors under Section 5.8(b),
(ii) were incurred on or after the date of such balance sheet in the normal
course of business and in the aggregate do not exceed the equivalent of
RMBY5,000,000 or (iii) are set forth in Schedule 5.8(c) of the Disclosure
Schedule.
(d) All receivables of each of the Company and the Group Companies,
are reflected in the most recent balance sheet therefor delivered to the
Investors under Section 5.8(b), and represent sales or loans actually made in
the ordinary course of business, and are current and fully collectible net of
any reserves shown on the balance sheet, and, except for those receivables
listed on Schedule 5.8(d), have not been due for more than sixty . (60) days.
5.9 Absence of Change. Since the most recent balance sheet delivered to the
Investors under Section 5.8(b),
(a) None of the Company or the Group Companies has entered into any
transaction in an amount in excess of RMBY2,000,000 which has not been in the
ordinary course of business consistent with past practice;
(b) there has been no material adverse change in or affecting the
business, financial condition, results, operations or prospects of any of the
Company or the Group Companies;
(c) there has been no damage to, destruction or loss of physical
property (whether or not covered by insurance) materially affecting the business
or operations of the Company or any Group Company;
(d) none of the Company or any Group Company has declared or paid any
dividend or made any distribution on its shares or registered capital, or
redeemed, purchased or otherwise acquired any of its shares or registered
capital;
(e) none of the Company or any Group Company has increased the
compensation of any of its officers, or the rate of pay of its employees as a
group, except as part of regular compensation increases in the ordinary course
of business;
(f) there has been no waiver of any material right or claim of the
Company or any Group Company, or the cancellation of any debt or claim held by
the Company or any Group Company; and
(g) there has been no sale, assignment or transfer of any tangible or
intangible assets of the Company or the Group Companies except in the ordinary
course of business consistent with past practice.
5.10 Taxes.
(a) Except as set forth in Schedule 5.10(a) of the Disclosure
Schedules, each of the Company and the Group Companies (i) has timely filed all
Tax Returns that are required to have been filed by it with any Government
Entity, (ii) has timely paid all Taxes owed by it which are due and payable or
withheld and remitted to the appropriate Governmental Entity all Taxes which it
is obligated to withhold and remit from amounts owing to any employee, creditor,
customer or third party, and (iii) has not waived any statute of limitations
with respect to Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
(b) Each Tax Return referred to in paragraph (a) above was properly
prepared in compliance with Applicable Law and was (and will be) true, correct
and complete in all material respects. None of such Tax Returns contains a
statement that is false or misleading in any material respect or omits any
matter that is required to be included or without which the statement would be
false or misleading in any material respect. No reporting position was taken on
any such Tax Return which has not been disclosed to the appropriate tax
authority or in such Tax Return, as may be required by Applicable Law. All
records relating to such Tax Returns or to the preparation thereof required by
Applicable Law to be maintained by each of the Company and the Group Companies
have been duly maintained.
(c) The assessment of any additional Taxes with respect to the Company
or any Group Company for periods for which Tax Returns have been filed is not
expected to exceed the recorded Liability therefor in the most recent balance
sheet for the Company or such Group Company delivered to the Investors under
Section 5.8(b), and except as disclosed in Schedule 5.10(a) of the Disclosure
Schedules, there are no material unresolved questions or claims concerning any
Tax Liability of the Company or any Group Company. There is no pending dispute
with, or notice from, any taxing authority relating to any of the Tax Returns
filed by the Company or any Group Company which, if determined adversely to the
Company or such Group Company, would result in the assertion by any taxing
authority of any valid deficiency in a material amount for Taxes, and to the
best knowledge of the Company and the Company Warrantors, there is no proposed
Liability for a deficiency in any Tax to be imposed upon the properties or
assets of the Company or any Group Company. None of the Company or the Group
Companies has been the subject of any examination or investigation by any tax
authority relating to the conduct of its business or the payment or withholding
of Taxes that has not been resolved or is currently the subject of any
examination or investigation by any tax authority relating to the conduct of its
business or the payment of withholding of Taxes. None of the Company or the
Group Companies are responsible for the Taxes of any other Person by reason of
contract, successor liability or otherwise.
(d) Within thirty (30) days after the date of the Tranche 1 Closing,
the Company shall have elected to be treated as a corporation under United
States Treasury Regulation Section 301.7701-3, and each of the Group Companies
shall have elected to be treated as a partnership or disregarded entity for U.S.
tax purposes under United States Treasury Regulation Section 301.7701-3.
5.11 Material Contracts. Schedule 5.11 of the Disclosure Schedule lists
each outstanding Contract to which the Company or any Group Company is a party
or to which the Company, any Group Company or any of their respective properties
is subject or by which any thereof is bound that is deemed a Material Contract
under this Agreement.
(a) True and complete copies of the Material Contracts, including any
amendments and supplements to such Contracts, have been delivered to each of the
Investors.
(b) Unless otherwise noted on Schedule 5.11(b) of the Disclosure
Schedule, each of the Material Contracts was entered into in the ordinary course
of business.
(c) Each Material Contract is valid and subsisting, enforceable by the
parties thereto in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally, and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other remedies in the nature of equitable remedies. The
Company
and each Group Company, as applicable, have duly performed all their obligations
under each Material Contract to the extent that such obligations to perform have
accrued. No breach or default, alleged breach or default, or event which would
(with the passage of time, notice or both) constitute a breach or default under
any of the Material Contracts by the Company or any Group Company, as the case
may be, or any other party or obligor with respect thereto, has occurred, or as
a result of this Agreement or any Ancillary Document, or the performance hereof
or thereof, will occur.
(d) Consummation of the transactions contemplated by this Agreement
and the Ancillary Documents will not (and will not give any Person a right to)
terminate or modify any rights of, or accelerate or augment any obligation of,
the Company or any Group Company under any Material Contract.
(e) Notwithstanding anything to the contrary provided herein, each of
the following Contracts is deemed to be a Material Contract and has been
identified in Schedule 5.11 of the Disclosure Schedule: (i) any Contract that,
after the date reflected in the most recent balance sheet for the Company and
the Group Companies delivered to the Investors under Section 5.8(b), obligates
the Company or any Group Company to pay an amount in excess of RMBY2,000,000,
(ii) any Contract that has an unexpired term in excess of one year, (iii) any
Contract on which the business of the Company or any of the Group Companies is
substantially dependent or which is otherwise material to the business of any of
the Company or the Group Companies, (iv) any loan agreement, indenture, letter
of credit, security agreement, mortgage pledge agreement, deed of trust, bond,
note, or other agreement relating to the borrowing of money or to the
mortgaging, pledging, transferring of a security interest, or otherwise placing
an Encumbrance on any material asset or material part of the assets of the
Company or any Group Company; (v) any Contract involving a guarantee of
performance by any Person or involving any agreement to indemnify or act as
surety for any Person, or any other Contract to be contingently or secondarily
liable for the obligations of any Person, (vi) any Contract that limits or
restricts the ability of the Company or any Group Company to compete or
otherwise to conduct its business in any manner or place; (vii) any joint
venture, partnership, alliance or similar Contracts involving a sharing of
profits or expenses (including joint development and joint marketing contracts);
(viii) any asset purchase agreement, share purchase agreement or other Contract
for acquisition or divestiture of any assets by or of the Company and/or any
Group Company for consideration in excess of RMBY2,000,000; (ix) any material
sales agency, marketing or distributorship Contract; (x) any Contract requiring
performance in any country other than the PRC; (xi) any Contract that grants a
power of attorney, agency or similar authority to another Person or entity,
agency or similar authority to another Person or entity, (xii) any Contract that
contains a right of first refusal; (xiii) any brokerage or finder's agreements,
and (xiv) any other Contract that was not made in the ordinary course of
business.
5.12 Certain Transactions. Except as set forth in Schedule 5.12 of the
Disclosure Schedule, none of the Company or the Group Companies, on the one
hand, is indebted, either directly or indirectly, to any of the officers,
directors, supervisory board members, or equityholders of Neptunus Group or its
Affiliates (other than the Company and the Group Companies), the Company or the
Group Companies or to any Affiliates of such officers, directors, supervisory
board members, or equityholders (collectively, "RELATED PARTIES"), on the other
hand, in any amount whatsoever, other than for payment of salary for services
rendered and reasonable expenses. No Related Party is indebted to any of the
Company or the Group Companies or, to the best knowledge of the Company and the
Company Warrantors, has any direct or indirect ownership interest (other than as
a result of any ownership interest held in the Company) in any of the Group
Companies. To the best knowledge of the Company and the Company Warrantors, no
Related Party has any direct or indirect ownership interest, or contractual
relationship, with any Person with
which any of the Company or the Group Companies has a business relationship or
any Person which, directly or indirectly, competes with any of the Company or
the Group Companies. Except as set forth in the Schedule 5.12 of the Disclosure
Schedule, no Related Party is, directly or indirectly, a party to or otherwise
an interested party with respect to any Contract with the Company or any Group
Company.
5.13 Litigation. There is no litigation, proceedings, investigations
(civil, criminal, regulatory or otherwise), arbitration claims, demands,
grievances or inquiries pending (or, to the knowledge of any of the Company or
the Company Warrantors, any basis therefor or threat thereof) against or
affecting the Company or any Group Company, or any of their assets or
properties, nor are there any facts which are likely to give rise to any such
litigation. There are no judgments unsatisfied against the Company or any Group
Company or consent decrees or injunctions to which the Company, any Group
Company or any assets of the foregoing are subject.
5.14 Compliance with Laws.
(a) Except as set forth in Schedule 5.14(a) of the Disclosure
Schedules, each of the Company and the Group Companies are, and at all times
have been, in full compliance with all Applicable Laws.
(b) No event has occurred or circumstance exists that (with or without
notice or lapse of time) (i) may constitute or result in a violation by any of
the Company or the Group Companies of, or a failure on the part thereof to
comply with, any Applicable Law, or (ii) may give rise to any obligation on the
part of any of the Company or the Group Companies to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature. None of the
Company or the Group Companies has received any notice or other communication
(whether oral or written) from any Government Entity regarding (x) any actual,
alleged, possible, or potential violation of, or failure to comply with, any
Applicable Law, or (y) any actual, alleged, possible, or potential obligation on
the part of the Company or any Group Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
(c) None of the Company, the Group Companies or any director, officer,
agent, employee, or any other Person associated with or acting for or on behalf
of the foregoing, has offered, paid, promised to pay, or authorized the payment
of any money, or offered, given a promise to give, or authorized the giving of
anything of value, to any Government Official, to any political party or
official thereof or to any candidate for political office (or to any Person
where the Company, such Group Company, director, officer, agent, employee or
other Person knew or was aware of a high probability that all or a portion of
such money or thing of value would be offered, given or promised, directly or
indirectly, to any Government Official, political party, party official, or
candidate for political office) for the purposes of:
(i) (x) influencing any act or decision of such Government Official,
political party, party official, or candidate in his or its official
capacity, (y) inducing such Government Official, political party, party
official or candidate to do or omit to do any act in violation of the
lawful duty of such Government Official, political party, party official or
candidate, or (z) securing any improper advantage, or
(ii) inducing such Government Official, political party, party
official, or candidate to use his or its influence with any Government
Entity to affect or influence any act or decision of such Government
Entity,
in order to assist the Company or such Group Company in obtaining or retaining
business for or with, or directing business to the Company or any Group Company.
(d) None of the Company, the Group Companies or any of the respective
officers, employees, directors, representatives, or agents of the foregoing has,
within the past five years, (i) taken any action in furtherance of any boycott
not sanctioned by the United States; (ii) engaged in transactions with any
Government Entity, agent, representative or resident of, or any entity based or
resident in, any of the following countries: North Korea, Iraq, Libya, Cuba,
Iran, Myanmar or Sudan; or (iii)otherwise engaged in transactions with any
entity or person that is the target of U.S. economic sanctions, as designated by
the U.S.Treasury Department Office of Foreign Assets Control on its list of
Specially Designated Nationals and Blocked Persons; or (iv) received unlicensed
donations or engaged in financial transactions with respect to which the Company
or any Group Companies knows or has reasonable cause to believe that the
financial transaction poses a risk of furthering terrorist attacks anywhere in
the world.
5.15 Real Property.
(a) None of the Company or the Group Companies owns or has legal or
equitable title or other right or interest in any real property other than the
land use rights (the "LAND USE RIGHTS") held by the Group Companies as set forth
in Schedule 5.15(a) of the Disclosure Schedule or as held pursuant to Lease.
True and complete copies of the certificates evidencing the Land Use Rights have
been delivered to each of the Investors or their agents or professional advisers
and any land grant premium required under Applicable Law in connection with
securing such Land Use Rights has been fully paid. None of the land with respect
to which the Land Use Rights relate constitute arable land that has been
converted to other uses. The particulars of the Land Use Rights as set out in
Schedule 5.15(a) of the Disclosure Schedule are true and complete.
(b) Schedule 5.15(b) of the Disclosure Schedule sets forth each
leasehold interest pursuant to which the Company or any Group Company holds any
real property (a "LEASE"), indicating the parties to such Lease, the address of
the property demised under the Lease, the rent payable under the Lease and the
term of the Lease. Each Lease constitutes the entire agreement to which the
Company or any Group Company is party with respect to the property demised
thereunder, and a true and complete copy of each such Lease has been delivered
to the Investors, together with all amendments, modifications, alterations and
other changes thereto. Each Lease is valid and subsisting, enforceable against
the parties thereto in accordance with its terms. As of the date hereof, all
conditions precedent to the enforceability of each Lease have been satisfied and
there exists no breach or default, nor state of facts which, with the passage of
time, notice, or both, would result in a breach or default on the part of any
party to the Lease. The Company or a Group Company has accepted possession of
the property demised pursuant to each Lease and is in actual possession thereof
and has not sublet, assigned or hypothecated its leasehold interest except as
set forth on Schedule 5.15(b) of the Disclosure Schedule. The particulars of the
Leases as set out in Schedule 5.15(b) of the Disclosure Schedule are true and
complete.
(c) Except as set forth in Schedule 5.15(c) of the Disclosure
Schedule, each of the Company and the Group Companies has obtained property
ownership certification for the plants, buildings and improvements located on
land with respect to which it holds Land Use Rights (collectively, the
"IMPROVEMENTS"). The Improvements and the operation thereof are part of a
construction project plan approved by the applicable construction commission for
the jurisdiction where the Improvements are located and do not (i) contravene
any Applicable Law relating to zoning or building or (ii) violate any
restrictive covenant or any provision, in the case of either (i) or (ii), the
effect of which could interfere with or prevent the continued use of such
Improvements for
the purpose for which they are now being used. All of the Improvements are in
good operating condition and in a state of reasonable maintenance and repair
(except for ordinary wear and tear) and are adequate for the conduct of the
business of the Company and the Group Companies as currently conducted.
(d) Each of the Land Use Rights and the Improvements is free and clear
of any and all Encumbrances except for those identified in Schedule 5.15(d) of
the Disclosure Schedule. A true and complete copy of each of the agreements
relating to the Encumbrances identified in Schedule 5.15(d) of the Disclosure
Schedule (the "MORTGAGES") has been delivered to each of the Investors or their
agents or professional advisors.
(e) Except as set forth in Schedule 5.15(e), none of the Company or
the Group Companies uses any real property in the conduct of its business except
insofar as it holds valid Land Use Rights or has secured a Lease with respect
thereto. No default or event of default on the part of the Company or any Group
Company or event which, with the giving of notice or passage of time or both,
would constitute a default or event of default has occurred and is continuing
unremedied or unwaived under the terms of any of the Land Use Rights, the Leases
or Mortgages. There exists no pending or threatened condemnation, confiscation,
dispute, claim, demand or similar proceeding with respect to, or which could
materially and adversely affect, the continued use and enjoyment of any Land Use
Right, Lease or Improvement. The Land Use Rights, Leases and Mortgages are valid
and subsisting and are enforceable in accordance with the terms contained
therein in all material respects.
5.16 Personal Property.
(a) The personal property of each of the Company and the Group
Companies is sufficient for the conduct of its business as currently conducted.
(b) All personal property of each of the Company and the Group
Companies which is reflected in the most recent balance sheet therefor delivered
to the Investors under Section 5.8(b) or which has been acquired by the Company
or any Group Company since the date of such balance sheet and which has not been
disposed of in the ordinary course of the Company's or such Group Company's
business is owned by the Company or such Group Company free and clear of any
Encumbrances.
(c) All machinery, tools and equipment of any of the Company or the
Group Companies (other than inventories) which are reflected in the most recent
balance sheet therefor delivered to the Investors under Section 5.8(b) or which
have been acquired thereby since the date of such balance sheet are in a state
of reasonable maintenance and repair (except for ordinary wear and tear) and are
adequate for the conduct of the business thereof as currently operated.
(d) The inventories of any of the Company or the Group Companies which
are reflected in the most recent balance sheet therefor delivered to the
Investors under Section 5.8(b) were, on the date of such balance sheet, in good
condition, and any inventories produced or acquired thereby after such date (to
the extent not sold or otherwise disposed of in the ordinary course of
business), are in good condition, are useable or useful in the ordinary course
of the business thereof and are not in excess of reasonable requirements.
5.17 Intangible Property. Schedule 5.17 of the Disclosure Schedule lists
any and all Intellectual Property and other material items of Intangible
Property material to the business of the Company and the Group Companies. Such
Intangible Property includes all Consents or other rights with respect to any of
the foregoing. Except as otherwise disclosed in Schedule 5.17 of the Disclosure
Schedule, each of the Company and the Group Companies (i) has legally valid
rights to and ownership of all Intangible Property required for use in
connection with its business, (ii) does not use any Intangible Property by
consent of any other Person and is not required to and does not make any
payments to others with respect thereto, and (iii) does not license any
Intangible Property to any other Person. Except as otherwise disclosed in
Schedule 5.17 of the Disclosure Schedule, the Intangible Property of the Company
and the Group Companies is fully assignable free and clear of any Encumbrances.
Each of the Company and the Group Companies have in all material respects
performed all obligations required to be performed by it, and is not in default
in any material respect, under any Contract relating to any of the foregoing.
None of the Company or the Group Companies has received any notice to the effect
(or is otherwise aware) that the Intangible Property or any use there of by any
of the Company or the Group Companies conflicts with or allegedly conflicts with
or infringes the rights of any Person.
5.18 No State Assets. None of the assets of the Company or the Group
Companies constitute state-owned assets and, inasmuch, are not required to
undergo any form of valuation under Applicable Law in the PRC governing the
transfer of state-owned assets prior to the consummation of the transactions
contemplated herein or in any of the Ancillary Documents.
5.19 Entire Business. There are no material facilities, services, assets or
properties shared (i) by the Company with any other Person that is not a Group
Company or (ii) by any Group Company with any other Person that is not the
Company or another Group Company.
5.20 Insurance. Each of the Company and the Group Companies maintains (i)
adequate insurance on all assets and activities of a type customarily insured,
covering property damage and loss of income by fire or other casualty and (ii)
adequate insurance protection against all Liabilities (including products
Liability), claims and risks against which it is customary for companies
similarly situated to insure.
5.21 Officers, Employees and Labor.
(a) Each of the Company and the Group Companies has complied with all
Applicable Laws relating to the employment of labor, including provisions
thereof relating to wages, hours, social welfare, equal opportunity and
collective bargaining. There is no organized labor strike, dispute, slowdown or
claim pending, or to the best knowledge of the Company and the Company
Warrantors threatened, against or affecting any of the Company or the Group
Companies. None of the Company or the Group Companies has any contract with any
labor union.
(b) Schedule 5.21(b) of the Disclosure Schedule sets forth a list of
all officers of the Company and the Group Companies and all other employees and
consultants whose current annual salary or rate of compensation (including
bonuses, commissions and inventive compensation) is in excess of RMBY800,000 (or
equivalent in a different currency), together with their current job titles or
relationship to the Company and the Group Companies. None of the Persons
referred to above, nor any other key employee or consultant of any of the
Company or the Group Companies, has notified the Company or the Group Companies
that such Person will cancel
or otherwise terminate such Person's relationship with the Company or the Group
Companies, or is being terminated by the Company or the Group Companies.
(c) To the best knowledge of the Company and the Company Warrantors,
none of the employees of the Company or the Group Companies is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company and the Group Companies or that
would conflict with the business of the Company or the Group as proposed to be
conducted. To the best knowledge of the Company and the Company Warrantors, the
following will not conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated: (i) the
execution, delivery and performance of any of this Agreement or the Ancillary
Documents; (ii) the adoption by the Company of the Amended Memorandum and
Articles, (iii) the carrying on of the Company's or any Group Company's business
by the employees thereof; and (iv) the conduct of the business of the Company or
any Group Company as currently conducted or as proposed to be conducted. The
Company has no reason to believe it is or will be necessary to utilize any
inventions of any employees of the Company or the Group Companies (or people the
Company or the Group Companies currently intend to hire) made prior to or
outside the scope of their employment by the Company or the Group Companies.
None of the execution, delivery and performance of this Agreement or the
Ancillary Documents or the adoption of the Amended Memorandum and Articles will
(either alone or upon the occurrence of any additional or subsequent event)
constitute an event under any benefit plan or individual agreement that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
vesting or increase in material benefits with respect to any employee, former
employee, consultant, agent or director of the Company or the Group Companies.
(d) Except as set forth on Schedule 5.21(d) of the Disclosure
Schedule, none of the Company or the Group Companies has any pension, profit
sharing, stock option, employee stock purchase or other plan providing for
incentives or other compensation to employees (aside from any salary payable in
thereto in the ordinary course), or any other employee benefit plan. The Company
has delivered to the Investors true, correct and complete copies of all
documents, summary plan descriptions, insurance contracts, third party
administration contracts and all other documentation created to embody all
benefit plans, plus descriptions of any benefit plans that have not been reduced
to writing. Except for required contributions or benefit accruals for the
current plan year, no material Liability has been or is expected to be incurred
by any of the Company or Group Companies under or pursuant to any Applicable Law
relating to benefit plans and, to the best knowledge of the Company and the
Company Warrantors, no event, transaction or condition has occurred or exists
that could result in any such Liability to any of the Company or the Group
Companies. Each of the benefit plans listed in Schedule 5.21(d) is and has at
all times been in compliance in all material respects with all applicable
provisions of Applicable Law.
5.22 Brokers. No finder, broker, agent, financial advisor or other
intermediary has acted on behalf of the Company, the Group Companies or any of
their respective Affiliates in connection with the offering of the Series A
Shares or the Earnout Warrants or the negotiation or consummation of this
Agreement or the Ancillary Documents or any of the transactions contemplated
hereby or thereby. All such negotiations or the consummation of this Agreement
or the Ancillary Documents or any of the transactions contemplated hereby or
thereby will not give rise to any valid claim against the Company, any Group
Company or any of the Investors for any brokerage or finder's commission, fee or
similar compensation.
5.23 Disclosure. The Company has fully provided the Investors with all the
information that the Investors have requested for deciding whether to purchase
the Series A Shares and the Earnout Warrants and all information that the
Company believes is materially necessary to enable the Investors to make such
decision. None of this Agreement or any other statements or certificates or
other materials made or delivered, or to be made or delivered to any of the
Investors in connection herewith or therewith, contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements herein or therein not misleading. Each of the Investors, severally
and not jointly, represents, warrants and covenants to the Company that:
SECTION 6 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each of the Investors, severally and not jointly, represents, warrants and
covenants to the Company that:
6.1 Authorization. Such Investor has full power and authority to enter into
this Agreement, and, assuming due and valid execution and delivery hereof, the
Agreement constitutes its valid and legally binding obligation, enforceable in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, and (ii) as limited by
laws relating to the availability of specific performance, injunctive relief, or
other equitable remedies.
6.2 Purchase Entirely for Own Account. This Agreement is made with such
Investor in reliance upon such Investor's representation to the Company, which
by such Investor's execution of this Agreement such Investor hereby confirms,
that the Earnout Warrant to be acquired hereunder, the Series A Shares to be
acquired hereunder and under the Earnout Warrant and the Conversion Shares
(collectively, the "SECURITIES") will be acquired by the Investor for investment
for the Investor's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Investor further
represents that it does not have any contract, undertaking, agreement or
arrangement with any Person to sell, transfer or grant participations to such
Person or to any third Person, with respect to any of the Securities.
6.3 Disclosure of Information. Such Investor believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Series A Shares and Earnout Warrant. Such Investor further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Series A Shares and Earnout Warrant and the business, properties, prospects and
financial condition of the Company. The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 5 of this
Agreement or the right of the Investors to rely thereon.
6.4 Investment Experience. Such Investor acknowledges that it is able to
fend for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Series A Shares and
Earnout Warrant. Such Investor also represents it has not been organized for the
purpose of acquiring the Series A Shares and Earnout Warrant.
6.5 Status of Investor. Such Investor (i) is purchasing the Securities
outside the United States in compliance with Regulation S under the Securities
Act of 1933, as amended (the "Act") and in accordance with any applicable
securities laws of any state of the United States or any other
jurisdiction or (ii) is an "accredited investor" within the meaning of
Securities and Exchange Commission ("SEC") Rule 501 of Regulation D, as
presently in effect, under the Act.
6.6 Restricted Securities. Such Investor understands that the Securities it
is purchasing are characterized as "restricted securities" under U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act, only in certain limited circumstances. In this connection, such
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
SECTION 7 ADDITIONAL COVENANTS
7.1 Use of Proceeds. The Company will use the proceeds from the sale of
Series A Shares and Earnout Warrants hereunder for business expansion, capital
expenditures, marketing and general working capital for its business of drug
retailing.
7.2 Pre-Closing Actions. As promptly as practicable, each of the parties to
this Agreement will: (i) use reasonable best efforts to take all actions
required of such party and to do all other things reasonably necessary, proper
or advisable to consummate the transactions contemplated hereby and by the
Ancillary Documents; (ii) file or supply, or cause to be filed or supplied, all
applications, notifications and information required to be filed or supplied by
such party pursuant to Applicable Law in connection with this Agreement, the
Ancillary Documents and the issuance of the Series A Shares and the Earnout
Warrants pursuant hereto and the consummation of the other transactions
contemplated hereby and by the Ancillary Documents; (iii) use reasonable best
efforts to obtain, or cause to be obtained, all Consents (including any Consents
required under any contract) necessary to be obtained by such party in order to
consummate the transactions contemplated pursuant to this Agreement and the
Ancillary Documents; and (iv) coordinate and cooperate with the other parties in
exchanging such information and supplying such assistance as may be reasonably
requested by the other parties in connection with any filings and other actions
to be made or taken in order to consummate the transactions contemplated
pursuant to this Agreement and the Ancillary Documents.
7.3 Conduct of Business. Except as otherwise permitted by this Agreement or
with the written consent of the Lead Investor, from the date hereof to the date
of the Tranche 1 Closing, the Company shall and shall cause each Group Company
to:
(a) carry on its business in the ordinary course consistent with past
practice and in substantially the same manner as conducted prior to the date
hereof and use reasonable best efforts to preserve its relationships with
customers, suppliers and others having business dealings with the Company and
any Group Company;
(b) not create, issue or sell any securities, or grant or otherwise
issue any options or purchase rights with respect thereto, or enter into any
contract or commitment to do any of the foregoing;
(c) not repay or prepay any Liability or obligation in excess of
RMBY5,000,000 in the aggregate prior to its stated maturity;
(d) not declare or make any dividend, payment or distribution to its
shareholders or purchase, retire, acquire or redeem any of its shares or any
part of its registered capital or other securities;
(e) not mortgage, pledge or subject to lien or any other Encumbrance,
any of its material assets, tangible or intangible;
(f) not sell, assign, license, transfer or otherwise dispose of any of
its assets having a fair market value of more than RMBY2,000,000 in aggregate,
or incur any Liabilities or obligations (including Liabilities with respect to
indebtedness, capital leases or guarantees thereof) in excess of RMBY5,000,000
in the aggregate, other than in the ordinary course of business;
(g) not grant (or commit to grant) any increase in compensation
(including incentive or bonus compensation) to any officer or any general
increase in compensation (including incentive or bonus compensation) to its
employees other than, in each case, normal merit and cost-of-living increases,
or enter into any new, or amend or alter (or commit to enter into, amend or
alter) in any material respect any existing, employment or consulting agreements
or any bonus, incentive compensation, profit sharing, retirement, pension, group
insurance, death benefit or other fringe benefit plan, collective bargaining
agreement or commitment (including any commitment to pay retirement or other
benefits) trust agreement or similar arrangement adopted by it with respect to
its own employees;
(h) not amend its Constitutional Documents except as provided herein
or as required by Applicable Law;
(i) not merge or consolidate with or into any other Person, or make
any acquisition of all or substantially all of the stock, assets or business of
any other Person;
(j) maintain in full force and effect existing insurance to the extent
available on commercially reasonable terms;
(k) not make any capital expenditure or capital commitment (other than
in an emergency) which exceeds RMBY5,000,000 in a single transaction or a series
of related transactions or which exceeds RMBY15,000,000 where taken together
with all other capital expenditures or capital commitments undertaken by the
Company and the Group Companies within the immediately preceding twelve-month
period;
(l) not make any Tax elections (other than those provided for in
Section 5.10(d), settle any Tax disputes or make any changes to any accounting
methods;
(m) other than as may be reasonably required to consummate the
transactions contemplated hereby, not make any modifications of or changes in or
terminate any existing Contract set forth on Schedule 5.11 of the Disclosure
Schedule; or
(n) except as expressly required by this Agreement, enter into or
assume any material contract, agreement, obligation lease, license or commitment
which involves an aggregate monetary commitment or exposure for all such
contracts in excess of RMBY5,000,000 other than in the ordinary course of
business.
7.4 Non-Violation. Pending the Tranche 1 Closing, neither the Company nor
any Group Company will, without the prior written consent of the Lead Investor,
take any action which (i) would render any of the representations or warranties
made by the Company or the Company
Warrantors in this Agreement untrue in any material respect if given with
reference to the facts and circumstances then existing, or (ii) would result in
any of the covenants contained in this Agreement becoming incapable of
performance. The Company and each of the Company Warrantors will promptly advise
the Investor of any action or event of which the Company or such Company
Warrantor becomes aware which would have the effect of making incorrect in any
material respect any such representations or warranties if given with reference
to facts and circumstances then existing or which has the effect of rendering
any such covenants incapable of performance.
7.5 Certain Business Practices. The Company and each Group Company will (i)
pay and/or fund all social benefits which it is required by Applicable Law to
pay or fund to or on behalf of any of the prior or continuing employees thereof,
(ii) will timely and accurately declare all taxable revenues and pay all Taxes
required by Applicable Law, and (iii) will not enter into multiple lease
contracts with concurrent terms for a single business premise.
7.6 Confidentiality. Each party hereto shall keep confidential, and shall
cause its officers, directors, and employees to keep confidential, the terms and
conditions hereof, of any predecessor agreement and of any Ancillary Document
(collectively, the "CONFIDENTIAL INFORMATION") except as the Lead Investor and
the Company mutually agree otherwise; provided that any party may disclose
Confidential Information (i) to the extent required by Applicable Law so long
as, where such disclosure is to a Government Entity, such party shall use all
reasonable efforts to obtain confidential treatment of the Confidential
Information so disclosed, (ii) to the extent required by the rules of any stock
exchange, (iii) to its officers, directors, employees and professional advisors
as necessary to the performance of its obligations in connection herewith and
with the Ancillary Documents so long as such party advises each Person to whom
the Confidential Information is so disclosed as to the confidential nature
thereof, (iv) to its investors and any Person otherwise providing substantial
debt or equity financing to such party so long as the party advises each Person
to whom the Confidential Information is so disclosed as to the confidential
nature thereof, and (v) to any Person that enters into bona fide negotiations to
acquire such party or such party's interest in the Company so long as such
Person has agreed to maintain the confidentiality of the Confidential
Information.
7.7 Acquisition of Remaining Minority Interests. With the exception of the
Yunnan ROC, within three (3) months after the date hereof, the Company agrees to
acquire all equity interests in each Group Company which are not currently held
either by the Company or another Group Company. The Company further covenants
that the cost to acquire such equity interests will not exceed RMBY500,000 in
aggregate.
7.8 Service Agreements. Within three (3) months after the date hereof, the
Company agrees to cause HQCo and ServiceCo to enter into service agreements with
each other Group Company, pursuant to which HQCo and ServiceCo will take on a
central management and support function for such other Group Company in return
for a fee charged at market rates. The service agreements will be in form and
substance reasonably satisfactory to the Lead Investor.
7.9 Sale of Receivables. Neptunus Group shall pay Nepstar RMBY522,174.00
within fifteen (15) days after the date of the Tranche 1 Closing to acquire
certain account receivables outstanding at August 31, 2003, as required by that
certain letter agreement, dated August 31, 2003, among Neptunus Group, Shenzhen
Neptunus Health Chain Stores Co. Ltd. and Nepstar.
7.10 Employment Agreements. Within thirty (30) days after the date of the
Tranche 1
Closing, the Company shall procure each of the individuals listed in Schedule D
to enter into an employment agreement (or a supplemental agreement to his/her
existing
SECTION 8 CONDITIONS TO CLOSING BY INVESTORS
8.1 Conditions Precedent to Tranche 1 Closing. The obligations of each
Investor at the Tranche 1 Closing are subject to the fulfillment on or before
the Tranche 1 Closing of each of the following conditions, unless waived by the
Lead Investor in writing:
(a) Representations and Warranties. The representations and warranties
of the Company and the Company Warrantors contained or referred to herein shall
be true and correct as of the date of the Tranche 1 Closing, in all material
respects as though made at such date with reference to the facts and
circumstances existing at such time (except to the extent that a representation
and warranty speaks as of an earlier date, in which case such representation and
warranty shall be true as of such earlier date), and each of the Company and the
Company Warrantors shall have delivered a certificate to such effect, dated the
date of the Tranche 1 Closing, signed by a director or officer thereof.
(b) Performance. Each other party to this Agreement shall have
materially performed and complied with all agreements, obligations and
conditions contained in this Agreement or the Ancillary Documents which such
party is required to perform or comply with on or before the Tranche 1 Closing.
(c) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Tranche 1 Closing, and all
documents incident thereto, shall be in form and substance reasonably
satisfactory to the Lead Investor, and each Investor shall have received all
such counterpart original and certified or other copies of such documents as
such Investor may reasonably request.
(d) Qualifications. All Consents of any competent Government Entity
that are required in connection any of the transactions contemplated hereunder,
under any of the Ancillary Documents or under other agreements to be entered
into in connection herewith shall have been duly obtained and shall continue to
be in effect.
(e) No Orders; Legal Proceedings. There shall be no Applicable Law in
effect which prohibits or restricts the transactions contemplated by this
Agreement or the Ancillary Documents which is not waived by a competent
Government Entity.
(f) No Material Adverse Change. There shall not have been any material
adverse change in or affecting the business, financial condition, results,
operations or prospects of any of the Company or the Group Companies since the
date of the most recent balance sheets therefor delivered to the Investors under
Section 5.8(b).
(g) Compliance Certificate. A director of the Company shall deliver to
each Investor at the Tranche 1 Closing a certificate stating that the conditions
specified in Section 8.1(b), Section 8.1(d), Section 8.1(e) and Section 8.1(f)
have been fulfilled.
(h) Legal Opinions. The Investors shall have each received from
Xxxxxxx Xxxx & Xxxxxxx, Cayman, Cayman Islands counsel for the Company, Xxxxxxx
Y.T. Ho & Co., Hong Kong counsel for the Company, and Kangda Law Office, PRC
counsel for the Company, written opinions dated and delivered as of the date of
the date of the Tranche 1 Closing, in form and
substance satisfactory to the Lead Investor.
(i) Due Diligence. The Investors shall have completed financial,
business and legal due diligence on the Company and the Group Companies to their
satisfaction.
(j) Investment Committee Approval. The Lead Investor shall have
received approval from its Investment Committee for the consummation of the
transactions contemplated herein.
(k) MOFCOM. The Company shall have arranged for the Lead Investor to
receive such comfort as the Lead Investor shall request to demonstrate that the
Ministry of Commerce will not raise objections or take any action against the
Investors, the Company or the Group Companies as a result of the transactions
contemplated herein, the reorganization of the Group Companies under the Company
prior to the date hereof or the conduct of business by any of the Company or the
Group Companies in the ordinary course following the consummation of any of the
transactions contemplated herein.
(l) Sale of Receivables. Neptunus Group shall have paid Nepstar
RMBY4,661,770.35 to acquire certain account receivables outstanding at August
31, 2003, as required by that certain letter agreement, dated August 31, 2003,
among Neptunus Group, Shenzhen Neptunus Health Chain Stores Co. Ltd. and
Nepstar.
(m) Discharge of Intercompany Debt. Neptunus Group and any Affiliates
thereof (other than the Company and the Group Companies) (i) shall have repaid
all amounts owing thereby to the Company and the Group Companies and (ii) shall
have forgiven all amounts owing by the Company and the Group Companies thereto.
(n) Memorandum and Articles. The Amended and Restated Memorandum and
Articles of Association, in substantially the form attached hereto as Exhibit D
(the "Amended Memorandum and Articles", shall have been adopted and shall remain
in effect.
(o) Investors Rights Agreement. The Company shall have entered into an
Investors' Rights Agreement in substantially the form attached hereto as Exhibit
E (the "INVESTORS RIGHTS AGREEMENT"), and such agreement shall be in full force
and effect.
(p) Share Restriction Agreement. Each of NeptunusBVI, ManagerCo and
the Company shall have entered into a Share Restriction Agreement (the "SHARE
RESTRICTION AGREEMENT") in substantially the form attached hereto as Exhibit F,
and such agreement shall be in full force and effect.
(q) Voting Agreement. Each of NeptunusBVI, ManagerCo and the Company
shall have entered into a Voting Agreement (the "Voting Agreement") in
substantially the form attached hereto as Exhibit G, and such agreement shall be
in full force and effect.
(r) NeptunusBVI Clawback Rights Agreement. Each of NeptunusBVI, the
Company and Xxxxx Xxxxx shall have entered into a Clawback Rights Agreement, in
substantially the form attached hereto as Exhibit H (the "NeptunusBVI Clawback
Rights Agreement"), and such agreement shall be in full force and effect.
(s) ManagerCo Clawback Rights Agreement. Each of ManagerCo, the
Company and Xxx Xxx shall have entered into a Clawback Rights Agreement, in
substantially the form attached hereto as Exhibit I (the "ManagerCo Clawback
Rights Agreement") and such
Agreement shall be in full force and effect.
(t) Sponsor Agreement. Neptunus Group shall have entered into a
Sponsor Agreement, in substantially the form attached hereto as Exhibit J
("Sponsor Agreement"), and such agreement shall be in full force and effect.
(u) Indemnity Agreement. The Company, Neptunus Group and each Group
Company shall have entered into an Indemnity Agreement, in substantially the
form attached hereto as Exhibit K ("Indemnity Agreement"), and such agreement
shall be in full force and effect.
(v) Redemption Agreement. The Company, Ankeen, ManagerCo and
NeptunusBVI shall have entered into a Redemption Agreement, in substantially the
form attached hereto as Exhibit L ("Redemption Agreement"), such agreement shall
be in full force and effect, and the Company shall have registered such
agreement on the Register of Mortgages and Charges of the Company.
(w) Guarantee Agreement. Neptunus Group shall have entered into a
Guarantee Agreement, in substantially the form attached hereto as Exhibit M (the
"Guarantee Agreement"), and such agreement shall be in full force and effect.
(x) Medicine Shoppe Master License Agreement. The Master License
Agreement, dated June 27, 2002, between Medicine Shoppe International, Inc. and
Medicine Shoppe Medical Chains Management Consulting (Shenzhen) Co., Ltd. shall
have been ratified by Medicine Shoppe Medical Chains Management Consulting
(Shenzhen) Co., Ltd. such that the agreement shall be a valid and binding
agreement, enforceable against each of the parties thereto.
(y) Lease of Office Space. Nepstar shall have entered into a lease, in
form and substance reasonably satisfactory to the Lead Investor, with respect to
the use of its current offices.
8.2 Conditions Precedent to Tranche 2 Closing. The obligations of each
Investor at the Tranche 2 Closing are subject to the fulfillment on or before
the Tranche 2 Closing of each of the following conditions, unless waived by the
Lead Investor in writing:
(a) epresentations and Warranties. The representations and warranties
of the Company and the Company Warrantors previously given hereunder shall have
been true and correct as of the date given and each of the representations and
warranties of the Company and the Company Warrantors set forth in Section 5.1,
Section 5.2, Section 5.3, Section 5.4, Section 5.7, Section 5.10(a), Section
5.12, Section 5.13, Section 5.14, Section 5.15(e), Section 5.16(a), Section
5.20, Section 5.21(a), Section 5.21(b), Section 5.22, Section 5.23 shall be true
and correct as of the date of the Tranche 2 Closing, in all material respects as
though made at such date with reference to the facts and circumstances existing
at such time (except to the extent that a representation and warranty speaks as
of an earlier date, in which case such representation and warranty shall be true
as of such earlier date), and each of the Company and the Company Warrantors
shall have delivered a certificate to such effect, dated the date of the Tranche
2 Closing, signed by a director or officer thereof.
(b) Performance. Each other party to this Agreement shall have
materially performed and complied with all agreements, obligations and
conditions contained in this Agreement or the Ancillary Documents which such
party is required to perform or comply with on or before the Tranche 2 Closing.
(c) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Tranche 2 Closing, and all
documents incident thereto, shall be in form and substance reasonably
satisfactory to the Lead Investor, and each Investor shall have received all
such counterpart original and certified or other copies of such documents as
such Investor may reasonably request.
(d) Qualifications. All Consents of any competent Government Entity
that are required in connection any of the transactions contemplated hereunder,
under any of the Ancillary Documents or under other agreements to be entered
into in connection herewith shall have been duly obtained and shall continue to
be in effect.
(e) No Orders; Legal Proceedings. There shall be no Applicable Law in
effect which prohibits or restricts the transactions contemplated by this
Agreement or the Ancillary Documents which is not waived by a competent
Government Entity.
(f) No Material Adverse Changes. There shall not have been any
material adverse change in or affecting the business, financial condition,
results, operations or prospects of any of the Company or the Group Companies
since the date of the Tranche 1 Closing.
(g) Legal Opinions. The Investors shall have each received from
Xxxxxxx Xxxx & Xxxxxxx, Cayman, Cayman Islands counsel for the Company, Xxxxxxx
Y.T. Ho & Co., Hong Kong counsel for the Company, and Kangda Law Office, PRC
counsel for the Company, written opinions dated and delivered as of the date of
the Tranche 2 Closing, in form and substance satisfactory to the Lead Investor.
(h) Tranche 2 Funding Notice. The Lead Investor shall have delivered a
Tranche 2 Funding notice to the Company on or prior to the date 270 days after
the date of the Tranche 1 Closing.
(i) Compliance Certificate. A director of the Company shall deliver to
each Investor at the Tranche 1 Closing a certificate stating that the conditions
specified in Section 8.2(b), Section 8.2(d), Section 8.2(e) and Section 8.2(f)
have been fulfilled.
8.3 Conditions Precedent to Tranche 3 Closing. The obligations of each
Investor at the Tranche 3 Closing are subject to the fulfillment on or before
the Tranche 3 Closing of each of the following conditions, unless waived by the
Lead Investor in writing:
(a) Representations and Warranties. The representations and warranties
of the Company and the Company Warrantors previously given hereunder shall have
been true and correct as of the date given and each of the representations and
warranties of the Company and the Company Warrantors set forth in Section 5.1,
Section 5.2, Section 5.3, Section 5.4, Section 5.7, Section 5.10(a), Section
5.12, Section 5.13, Section 5.14, Section 5.15(e), Section 5.16(a), Section
5.20, Section 5.21(a), Section 5.21(b), Section 5.22, Section 5.23 shall be true
and correct as of the date of the Tranche 3 Closing, in all material respects as
though made at such date with reference to the facts and circumstances existing
at such time (except to the extent that a representation and warranty speaks as
of an earlier date, in which case such representation and warranty shall be true
as of such earlier date) , and each of the Company and the Company Warrantors
shall have delivered a certificate to such effect, dated the date of the Tranche
3 Closing, signed by a
director or officer thereof.
(b) Performance. Each other party to this Agreement shall have
materially performed and complied with all agreements, obligations and
conditions contained in this Agreement or the Ancillary Documents which such
party is required to perform or comply with on or before the Tranche 3 Closing.
(c) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Tranche 3 Closing, and all
documents incident thereto, shall be in form and substance reasonably
satisfactory to the Lead Investor, and each Investor shall have received all
such counterpart original and certified or other copies of such documents as
such Investor may reasonably request.
(d) Qualifications. All Consents of any competent Government Entity
that are required in connection any of the transactions contemplated hereunder,
under any of the Ancillary Documents or under other agreements to be entered
into in connection herewith shall have been duly obtained and shall continue to
be in effect.
(e) No Orders; Legal Proceedings. There shall be no Applicable Law in
effect which prohibits or restricts the transactions contemplated by this
Agreement or the Ancillary Documents which is not waived by a competent
Government Entity.
(f) No Material Adverse Changes. There shall not have been any
material adverse change in or affecting the business, financial condition,
results, operations or prospects of any of the Company or the Group Companies
since the date of the Tranche 2 Closing.
(g) Legal Opinions. The Investors shall have each received from
Xxxxxxx Xxxx & Xxxxxxx, Cayman, Cayman Islands counsel for the Company, Xxxxxxx
Y.T. Ho & Co., Hong Kong counsel for the Company, and Kangda Law Office, PRC
counsel for the Company, written opinions dated and delivered as of the date of
the Tranche 3 Closing, in form and substance satisfactory to the Lead Investor.
(h) Tranche 3 Funding Notice. The Lead Investor shall have delivered a
Tranche 3 Funding notice to the Company on or prior to June 30, 2006.
(i) Compliance Certificate. A director of the Company shall deliver to
each Investor at the Tranche 1 Closing a certificate stating that the conditions
specified in Section 8.3(b), Section 8.3(d), Section 8.3(e) and Section 8.3(f)
have been fulfilled.
SECTION 9 CONDITIONS TO CLOSING BY COMPANY
9.1 Conditions Precedent to Tranche 1 Closing. The obligations of the
Company at the Tranche 1 Closing are subject to the fulfillment on or before the
Tranche 1 Closing of each of the following conditions, unless waived by the
Company in writing:
(a) Representations and Warranties. The representations and warranties
of the Investors contained in Section 6 of this Agreement shall be true and
correct as of the date of the Tranche 1 Closing, in all material respects as
though made at such date with reference to the facts and circumstances existing
at such time (except to the extent that a representation and warranty speaks as
of an earlier date, in which case such representation and warranty shall be true
as of such earlier date).
(b) Performance. Each Investor shall have materially performed and
complied with all agreements, obligations and conditions contained in this
Agreement or the Ancillary Documents which such Investor is required to perform
or comply with on or before the Tranche 1 Closing.
(c) No Orders; Legal Proceedings. There shall be no Applicable Law in
effect which prohibits or restricts the transactions contemplated by this
Agreement or the Ancillary Documents which is not waived by a competent
Government Entity.
(d) Investors' Rights Agreement. The Investors shall have entered into
the Investors' Rights Agreement in substantially the form attached hereto as
Exhibit E, and such agreement shall be in full force and effect.
(e) Share Restriction Agreement. Each of the Investors shall have
entered into a Share Restriction Agreement in substantially the form attached
hereto as Exhibit F, and such agreement shall be in full force and effect.
9.2 Conditions Precedent to Tranche 2 Closing.
(a) Representations and Warranties. The representations and warranties
of the Investors contained in Section 6 of this Agreement shall be true and
correct as of the date of the Tranche 2 Closing, in all material respects as
though made at such date with reference to the facts and circumstances existing
at such time (except to the extent that a representation and warranty speaks as
of an earlier date, in which case such representation and warranty shall be true
as of such earlier date).
(b) Performance. Each Investor shall have materially performed and
complied with all agreements, obligations and conditions contained in this
Agreement or the Ancillary Documents which such Investor is required to perform
or comply with on or before the Tranche 2 Closing.
(c) No Orders; Legal Proceedings. There shall be no Applicable Law in
effect which prohibits or restricts the transactions contemplated by this
Agreement or the Ancillary Documents which is not waived by a competent
Government Entity.
(d) Tranche 2 Funding Notice. The Lead Investor shall have timely
delivered a Tranche 2 Funding notice to the Company pursuant to Section 3.2.
9.3 Conditions Precedent to Tranche 3 Closing.
(a) Representations and Warranties. The representations and warranties
of the Investors contained in Section 6 of this Agreement shall be true and
correct as of the date of the Tranche 3 Closing, in all material respects as
though made at such date with reference to the facts and circumstances existing
at such time (except to the extent that a representation and warranty speaks as
of an earlier date, in which case such representation and warranty shall be true
as of such earlier date).
(b) Performance. Each Investor shall have materially performed and
complied with all agreements, obligations and conditions contained in this
Agreement or the
Ancillary Documents which such Investor is required to perform or comply with on
or before the Tranche 3 Closing.
(c) No Orders; Legal Proceedings. There shall be no Applicable Law in
effect which prohibits or restricts the transactions contemplated by this
Agreement or the Ancillary Documents which is not waived by a competent
Government Entity.
(d) Tranche 3 Funding Notice. The Lead Investor shall have timely
delivered a Tranche 3 Funding notice to the Company pursuant to Section 4.2.
SECTION 10 INDEMNITY; OTHER REMEDIES
10.1 Indemnity.
(a) Each of the Company and the Company Warrantors hereby agrees to
indemnify and hold harmless each Investor, and such Investor's employees,
Affiliates, agents and assigns, from and against any and all Indemnifiable
Losses suffered by such Investor, or such Investor's employees, Affiliates,
agents and assigns, directly or indirectly, as a result of, or based upon or
arising from any inaccuracy in or breach or nonperformance of any of the
representations, warranties, covenants or agreements made by the Company or such
Company Warrantor in or pursuant to this Agreement or any of the Ancillary
Documents.
(b) Each Investor, severally and not jointly, hereby agrees to
indemnify and hold harmless the Company, and the Company's employees,
Affiliates, agents and assigns, from and against any and all Indemnifiable
Losses suffered by the Company, or the Company's employees, Affiliates, agents
and assigns, directly or indirectly, as a result of, or based upon, or arising
from any inaccuracy in or breach or nonperformance of any of the
representations, warranties, covenants or agreements made by such Investor in or
pursuant to this Agreement.
10.2 Procedure.
(a) Any party seeking indemnification with respect to any
Indemnifiable Loss (an "INDEMNIFIED PARTY") shall give notice to the party
required to provide indemnity hereunder (the "INDEMNIFYING PARTY").
(b) If any claim, demand or Liability is asserted by any third party
against any Indemnified Party, the Indemnifying Party shall upon the written
request of the Indemnified Party, defend any actions or proceedings brought
against the Indemnified Party in respect of matters embraced by the indemnity
under this Section 10. If, after a request to defend any action or proceeding,
the Indemnifying Party neglects to defend the Indemnified Party, a recovery
against the Indemnified Party suffered by it in good faith, shall be conclusive
in its favor against the Indemnifying Party, provided, however, that, if the
Indemnifying Party has not received reasonable notice of the action or
proceeding against the Indemnified Party or is not allowed to control its
defense, judgment against the Indemnified Party shall only constitute
presumptive evidence against the Indemnifying Party.
10.3 Not Exclusive Remedy. This Section 10 shall not be deemed to preclude
or otherwise limit in any way the exercise of any other rights or pursuit of
other remedies for the breach of this Agreement or with respect to any
misrepresentation.
SECTION 11 TERMINATION
11.1 Termination of Agreement. This Agreement and the transactions
contemplated by this Agreement shall terminate:
(a) in the event the Tranche 1 Closing does not take place prior to
December 31, 2004;
(b) upon the mutual consent in writing of the parties hereto;
(c) in the event of any misrepresentation or other breach under this
Agreement which materially affects any party hereto, such breach is not remedied
within thirty (30) days after written notice thereof is given to the breaching
party by the affected party; or
(d) upon notice from the Lead Investor given to the other parties if
there shall be any Applicable Law that makes consummation of the transactions
hereunder illegal or otherwise prohibited which is not waived or repealed by a
competent Government Entity within one (1) month of first becoming known to any
party hereto.
11.2 Effect of Termination. If this Agreement is terminated pursuant to the
provisions of this Section 11, then this Agreement shall become void and have no
further effect, provided that no party shall be relieved of any liability for a
breach of this Agreement or for any misrepresentation hereunder, nor shall such
termination be deemed to constitute a waiver of any available remedy (including
specific performance if available) for any such breach or misrepresentation.
11.3 Survival. The provisions of Section 5, Section 6, Section 10, Section
11.2, this Section 11.3 and Section 12 shall survive the expiration or early
termination of this Agreement.
SECTION 12 MISCELLANEOUS
12.1 Binding Effect; Assignment. This Agreement shall be binding upon and
shall be enforceable by each party, its successors and permitted assigns. Each
of the Investors shall have the right to assign all or part of its rights under
this Agreement to any of its Affiliates. Except as provided in the preceding
sentence, no party may assign any of its rights or obligations hereunder without
the prior written approval of the other party.
12.2 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Hong Kong, without regard to conflicts of laws
principles thereunder; provided that Section 10 shall be governed by, and
construed in accordance with the laws of the State of New York, without regard
to conflicts of laws principles thereunder.
12.3 Dispute Resolution.
(a) Any dispute, controversy or claim (each, a "DISPUTE") arising out
of or relating to this Agreement, or the interpretation, breach, termination or
validity hereof, shall be resolved at the first instance through consultation
between the parties to such Dispute. Such consultation shall begin immediately
after any party has delivered written notice to any other party to the Dispute
requesting such consultation.
(b) If the Dispute is not resolved within sixty (60) days following
the date on which such notice is given, the Dispute shall be submitted to
arbitration upon the request of any party to the Dispute with notice to each
other party to the Dispute (the "ARBITRATION NOTICE").
(c) The arbitration shall be conducted in Hong Kong under the auspices
of the Hong Kong International Arbitration Centre (the "CENTRE"). There shall be
three (3) arbitrators. The claimants in the Dispute shall collectively choose
one arbitrator, and the respondents shall collectively choose one arbitrator.
The Secretary General of the Centre shall select the third arbitrator, who shall
be qualified to practice law in the Hong Kong Special Administrative Region. If
any of the members of the arbitral tribunal have not been appointed within
thirty (30) days after the Arbitration Notice is given, the relevant appointment
shall be made by the Secretary General of the Centre.
(d) The arbitration proceedings shall be conducted in English and
Chinese. The arbitration tribunal shall apply the Arbitration Rules of the
United Nations Commission on International Trade Law, as in effect at the time
of the arbitration. However, if such rules are in conflict with the provisions
of this Section 12.3, including the provisions concerning the appointment of
arbitrator, the provisions of this Section 12.3 shall prevail.
(e) Each party to the arbitration shall cooperate with each other
party to the arbitration in making full disclosure of and providing complete
access to all information and documents requested by such other party in
connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on such party.
(f) The award of the arbitration tribunal shall be final and binding
upon the parties, and the prevailing party may apply to a court of competent
jurisdiction for enforcement of such award.
(g) The arbitrators shall decide any dispute submitted by the parties
to the arbitration tribunal strictly in accordance with the substantive law of
Hong Kong and shall not apply any other substantive law; provided that the
arbitrators shall decide any dispute submitted by the parties to the arbitration
tribunal with respect to Section 10 strictly in accordance with the substantive
law of the State of New York and shall not apply any other substantive law.
(h) Any party to the Dispute shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
(i) During the course of the arbitration tribunal's adjudication of
the dispute, this Agreement shall continue to be performed except with respect
to the part in dispute and under adjudication.
12.4 Language. The governing version of this Agreement is the English
language version; provided that the Disclosure Schedules have been prepared in
the Chinese language. Any translation of this Agreement into any other language
is for the convenience of the parties only.
12.5 Amendments. Except as otherwise permitted herein, this Agreement and
its provisions may be amended, changed, waived, discharged or terminated only by
a writing signed by each of the parties.
12.6 Notices. All notices, claims, certificates, requests, demands and
other communications under this Agreement shall be made in writing and shall be
delivered to any party hereto by hand or sent by facsimile, or sent, postage
prepaid, by reputable overnight courier services at the address given for such
party on the signature pages hereof (or at such other address for such party as
shall be specified by like notice), and shall be deemed given when so delivered
by hand, or if sent by facsimile, upon receipt of a confirmed transmittal
receipt, or if sent by overnight courier, five (5) calendar days after delivery
to or pickup by the overnight courier service.
12.7 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party may reasonably request to give effect to the terms and intent of
this Agreement.
12.8 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior written or oral understandings or agreements.
12.9 Severability. If any provision of this Agreement shall be held invalid
or unenforceable to any extent, the remainder of this Agreement shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
12.10 Remedies Cumulative. The rights and remedies available under this
Agreement or otherwise available shall be cumulative of all other rights and
remedies and may be exercised successively.
12.11 Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.12 No Third Party Beneficiary. Except to the extent expressly stated
otherwise, nothing in this Agreement is intended to confer upon any Person other
than the parties hereto and their respective successors and permitted assigns
any rights, benefits, or obligations hereunder.
12.13 Knowledge. In this Agreement, any reference to a Person's "knowledge"
means the actual knowledge of such Person and that knowledge which should have
been acquired by such Person after making such due inquiry and exercising such
due diligence as a prudent business person would have made or exercised in the
management of his or her business affairs, including due inquiry of those
officers, directors, key employees and professional advisers (including
attorneys, accountants and consultants) of the Person and its Affiliates who
could reasonably be expected to have knowledge of the matters in question.
IN WITNESS WHEREOF the parties hereto have caused their duty authorized
representatives to execute this Agreement as of the first date written above.
CHINA NEPSTAR CHAIN DRUGSTORE LTD.
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx (CHINESE CHARACTERS)
Capacity: Director
Address for notice:
15th Floor, Tower A, Neptunus Building
Nanyou Avenue, Nanshan District
Shenzhen, Guangdong Province
PRC 518054
Attn: Xxxxx Xxxxx (CHINESE CHARACTERS)
Tel: 00-000-0000-0000-0000
Fax: 00-000-0000-0000
CHINA NEPSTUNUS DRUGSTORE HOLDING LTD.
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx (CHINESE CHARACTERS)
Capacity: Director
Address for notice:
27th Floor, Tower A, Neptunus Building
Nanyou Avenue, Nanshan District
Shenzhen, Guangdong Province
PRC 518054
Attn: Xxxxx Xxxxx (CHINESE CHARACTERS)
Tel: 00-000-0000-0000-0000
Fax: 00-000-0000-0000
GS CAPITAL PARTNERS 2000, L.P.
By: GS Advisors 2000, L.L.C.,
Its general partner
By: /s/ Xxxxx X. X. Xxxx
------------------------------------
Name: Xxxxx X. X. Xxxx
Capacity: Power of Attorney
Address for notice:
68th Floor, Xxxxxx Kong Center,
0 Xxxxx'x Xxxx Xxxxxxx
Xxxx Xxxx PRC
Attn: Xxxxx X. X. Xxxx
Tel: 000-0000-0000
Fax: 000-0000-0000
GS CAPITAL PARTNERS 2000
OFFSHORE, L.P.
By: GS Advisors 2000, L.L.C.,
Its general partner
By: /s/ Xxxxx X. X. Xxxx
------------------------------------
Name: Xxxxx X. X. Xxxx
Capacity: Power of Attorney
Address for notice:
68th Floor, Xxxxxx Kong Center,
0 Xxxxx'x Xxxx Xxxxxxx
Xxxx Xxxx PRC
Attn: Xxxxx X. X. Xxxx
Tel: 000-0000-0000
Fax: 000-0000-0000
GS CAPITAL PARTNERS 2000,
GMBH & CO. BETEILIGUNGS KG
By: Xxxxxxx Sachs Management GP
GmbH
Its general partner
By: /s/ Xxxxx X. X. Xxxx
------------------------------------
Name: Xxxxx X. X. Xxxx
Capacity: Power of Attorney
Address for notice:
68th Floor, Xxxxxx Kong Center,
0 Xxxxx'x Xxxx Xxxxxxx
Xxxx Xxxx PRC
Attn: Xxxxx X. X. Xxxx
Tel: 000-0000-0000
Fax: 000-0000-0000
GS CAPITAL PARTNERS 2000,
EMPLOYEE FUND, L.P.
By: GS Employee Funds 2000 GP, L.L.C.
Its general partner
By: /s/ Xxxxx X. X. Xxxx
------------------------------------
Name: Xxxxx X. X. Xxxx
Capacity: Power of Attorney
Address for notice:
68th Floor, Xxxxxx Kong Center,
0 Xxxxx'x Xxxx Xxxxxxx
Xxxx Xxxx PRC
Attn: Xxxxx X. X. Xxxx
Tel: 000-0000-0000
Fax: 000-0000-0000
XXXXXXX SACHS DIRECT INVESTMENT FUND
2000, L.P.
By: GS Employee Funds 2000 GP, L.L.C.
Its general partner
By: /s/ Xxxxx X. X. Xxxx
------------------------------------
Name: Xxxxx X. X. Xxxx
Capacity: Power of Attorney
Address for notice:
68th Floor, Xxxxxx Kong Center,
0 Xxxxx'x Xxxx Xxxxxxx
Xxxx Xxxx PRC
Attn: Xxxxx X. X. Xxxx
Tel: 000-0000-0000
Fax: 000-0000-0000
SHENZHEN NEPSTAR
COMMERCIAL DEVELOPMENT CO., LTD.
(CHINESE CHARACTERS)
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx (CHINESE CHARACTERS)
Capacity: Legal Representative
Address for notice:
00X, Xxxxx X, Xxxxxxxx Xxxxxxxx
Xxxxxx Xxxxxx, Xxxxxxx District
Shenzhen, Guangdong Province
PRC 518054
Attn: Qian Shunyao (CHINESE CHARACTERS)
Tel: 00-000-0000-0000
Fax: 00-000-0000-0000
SHENZHEN NEPSTAR MEDICAL &
PHARMACEUTICAL ELECTRONIC TECHNOLOGY
CO., LTD.
(CHINESE CHARACTERS)
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx (CHINESE CHARACTERS)
Capacity: Legal Representative
Address for notice:
00X, Xxxxx X, Xxxxxxxx Xxxxxxxx
Xxxxxx Xxxxxx, Xxxxxxx District
Shenzhen, Guangdong Province
PRC 518054
Attn: Qian Shunyao (CHINESE CHARACTERS)
Tel: 00-000-0000-0000
Fax: 00-000-0000-0000
ANKEEN ENTERPRISES LIMITED
(CHINESE CHARACTERS)
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx (CHINESE CHARACTERS)
Capacity: Authorized Representative
Address for notice:
Xxxx / XX 000 XXX 0/X Xxxxxxxxxx
30, CANTON Road, TST
Attn: Xxxxx Xxxxx (CHINESE CHARACTERS)
Tel: 00-000-0000-0000-0000
Fax: 00-000-0000-0000
SHENZHEN NEPSTUNUS GROUP CORPORATION
(CHINESE CHARACTERS)
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx (CHINESE CHARACTERS)
Capacity: Legal Representative
Address for notice:
27th Floor, Tower A, Neptunus Building
Nanyou Avenue, Nanshan District
Shenzhen, Guangdong Province
PRC 518054
Attn: Xxxxx Xxxxx (CHINESE CHARACTERS)
Tel: 00-000-0000-0000-0000
Fax: 00-000-0000-0000
SHENZHEN NEPSTAR MEDICAL CO., LTD.
(CHINESE CHARACTERS)
By: /s/ Xxx Xxx
------------------------------------
Name: Xxx Xxx (CHINESE CHARACTERS)
Capacity: Legal Representative
Address for notice:
15th Floor, Tower A, Neptunus Building
Nanyou Avenue, Nanshan District
Shenzhen, Guangdong Province
PRC 518054
Attn: Qian Shunyao (CHINESE CHARACTERS)
Tel: 00-000-0000-0000
Fax: 00-000-0000-0000
SHENZHEN NEPSTAR HEALTH DRUGSTORE CHAIN
CO., LTD.
(CHINESE CHARACTERS)
By: /s/ Xx Xxxxx
------------------------------------
Name: Xx Xxxxx (CHINESE CHARACTERS)
Capacity: Director
Address for notice:
0xx Xxxxx, Xxxxx X, Xxx Xxxxxx Building
Nanyou Avenue, Nanshan District
Shenzhen, Guangdong Province
PRC 518054
Attn: Xxxxx Xxxxxxx (CHINESE CHARACTERS)
Tel: 00-000-0000-0000
Fax: 00-000-0000-0000
SHANGHAI NEPSTAR DRUGSTORE CO., LTD.
(CHINESE CHARACTERS)
By: /s/ Xx Xxxxx
------------------------------------
Name: Xx Xxxxx (CHINESE CHARACTERS)
Capacity: Director
Address for notice:
0xx Xxxxx, Xxxxxxxx Xxxxxxxx
000 Xxxx Xxxx, Xxxxxxxx
PRC 200020
Attn: Liu Jingnan (CHINESE CHARACTERS)
Tel: 00-00-0000-0000
Fax: 00-00-0000-0000
SICHUAN NEPSTAR HEALTH DRUGSTORE CO.,
LTD.
(CHINESE CHARACTERS)
By: /s/ Xx Xxxxx
------------------------------------
Name: Xx Xxxxx (CHINESE CHARACTERS)
Capacity: Director
Address for notice:
0xx Xxxxx, 000 Xxxxxxxxx Xxxx,
Xxxxxxx, Xxxxxx Xxxxxxxx
PRC 610066
Attn: Yang Fei (CHINESE CHARACTERS)
Tel: 00-00-0000-0000
Fax: 00-00-0000-0000
YUNAN JIANZHIJIA CHAIN HEALTH DRUGSTORE
CO., LTD.
(CHINESE CHARACTERS)
By: /s/ Xxx Xxx
------------------------------------
Name: Xxx Xxx (CHINESE CHARACTERS)
Capacity: Legal Representative
Address for notice:
0000, Xxxxxxxxxxxx, Xxxxxxx Xxxx,
Xxxxxxx, Xxxxxx Province
Attn: Lan Bo (CHINESE CHARACTERS)
Tel: 00-000-0000-000
Fax: 00-000-0000-000
JIANGSU NEPSTAR HEALTH DRUGSTORE CHAIN
CO., LTD.
(CHINESE CHARACTERS)
By: /s/ Xxx Xxx
------------------------------------
Name: Xxx Xxx (CHINESE CHARACTERS)
Capacity: Legal Representative
Address for notice:
00, Xxxxx Xxxx, Xxxxxx Xxxx
Xxxxxx, Xxxxxxx Xxxxxxxx
PRC 215002
Attn: Xxxx Xxxxxxxx (CHINESE CHARACTERS)
Tel: 00-000-0000-0000
Fax: 00-000-0000-0000
DALIAN NEPSTAR MEDICAL CO., LTD.
(CHINESE CHARACTERS)
By: /s/ Wu Zhiya
------------------------------------
Name: Xx Xxxxx (CHINESE CHARACTERS)
Capacity: Director
Address for notice:
0xx Xxxxx, Xxxxxxxx Xxxxxxxx
00, Xxxxxx Xxxxxx, Shahekou District
Dalian, Liaoning Province
PRC 116021
Attn: Mou Liangping (CHINESE CHARACTERS)
Tel: 00-000-0000-000
Fax: 00-000-0000-000
NINGBO HUAMEI STAR HEALTH DRUGSTORE CO.,
LTD.
(CHINESE CHARACTERS)
By: /s/ Xxx Xxx
------------------------------------
Name: Xxx Xxx (CHINESE CHARACTERS)
Capacity: Legal Representative
Address for notice:
0xx Xxxxx, Xx.0, Xxxx 00
Xxxxxxxxx Xxxxxx, Xxxxxx District
Ningbo, Zhejiang Province
PRC 315016
Attn: Dai Jing (CHINESE CHARACTERS)
Tel: 00-000-0000-0000
Fax: 00-000-0000-0000
HANGZHOU NEPSTAR HEALTH DRUGSTORE CO.,
LTD.
(CHINESE CHARACTERS)
By: /s/ Xx Xxxxx
------------------------------------
Name: Xx Xxxxx (CHINESE CHARACTERS)
Capacity: Director
Address for notice:
000 Xxxxx Xxxxxxxxx Xxxx
Shangcheng District
Hangzhou Zhejiang Province
PRC 310002
Attn: Xxxx Xxxxxx (CHINESE CHARACTERS)
Tel: 00-000-0000-0000
Fax: 00-000-0000-0000
GUANGZHOU NEPSTAR MEDICAL CHAIN STORE
CO., LTD.
(CHINESE CHARACTERS)
By: /s/ Xx Xxxxx
------------------------------------
Name: Xx Xxxxx (CHINESE CHARACTERS)
Capacity: Director
Address for notice:
0xx Xxxxx, Xxxxx Xxxxxxxx,
00, Xxxxx Siyou Road, Dongshan District
Guangzhou, Guangzhou Province
PRC 510600
Attn: Zhao Dongqiang (CHINESE CHARACTERS)
Tel: 00-00-0000-0000
Fax: 00-00-0000-0000
CHANGZHOU NEPSTAR HEALTH DRUGSTORE CO.,
LTD.
(CHINESE CHARACTERS)
By: /s/ Xxx Xxx
------------------------------------
Name: Xxx Xxx (CHINESE CHARACTERS)
Capacity: Legal Representative
Address for notice:
000, Xxxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
PRC 213003
Attn: Xxxx Xxxxxxxx (CHINESE CHARACTERS)
Tel: 00-000-0000-000
Fax: 00-000-0000-000
SUZHOU NEPSTAR HEALTH DRUGSTORE CO.,
LTD.
(CHINESE CHARACTERS)
By: /s/ Xxx Xxx
------------------------------------
Name: Xxx Xxx (CHINESE CHARACTERS)
Capacity: Legal Representative
Address for notice:
00, Xxxxx Xxxx, Xxxxxx Xxxx
Xxxxxx, Xxxxxxx Xxxxxxxx
PRC 215002
Attn: Xxxx Xxxxxxxx (CHINESE CHARACTERS)
Tel: 00-000-0000-0000
Fax: 00-000-0000-0000
WUXI NEPSTAR DRUG RETAIL CO., LTD.
(CHINESE CHARACTERS)
By: /s/ Xxx Xxx
------------------------------------
Name: Xxx Xxx (CHINESE CHARACTERS)
Capacity: Legal Representative
Address for notice:
00-0 Xxx Xxxxxxxx Xxxxxxx,
Xxxx, Xxxxxxx Xxxxxxxx
XXX 000000
Attn: Xxxx Xxxxxxxx (CHINESE CHARACTERS)
Tel: 00-000-0000-000
Fax: 00-000-0000-000
MEDICINE SHOPPE MEDICAL CHAINS
MANAGEMENT CONSULTING (SHENZHEN) CO.,
LTD.
(CHINESE CHARACTERS)
By: /s/ Xxx Xxx
------------------------------------
Name: Xxx Xxx (CHINESE CHARACTERS)
Capacity: Legal Representative
Address for notice:
00xx Xxxxx, Xxxxx X, Xxx Xxxxxx Building
Nanyou Avenue, Nanshan District
Shenzhen, Guangdong Province
PRC 518054
Attn: Xxx Xxx (CHINESE CHARACTERS)
Tel: 00-000-0000-0000
Fax: 00-000-0000-0000
CHINA STAR CHAIN LTD.
By: /s/ Xxx Xxx
------------------------------------
Name: Xxx Xxx (CHINESE CHARACTERS)
Capacity: Legal Representative
Address for notice:
15th Floor, Tower A, New Energy Building
Nanyou Avenue, Nanshan District
Shenzhen, Guangdong Province
PRC 518054
Attn: Xxx Xxx (CHINESE CHARACTERS)
Tel: 00-000-0000-0000
Fax: 00-000-0000-0000
Schedule A - Company Warrantors
1. Shenzhen Nepstar Commercial Development Co., Ltd. (CHINESE CHARACTERS), a
wholly foreign-owned enterprise organized and existing under the laws of
the People's Republic of China
2. Shenzhen Neptunus Medical & Pharmaceutical Electronic Technology Co., Ltd.
(CHINESE CHARACTERS), a wholly foreign-owned enterprise organized and
existing under the laws of the People's Republic of China
3. Shenzhen Neptunus Group Corporation (CHINESE CHARACTERS), a joint stock
company organized and existing under the laws of the People's Republic of
China
4. Shenzhen Nepstar Medical Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the People's
Republic of China
5. Ankeen Enterprises Limited (CHINESE CHARACTERS), a company organized and
existing under the laws of the Hong Kong Special Administrative Region
6. China Neptunus Drugstore Holding Ltd., an international business company
organized and existing under the laws of the British Virgin Islands
7. China Star Chain Ltd., an international business company organized and
existing under the laws of the British Virgin Islands.
8. Shenzhen Nepstar Health Chain Stores Co., Ltd. (CHINESE CHARACTERS), a
limited liability company organized and existing under the laws of the
People's Republic of China
9. Shanghai Nepstar Drugstore Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the People's
Republic of China
10. Sichuan Nepstar Health Drugstore Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the People's
Republic of China
11. Yunnan Jianzhijia Chain Health Drugstore Co., Ltd. (CHINESE CHARACTERS), a
limited liability company organized and existing under the laws of the
People's Republic of China
12. Jiangsu Nepstar Health Drugstore Chain Co., Ltd. (CHINESE CHARACTERS), a
limited liability company organized and existing under the laws of the
People's Republic of China
13. Dalian Nepstar Medical Co., Ltd. (CHINESE CHARACTERS), a limited liability
company organized and existing under the laws of the People's Republic of
China
14. Ningbo Huamei Star Health Drugstore Co., Ltd. (CHINESE CHARACTERS), a
limited liability company organized and existing under the laws of the
People's Republic of China
15. Hangzhou Nepstar Health Drugstore Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the People's
Republic of China
16. Guangzhou Nepstar Medical Chain Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the People's
Republic of China
17. Changzhou Nepstar Health Drugstore Co., Ltd. (CHINESE CHARACTERS), a
limited liability company organized and existing under the laws of the
People's Republic of China
18. Suzhou Nepstar Health Drugstore Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the People's
Republic of China
19. Wuxi Nepstar Drug Retail Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the People's
Republic of China
20. Medicine Shoppe Medical Chains Management Consulting (Shenzhen) Co., Ltd.
(CHINESE CHARACTERS), a Sino-foreign equity joint venture organized and
existing under the laws of the People's Republic of China
Schedule B - Other Investors
1. GS Capital Partners 2000 Offshore, L.P., a limited partnership organized
and existing under the laws of the Cayman Islands.
2. GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, an entity organized
and existing under the laws of Germany.
3. GS Capital Partners 2000 Employee Fund, L.P., a limited partnership
organized and existing under the laws of the State of Delaware.
4. Xxxxxxx Xxxxx Direct Investment Fund 2000, L.P., a limited partnership
organized and existing under the laws of the State of Delaware.
Schedule C - Subscription Amounts
1. 1. Tranche 1 Closing. Set forth below is the aggregate consideration to
be paid by each Investor in the Tranche 1 Closing:
Investor Name Aggregate Consideration
------------- -----------------------
GS Capital Partners 2000, L.P. US$8,270,994.50
GS Capital Partners 2000 US$3,005,361.00
Offshore, L.P.
GS Capital Partners 2000 US$ 345,709.00
GmbH & Co. Beteiligungs KGGS
Capital Partners 2000 US$2,627,935.50
Employee Fund, X.X. Xxxxxxx
Sachs Direct US$ 750,000.00
Investment Fund 2000, L.P.
2. Tranche 2 Closing. Set forth below is the aggregate consideration to be
paid by each Investor in the Tranche 2 Closing:
Investor Name Aggregate Consideration
------------- -----------------------
GS Capital Partners 2000, L.P. US$5,513,996.36
GS Capital Partners 2000 US$2,003,573.93
Offshore, L.P.
GS Capital Partners 2000 2000 US$ 230,472.57
GmbH & Co. Beteiligungs KGGS
Capital Partners 2000 US$1,751,957.14
Employee Fund, X.X. Xxxxxxx
Xxxxx Direct US$ 500,000.00
Investment Fund 2000, L.P.
3. Tranche 3 Closing. Set forth below is the aggregate consideration to be
paid by each Investor in the Tranche 3 Closing:
Investor Name Aggregate Consideration
------------- -----------------------
GS Capital Partners 2000, L.P. US$8,270,994.54
GS Capital Partners 2000 US$3,005,360.89
Offshore, L.P.
GS Capital Partners 2000 US$ 345,708.86
GmbH & Co. Beteiligungs KGGS
Capital Partners 2000 US$2,627,935.71
Employee Fund, X.X. Xxxxxxx
Sachs Direct US$ 750,000.00
Investment Fund 2000, L.P.
Schedule D - Key Employees
Nepstar
(CHINESE CHARACTERS)
1. Acting General Manager - QIAN Shunyao
(CHINESE CHARACTERS)
2. Deputy General Manager and Chief Finance Officer - SHAO Zixin
(CHINESE CHARACTER)
3. Deputy General Manager and North Regional General Manager - MOU
Liangping
(CHINESE CHARACTERS)
4. Assistant General Manager - XXXXX Xxx (to be confirmed)
(CHINESE CHARACTERS)
5. Director of Investment Management (concurrent) - FENG Jiaxin
(CHINESE CHARACTERS)
6. Director of Merchandizes - XXXX Xxxxxxxx
(CHINESE CHARACTERS)
7. Director of Marketing - QIAN Ranting
(CHINESE CHARACTERS)
8. Director of Office of General Manager - XXXX Xxxxxx
(CHINESE CHARACTERS)
9. Manager of Information Center - FAN Guowei
(CHINESE CHARACTERS)
10. Manager of Investment Management and Manager of Auditing - TU Feng
(CHINESE CHARACTERS)
11. Manager of Human Resources - GONG Keyu
(CHINESE CHARACTERS)
12. Manager of Quality and Technology - XXX Xxxxxxx
(CHINESE CHARACTERS)
REGIONAL OPERATING COMPANIES
(CHINESE CHARACTERS)
13. General Manager of Shenzhen ROC - XXXXX Xxxxxxx
(CHINESE CHARACTERS)
14. General Manager of Guangzhou ROC - ZHAO Dongqiang
(CHINESE CHARACTERS)
15. Deputy General Manager of Guangzhou ROC - XXXXX Xxxxxxxxx
(CHINESE CHARACTER)
16. General Manager of Dalian ROC (concurrent) - MOU Liangping
(CHINESE CHARACTERS)
17. General Manager of Hangzhou ROC - XXXX Xxxxxx
(CHINESE CHARACTERS)
18. General Manager of Ningbo ROC - DAI Jing
(CHINESE CHARACTERS)
19. General Manager of Jiangsu ROC - XXXX Xxxxxxxx
(CHINESE CHARACTERS)
20. Deputy General Manager of Jiangsu ROC - XXXX Xxxxxxx
(CHINESE CHARACTERS)
21. General Manager of Shanghai ROC - LIU Jingnan
(CHINESE CHARACTERS)
22. General Manager of Yunnan ROC - LAN Bo
(CHINESE CHARACTERS)
23. Deputy General Manager of Yunnan ROC - XXXX Xxxx
(CHINESE CHARACTERS)
24. General Manager of Sichuan ROC - YANG Fei
(CHINESE CHARACTERS)
Exhibit A - Form of Tranche 2 Funding Notice
[Date]
China Nepstar Chain Drugstore Ltd. (the "COMPANY")
Attention: ____________
RE: TRANCHE 2 FUNDING NOTICE
Reference is made to that certain Securities Purchase Agreement, dated
September __, 2004, among the Company, GS Capital Partners 2000, L.P., certain
affiliates of the Company, and certain other Investors (the "SECURITIES PURCHASE
AGREEMENT"). Capitalized terms used and not otherwise defined herein have the
meanings assigned to such terms in the Securities Purchase Agreement.
THE UNDERSIGNED, as Lead Investor, does hereby deliver this notice
pursuant to Section 3.2 of the Securities Purchase Agreement to notify the
Company that each Investor shall, subject to the terms and conditions of the
Securities Purchase Agreement, at the Tranche 2 Closing, purchase the number of
Series A-1 Preferred Shares equal to such Investor's Tranche 2 Allocation for
the aggregate consideration indicated opposite such Investor's name in Schedule
A of the Securities Purchase Agreement.
Very truly yours,
for and on behalf of GS Capital Partners
2000, L.P.
Exhibit B - Form of Tranche 3 Funding Notice
[Date]
China Nepstar Chain Drugstore Ltd. (the "COMPANY")
Attention: ____________
RE: TRANCHE 3 FUNDING NOTICE
Reference is made to that certain Securities Purchase Agreement, dated
September __, 2004, among the Company, GS Capital Partners 2000, L.P., certain
affiliates of the Company, and certain other Investors (the "SECURITIES PURCHASE
AGREEMENT"). Capitalized terms used and not otherwise defined herein have the
meanings assigned to such terms in the Securities Purchase Agreement.
THE UNDERSIGNED, as Lead Investor, does hereby deliver this notice
pursuant to Section 4.2 of the Securities Purchase Agreement to notify the
Company that each Investor shall, subject to the terms and conditions of the
Securities Purchase Agreement, at the Tranche 3 Closing, purchase the number of
Series A-2 Preferred Shares equal to such Investor's Tranche 3 Allocation for
the aggregate consideration indicated opposite such Investor's name in Schedule
A of the Securities Purchase Agreement.
Very truly yours,
for and on behalf of
GS Capital Partners 2000, L.P.
Exhibit C - Form of Earnout Warrant
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER ANY OTHER SECURITIES LAWS. THESE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. HOLDERS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
WARRANT
FOR VALUE RECEIVED, THIS WARRANT (this "WARRANT") is issued on October
6, 2004 to ______________ (together with its successors, and permitted
transferees and assigns, the "HOLDER"), by China Nepstar Chain Drugstore Ltd.,
an exempted company organized and existing under the laws of the Cayman Islands
(the "COMPANY"). This Warrant is issued pursuant to the terms of that certain
Securities Purchase Agreement, dated as of October 6, 2004 (the "SECURITIES
PURCHASE AGREEMENT"), among the Company, the Holder and certain other parties.
SECTION 1 INTERPRETATION
1.1 Definitions. Unless otherwise defined in this Warrant, capitalized
terms used herein shall have the following meanings:
"ACCOUNTING PRINCIPLES" shall mean International Financial Reporting
Standards as promulgated from time to time by the IASB (including, without
limitation, standards and interpretations approved by the IASB and
International Accounting Principles issued under previous constitutions
thereof), together with the IASB's pronouncements thereon from time to
time.
"AGGREGATE CONSIDERATION" means the amount equal to US$________, which
reflects the aggregate consideration paid by the Holder in the Tranche 1
Closing.
"AUDITORS" means Ernst & Young, or such successor thereto as may be
from time to time duly appointed by the Company's Board of Directors to
audit the Company's annual financial statements.
"COMMON SHARES" means the Common Shares, par value US$0.0001 per
share, of the Company.
"CONTROL" means, when used with respect to any Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise, and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"DILUTED PER SHARE PRICE" means the amount determined according to the
following formula:
(US$40,000,000 + Adj) x Tranche 1 Per Share Price
Diluted Per Share Price = -------------------------------------------------
US$60,000,000
where:
Adj = the product of US$20,000,000 and the average of AdjA, AdjB and AdjC;
AdjA = the lesser of (i) 1 and (ii) a fraction, where (x) the numerator is
equal to the excess, if any, of Net Revenue for the year ending
December 31, 2004, over RMBY540,000,000 and (y) the denominator is
RMBY225,000,000;
AdjB = the lesser of (i) 1 and (ii) a fraction, where (x) the numerator is
equal to the excess, if any, of EBITDA for the year ending December
31, 2004, over RMBY18,600,000 and (y) the denominator is
RMBY7,750,000; and
AdjC = the lesser of (i) 1 and (ii) a fraction, where (x) the numerator is
equal to the excess, if any, of EBIT for the year ending December
31, 2004, over RMBY5,100,000 and (y) the denominator is
RMBY2,125,000.
"EBIT" means, with reference to any year, net income (or net loss) for
such year, less any amount credited in arriving at such net income amount
in respect of any extraordinary gain, plus the sum of all amounts deducted
in arriving at such net income amount in respect of (i) interest charges
(net of interest income) accrued on any indebtedness for borrowed money at
the rates applicable to such indebtedness for such year and (ii) Taxes
accrued for such year, all as computed for the Company and the Group
Companies on a consolidated basis in accordance with the Accounting
Principles and as certified by the Auditors.
"EBITDA" means, with reference to any year, net income (or net loss)
for such year, less any amount credited in arriving at such net income
amount in respect of any extraordinary gain, plus the sum of all amounts
deducted in arriving at such net income amount in respect of (i) interest
charges (net of interest income) accrued on any indebtedness for borrowed
money at the rates applicable to such indebtedness for such year, (ii)
depreciation of fixed assets and amortization of intangible assets for such
year, and (iii) Taxes accrued for such year, all as computed for the
Company and the Group Companies on a consolidated basis in accordance with
the Accounting Principles and as certified by the Auditors.
"EFFECTIVE DATE" means such date as the Auditors shall certify the
Company's Net Revenue, EBIT and EBITDA for the year ending December 31,
2004 under Section 6.1.
"EXERCISE PRICE" means an amount equal to US$0.0001, as adjusted from
time to time pursuant to Section 4.
"GOVERNMENT ENTITY" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government.
"GROUP COMPANY" means any Person that is not a natural person and that
is Controlled by the Company.
"IASB" means the International Accounting Standards Board.
"LIABILITIES" means, with respect to any Person, liabilities owing by
such Person of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due.
"NET REVENUE" means, with respect to any year, revenues for such year,
exclusive of any value-added Tax, less any returns, discounts or allowances
for such year, all as computed for the Company and the Group Companies on a
consolidated basis in accordance with the Accounting Principles and as
certified by the Auditors.
"PERSON" means any natural person, limited liability company, joint
stock company, joint venture, partnership, enterprise, trust,
unincorporated organization or any other entity or organization.
"SERIES A-1 PREFERRED SHARES" means the Series A-1 Preferred Shares,
par value US$0.0001 per share, of the Company.
"TAXES" means any national, provincial or local income, sales and use,
excise, franchise, real and personal property, gross receipt, capital
stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or any other type of tax, levy,
assessment, custom duty or charge imposed by any Government Entity, any
interest and penalties (civil or criminal) related thereto or to the
nonpayment thereof, and any loss or Tax Liability incurred in connection
with the determination, settlement or litigation of any Liability arising
therefrom.
"TRANCHE 1 CLOSING" has the meaning ascribed thereto in the Securities
Purchase Agreement.
"TRANCHE 1 PER SHARE PRICE" means the amount equal to US$0.50.
"WARRANT EXERCISE AMOUNT" means, as adjusted from time to time
pursuant to Section 4, such number of Series A-1 Preferred Shares, rounded
to the nearest whole number, as equals the excess, if any, of (i) the
Aggregate Consideration divided by the Diluted Per Share Price over (ii)
the aggregate number of Series A-1 Preferred Shares which, under the
Securities Purchase Agreement, the Holder agreed to purchase at the Tranche
1 Closing.
1.2 Interpretation. For all purposes of this Warrant, except as otherwise
herein expressly provided, (i) the terms defined in this Section 1 shall have
the meanings assigned to them in this Section 1 and include the plural as well
as the singular, (ii) all references in this Warrant to designated "Sections"
and other subdivisions are to the designated Sections and other subdivisions of
the body of this Warrant, (iii) pronouns of either gender or neuter shall
include, as appropriate, the other pronoun forms, (iv) the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this Warrant
as a whole and not to any particular Section or other subdivision, (v) all
references in this Warrant to designated Schedules, Exhibits and Annexes are to
the Schedules, Exhibits and Annexes attached to this Warrant, and (vi) any
formula that purports to calculate the excess of one value over another shall be
deemed to yield a value equal to zero if there
is no excess.
SECTION 2 WARRANT GRANT
2.1 Grant. Subject to the terms and conditions hereof, the Holder is hereby
entitled to purchase from the Company, at a price per share equal to the
Exercise Price, up to the number of Series A-1 Preferred Shares of the Company
(the "WARRANT SHARES") as equal the Warrant Exercise Amount.
2.2 Exercise Period. This Warrant shall be exercisable, in whole or in
part, from time to time and at any time, during the term commencing on the
Effective Date and ending at 5:00 p.m. on October 5, 2014.
SECTION 3 EXERCISE
3.1 Surrender of Warrant. This Warrant may be exercised by the Holder, in
whole or in part, by surrendering this Warrant, accompanied by the purchase form
appended hereto as Exhibit A duly executed by the Holder, at the principal
office of the Company, or at such other office or agency as the Company may
designate by notice to the Holder in writing, accompanied by payment in full of
the Exercise Price payable in respect of the number of Warrant Shares purchased
upon such exercise. The Exercise Price may be paid by cash, check or wire
transfer.
3.2 Time of Exercise. Each exercise of this Warrant shall be deemed to have
been effected immediately prior to the close of business on the day on which
this Warrant shall have been surrendered to the Company as provided in Section
3.1 above. At such time, the person or persons in whose name or names any
certificates for Warrant Shares shall be issuable upon such exercise as provided
in Section 3.3 below shall be deemed to have become the holder or holders of
record of the Warrant Shares represented by such certificates.
3.3 Company Deliveries. As soon as practicable after the exercise of this
Warrant in whole or in part, and in any event within ten (10) days thereafter,
the Company at its expense will cause to be issued in the name of, and delivered
to, the Holder (or as such Holder may otherwise direct):
(a) a certificate or certificates for the number of Warrant Shares to
which the Holder shall be entitled, and
(b) in case such exercise is in part only, a new warrant or warrants
(dated the date hereof) of like tenor, exercisable for the balance of
any Warrant Shares purchasable under this Warrant.
3.4 Issuance of Shares. The Company covenants that, subject to the Holder
paying the Exercise Price as provided in Section 2.1, when issued pursuant to
the exercise of this Warrant, the Warrant Shares will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof.
3.5 No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor, proportional to the fair value of a share, as determined by
the Company's Board of Directors in good faith.
SECTION 4 ANTI-DILUTION PROVISIONS
4.1 Share Splits and Dividends. If outstanding Series A-1 Preferred Shares
shall be subdivided into a greater number of shares, a dividend in Series A-1
Preferred Shares shall be paid in respect of Series A-1 Preferred Shares, or the
Company shall issue bonus Series A1 Preferred Shares to the holders of Series
A-1 Preferred Shares, then the Exercise Price in effect immediately prior to
such subdivision or at the record date of such dividend or bonus issuance shall,
simultaneously with the effectiveness of such subdivision or immediately after
the record date of such dividend or bonus issuance, be proportionately reduced.
If outstanding Series A-1 Preferred Shares shall be combined into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Exercise Price, the number of Warrant Shares purchasable upon the exercise of
this Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the full exercise of this Warrant
immediately prior to such adjustment, multiplied by the Exercise Price in effect
immediately prior to such adjustment, by (ii) the Exercise Price in effect
immediately after such adjustment.
4.2 Redemption or Conversion of Series A-1 Preferred Shares. If all of the
Series A-1 Preferred Shares are redeemed or converted into Common Shares, then
this Warrant shall automatically become exercisable for that number of Common
Shares equal to the number of Common Shares that would have been received if
this Warrant had been exercised in full and the Series A-1 Preferred Shares
received thereupon had been simultaneously converted into Common Shares
immediately prior to such event, and the Exercise Price per share shall be
automatically adjusted to equal the number obtained by dividing (i) the
aggregate purchase price of the Series A-1 Preferred Shares for which this
Warrant was exercisable immediately prior to such redemption or conversion, by
(ii) the number of Common Shares for which this Warrant is exercisable
immediately after such redemption or conversion.
4.3 Reclassification, etc. In the event of any reclassification or change
of the outstanding securities of the Company or of any reorganization of the
Company (or any other corporation the stock or securities of which are at the
time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
Holder, upon the exercise hereof at any time after the consummation of such
reclassification, change, or reorganization shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the exercise
hereof prior to such consummation, the stock or other securities or property to
which such Holder would have been entitled upon such consummation if such Holder
had exercised this Warrant immediately prior thereto, all subject to further
adjustment pursuant to the provisions of this Section 4.
4.4 Other Dilutive Events. In case any event shall occur as to which the
other provisions of this Section 4 are not strictly applicable, but the failure
to make any adjustment to the Exercise Price would not fairly protect the
exercise rights under this Warrant in accordance with the essential intent and
principles hereof (including, without limitation, if there shall be any issuance
of securities by a Group Company which has the effect of diluting the value of
the Warrant Shares), then, in each such case, the Company, in good faith, shall
determine the appropriate adjustment to be made, on a basis consistent with the
essential intent and principles established in this Section 4, necessary to
preserve, without dilution, the exercise rights of this Warrant.
4.5 No Adjustment Above Net Exercise Price. Notwithstanding anything to the
contrary herein, in no event shall the Exercise Price be adjusted to an amount
which would result in the
Holder being required to pay aggregate consideration in respect of the purchase
of all Warrant Shares hereunder that is greater than the product of (i) the
number of Warrant Shares purchasable hereunder at the Effective Date (without
giving effect to any adjustment under this Section 4) and (ii) the Exercise
Price at the Effective Date (without giving effect to any adjustment under this
Section 4).
4.6 Adjustment Certificate. When any adjustment is required to be made
pursuant to this Section 4 to the number of Warrant Shares issuable hereunder or
to the Exercise Price, the Company shall promptly mail to the Holder a
certificate setting forth (i) a brief statement of the facts requiring such
adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and
amount of stock or other securities or property into which this Warrant shall be
exercisable after such adjustment.
SECTION 5 TRANSFERABILITY
5.1 Unregistered Security. The Holder acknowledges that this Warrant, the
Warrant Shares and the Common Shares of the Company have not been registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), and agrees
not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose
of this Warrant, any Warrant Shares issued upon its exercise, or any Common
Shares issued upon conversion of the Warrant Shares in the absence of (i) an
effective registration statement under the Securities Act as to this Warrant,
such Warrant Shares or such Common Shares and registration or qualification of
this Warrant, such Warrant Shares or such Common Shares under any applicable
U.S. federal or state securities law then in effect or (ii) an opinion of
counsel that such registration and qualification are not required. Each
certificate or other instrument for Warrant Shares issued upon the exercise of
this Warrant or Common Shares issued upon conversion of the Warrant Shares shall
bear a legend substantially to the foregoing effect.
5.2 Obligations of Transferees. Each Holder agrees that it will not
transfer securities of the Company unless each transferee agrees in writing to
be bound by all of the provisions of this Section 5.
5.3 Transferability. Subject to the provisions of this Section 5, this
Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of the Warrant with a properly executed assignment (in the form of
Exhibit B hereto) at the principal office of the Company, or at such other
office or agency as the Company may designate by notice in writing to the
Holder.
5.4 Exchange of Warrants. Upon surrender by the Holder of this Warrant,
properly endorsed, to the Company at the principal office of the Company, the
Company will, subject to the provisions of this Section 5, issue and deliver to
or upon the order of such Holder, at the Company's expense, a new Warrant or
Warrants of like tenor, in the name of the Holder or as the Holder may direct,
which Warrant or Warrants, when taken together, shall be exercisable for
aggregate Warrant Shares equal to the number of Warrant Shares for which this
Warrant was exercisable.
5.5 No Impairment. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
SECTION 6 OTHER COVENANTS
6.1 Certification of Financial Results. The Company shall cause the
Auditors to certify Net Revenue, EBITDA and EBIT for the year ending December
31, 2004 on or prior to the earlier of (i) such date as the Auditors shall
complete their audit report in respect of the Company's financial statements for
such year, as required by Article 72(3) of the Company's Articles of
Association, and (ii) such date as is ninety (90) days after the end of such
year.
6.2 Notices of Certain Transactions. In each of the following cases, the
Company shall deliver written notice to the Holder:
(a) the Company shall take a record of the holders of its Series A-1
Preferred Shares (or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to subscribe
for or purchase any shares of stock of any class or any other securities, or to
receive any other right, to subscribe for or purchase any shares of stock of any
class or any other securities, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification of
the capital shares of the Company, any consolidation or merger of the Company,
any consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the surviving
entity), or any transfer of all or substantially all of the assets of the
Company, or
(c) the voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any redemption of the Series A-1 Preferred Shares or mandatory
conversion of the Series A-1 Preferred Shares into Common Shares of the Company,
Such notice shall specify, as applicable, (i) the date on which a record is to
be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, or (ii) the
effective date on which such reorganization, reclassification, consolidation,
merger, transfer, dissolution, liquidation, winding-up, redemption or conversion
is to take place, and the time, if any is to be fixed, as of which the holders
of record of Series A-1 Preferred Shares (or such other stock or securities at
the time deliverable upon such reorganization, reclassification, consolidation,
merger, transfer, dissolution, liquidation, winding-up, redemption or
conversion) are to be determined. Such notice shall be mailed at least thirty
(30) days prior to the record date or effective date for the event specified in
such notice.
6.3 Reservation of Shares. The Company will at all times reserve and keep
available, solely for the issuance and delivery upon the exercise of this
Warrant, such number of Series A-1 Preferred Shares and other shares, securities
and property, as from time to time shall be issuable upon the exercise of this
Warrant.
6.4 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
agreement reasonably satisfactory to the Company to indemnify the Company for
any loss incurred by it in connection therewith or (in the case of mutilation)
upon surrender and cancellation of this Warrant, the Company will issue, in lieu
of this Warrant, a new Warrant of like tenor.
6.5 No Shareholder Rights. Prior to exercise of this Warrant, the Holder
shall not be entitled to any rights of a shareholder with respect to the Warrant
Shares, including (without limitation) the right to vote such Warrant Shares,
receive dividends or other distributions thereon, or exercise preemptive rights.
SECTION 7 MISCELLANEOUS
7.1 Assignment. The terms and conditions of this Warrant shall inure to the
benefit of and be binding upon the respective successors and permitted assigns
of the Holder and the Company. Except as provided in Section 5.3, neither the
Company nor the Holder shall assign any of their rights or obligations hereunder
without the mutual written consent of the other.
7.2 Amendments and Waivers. Any term of this Warrant may be amended, and
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), with the
mutual written consent of the Company and the Holder.
7.3 Notices. All notices, claims, certificates, requests, demands and other
communications under this Warrant shall be made in writing and shall be
delivered to any party hereto by hand or sent by facsimile, or sent, postage
prepaid, by reputable overnight courier services at the address specified below
(or at such other address for such party as shall be specified by like notice),
and shall be deemed given when so delivered by hand, or if sent by facsimile,
upon receipt of a confirmed transmittal receipt, or if sent by overnight
courier, five (5) calendar days after delivery to or pickup by the overnight
courier service. Notices to the Company shall be sent to the principal office of
the Company (or at such other place as the Company shall notify the Holder
hereof in writing). Notices to the Holder shall be sent to the address of the
Holder on the books of the Company (or at such other place as the Holder shall
notify the Company hereof in writing).
7.4 Captions. The section and subsection headings of this Warrant are
inserted for convenience only and shall not constitute a part of this Warrant in
construing or interpreting any provision hereof.
7.5 Governing Law. This Warrant shall be governed by the laws of the Hong
Kong Special Administrative Region, without giving effect to principles of
conflicts of law thereunder.
7.6 Dispute Resolution.
(a) Any dispute, controversy or claim (each, a "DISPUTE") arising out
of or relating to this Warrant, or the interpretation, breach, termination or
validity hereof, shall be resolved at the first instance through consultation
between the parties to such Dispute. Such consultation shall begin immediately
after any party has delivered written notice to any other party to the Dispute
requesting such consultation.
(b) If the Dispute is not resolved within sixty (60) days following
the date on which such notice is given, the Dispute shall be submitted to
arbitration upon the request of any party to the Dispute with notice to each
other party to the Dispute (the "Arbitration Notice").
(c) The arbitration shall be conducted in Hong Kong under the auspices
of the Hong Kong International Arbitration Centre (the "Centre"). There shall be
three (3) arbitrators. Each party to the Dispute shall choose one arbitrator.
The Secretary General of the Centre shall select the third arbitrator, who shall
be qualified to practice law in the Hong Kong Special Administrative
Region. If any of the members of the arbitral tribunal have not been appointed
within thirty (30) days after the Arbitration Notice is given, the relevant
appointment shall be made by the Secretary General of the Centre.
(d) The arbitration proceedings shall be conducted in English and
Chinese. The arbitration tribunal shall apply the Arbitration Rules of the
United Nations Commission on International Trade Law, as in effect at the time
of the arbitration. However, if such rules are in conflict with the provisions
of this Section 7.6, including the provisions concerning the appointment of
arbitrator, the provisions of this Section 7.6 shall prevail.
(e) Each party to the arbitration shall cooperate with each other
party to the arbitration in making full disclosure of and providing complete
access to all information and documents requested by such other party in
connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on such party.
(f) The award of the arbitration tribunal shall be final and binding
upon the parties, and the prevailing party may apply to a court of competent
jurisdiction for enforcement of such award.
(g) The arbitrators shall decide any dispute submitted by the parties
to the arbitration tribunal strictly in accordance with the substantive law of
the Hong Kong Special Administrative Region and shall not apply any other
substantive law.
(h) Any party to the Dispute shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
(i) During the course of the arbitration tribunal's adjudication of
the dispute, this Warrant shall continue to be performed except with respect to
the part in dispute and under adjudication.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized representative.
CHINA NEPSTAR CHAIN DRUGSTORE LTD.
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx (CHINESE CHARACTERS)
Capacity: Director
EXHIBIT A - PURCHASE FORM
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby irrevocably elects to purchase _______ Series A-1 Preferred
Shares covered by such Warrant and herewith makes payment of US$_________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant.
The securities to be acquired by the undersigned will be acquired for
investment for the undersigned's own account, not as a nominee or agent, and the
undersigned has no present intention of selling, granting any participation in
or otherwise distributing the same. The undersigned has not been formed for the
specific purpose of acquiring any of the securities.
[Print Name of Holder]
By:
Name:
Capacity:
Dated:
EXHIBIT B - ASSIGNMENT FORM
FOR VALUE RECEIVED, _________________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant with respect to the number of shares of Series A-1 Preferred Shares
covered thereby set forth below, unto:
NAME OF ASSIGNEE ADDRESS/FACSIMILE NUMBER NO. OF SHARES
---------------- ------------------------ -------------
[Print Name of Holder]
By:
------------------------------------
Name:
Capacity:
Dated:
EXHIBIT D - FORM OF AMENDED AND RESTATED MEMORANDUM AND ARTICLES OF
ASSOCIATION
[Please refer to Exhibit 3.1 of this Registration Statement.]
EXHIBIT E - FORM OF INVESTORS' RIGHTS AGREEMENT
[Please refer to Exhibit 4.4 of this Registration Statement.]
EXHIBIT F - FORM OF SHARE RESTRICTION AGREEMENT
SHARE RESTRICTION AGREEMENT
THIS SHARE RESTRICTION AGREEMENT (this "AGREEMENT"), dated October 6, 2004,
is entered into by and among China Nepstar Chain Drugstore Ltd., an exempted
company organized and existing under the laws of the Cayman Islands (the
"COMPANY"), each of the parties set forth in Schedule A (the "NEPTUNUS
PARTIES"), and each of the investors set forth in Schedule B (the "INVESTORS").
RECITALS
WHEREAS the Company and the Investors are parties to a Securities Purchase
Agreement, dated October 6, 2004 (the "SECURITIES PURCHASE AGREEMENT");
WHEREAS it is a condition precedent under the Securities Purchase Agreement
that the Company, the Investors and the Neptunus Parties enter into this
Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual covenants and agreements set forth herein and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1 INTERPRETATION
1.1 Definitions. Unless otherwise defined in this Agreement, capitalized
terms used herein shall have the following meanings:
"COMMON SHARES" means the Company's common shares, par value US$0.0001
per share.
"COMMON SHARE EQUIVALENTS" means warrants, options and rights
exercisable for Common Shares and instruments convertible or exchangeable
for Common Shares.
"EARNOUT WARRANT" means those certain warrants issued by the Company
pursuant to the Securities Purchase Agreement and any succeeding warrant of
like tenor issued pursuant to any Earnout Warrant.
"EQUITY SECURITIES" means any Common Shares or Common Share
Equivalents.
"HOLDERS" means the Investors, together with the permitted transferees
and assigns of any Holder's rights hereunder.
"HOLDER MAJORITY" means, for any given time, Holders representing a
majority in voting power of the Equity Securities then held by all Holders.
"HONG KONG" means the Hong Kong Special Administrative Region.
"IPO" means a firm-commitment underwritten initial public offering of
the Company's Common Shares on the New York Stock Exchange, the Nasdaq
Stock Market's National Market System, the Main Board of the Hong Kong
Stock Exchange or any other exchange of the recognized international
reputation and standing duly approved by the Company's Board of Directors.
"MANAGERCO" means China Star Chain Ltd., an international business
company organized and existing in the British Virgin Islands.
"NEPTUNUS GROUP" means Shenzhen Neptunus Group Corporation (CHINESE
CHARACTERS), a foreign invested company limited by shares organized and
existing under the laws of the People's Republic of China.
"NEPTUNUSBVI" means China Neptunus Drugstore Holding Ltd., an
international business company organized and existing under the laws of the
British Virgin Islands.
"NEW SECURITIES" means any Equity Securities of the Company; provided
that the term "New Securities" does not include (i) securities issued upon
conversion of the Series A Preferred Shares; (ii) securities issued to
employees, professional consultants, officers or directors of the Company
pursuant to any share option, share purchase or share bonus plan, agreement
or arrangement approved by the Board of Directors of the Company; (iii)
securities issued in a Qualified IPO; (iv) securities issued in connection
with any share split, share dividend or re-capitalization of the Company;
(v) securities to be purchased under the Securities Purchase Agreement, any
Earnout Warrant or the True-up Subscription Agreement; and (vi) as may
otherwise be consented to in writing by a Holder Majority.
"QUALIFIED IPO" means an IPO that values the Company at no less than
US$250,000,000 immediately prior to the IPO and that results in aggregate
proceeds to the Company of US$50,000,000, net of Selling Expenses.
"REDEMPTION AGREEMENT" means that certain Redemption Agreement, of
even date herewith, among the Company, the Holders and certain other
parties.
"SELLING EXPENSES" means, with respect to the issue or sale of any
securities, any expenses payable directly or indirectly by the Company and
any underwriting, brokerage or similar commissions, compensation, discounts
or concessions paid or allowed by the Company in connection with such issue
or sale.
"SERIES A PREFERRED SHARES" means the Company's Series A-1 Preferred
Shares, par value US$0.0001 per share, and Series A-2 Preferred Shares, par
value US$0.0001 per share, issued pursuant to the Securities Purchase
Agreement.
"TRUE-UP SUBSCRIPTION AGREEMENT" means that certain Subscription
Agreement, of even date herewith, between the Company and NeptunusBVI.
"VOTING AGREEMENT" means that certain Voting Agreement, of even date
herewith, among the Company, the Holders and the Neptunus Parties.
1.2 Interpretation. For all purposes of this Agreement, except as otherwise
herein expressly provided, (i) the terms defined in this Section 1 shall have
the meanings assigned to them in this Section 1 and include the plural as well
as the singular, (ii) all references in this Agreement to designated "Sections"
and other subdivisions are to the designated Sections and other subdivisions of
the body of this Agreement, (iii) pronouns of either gender or neuter shall
include, as appropriate, the other pronoun forms, (iv) the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Section or other subdivision, and
(v) all references in this Agreement to designated Schedules, Exhibits and
Annexes are to the Schedules, Exhibits and Annexes attached to this Agreement.
SECTION 2 RESTRICTIONS ON SHARE TRANSFER BY NEPTUNUS PARTIES
2.1 Prohibition on Transfer of Shares. Except as otherwise provided in this
Agreement, the Neptunus Parties will not sell, assign, transfer, pledge,
hypothecate, or otherwise encumber or dispose of in any way, all or any part of
any interest in the Equity Securities now or hereafter owned or held by the
Neptunus Parties. Any sale, assignment, transfer, pledge, hypothecation or other
encumbrance or disposition of the Equity Securities not made in conformance with
this Agreement shall be null and void, shall not be recorded on the books of the
Company, and shall not be recognized by the Company.
2.2 Rights of First Refusal.
(a) Transfer Notice. If at any time a Neptunus Party (a "TRANSFEROR")
proposes to transfer Equity Securities to one or more third parties pursuant to
an understanding with such third parties (a "TRANSFER"), then the Transferor
shall give the Company and each Holder written notice of the Transferor's intent
to make the Transfer (the "TRANSFER NOTICE"), which Transfer Notice shall
include (i) a description of the Equity Securities to be transferred (the
"OFFERED SHARES"), including, without limitation, the number of Equity
Securities to be sold or transferred, (ii) the identity (including name and
address) of any prospective transferee, and (iii) the consideration and the
material terms and conditions upon which the proposed Transfer is to be made.
The Transfer Notice shall certify that the Transferor has received a firm offer
from each prospective transferee and in good faith believes a binding agreement
for the Transfer is obtainable on the terms set forth in the Transfer Notice.
The Transfer Notice shall also include a copy of any written proposal, term
sheet or letter of intent or other agreement relating to the proposed Transfer.
(b) Company's Option. The Company shall have an option for a period of
thirty (30) days from receipt of the Transfer Notice to elect to purchase the
Offered Shares at the same price and subject to the same material terms and
conditions as are described in the Transfer Notice. The Company may exercise
such purchase option and, thereby, purchase all or a portion of the Offered
Shares by notifying the Transferor in writing before expiration of the
thirty-day period as to the number of such shares which it wishes to purchase.
If the Company gives the Transferor notice that it desires to purchase such
shares, then payment for the Offered Shares shall be by check or wire transfer,
against delivery of the Offered Shares to be purchased, at a place agreed upon
between the parties and at the time of the scheduled closing therefor, which
shall be no later than sixty (60) days after the Company's receipt of the
Transfer Notice, unless the Transfer Notice contemplated a later closing with
any prospective third party transferee or unless the value of the purchase price
has not yet been established pursuant to Section 2.2(e).
(c) Additional Transfer Notice. If the Company has declined to
purchase all, or a portion of, the Offered Shares in connection with a proposed
Transfer, then the Transferor shall give each Holder a written "ADDITIONAL
TRANSFER NOTICE," which shall include all of the information and certifications
required in a Transfer Notice, and shall additionally identify the Offered
Shares which the Company has declined to purchase (the "REMAINING SHARES") and
briefly describe the Holders' rights of first refusal with respect to the
proposed Transfer.
(d) Holders' Option.
(i) Each Holder shall have an option for a period of thirty (30)
days from the Holder's receipt of the Additional Transfer Notice to elect
to purchase its respective pro rata share of the Remaining Shares at the
same price and subject to the same material terms and conditions as
described in the Additional Transfer Notice.
(ii) Each Holder may exercise such purchase option and, thereby,
purchase all or any portion of its pro rata share of the Remaining Shares,
by notifying the Transferor and the Company in writing, before expiration
of the thirty-day period as to the number of such shares which it wishes to
purchase. For purposes of this clause (ii), each Holder's pro rata share of
the Remaining Shares shall be a fraction of the Remaining Shares, of which
the number of Equity Securities (assuming the exercise, conversion and
exchange of any Common Share Equivalents) owned by such Holder on the date
of the Transfer Notice
shall be the numerator and the total number of Equity Securities (assuming
the exercise, conversion and exchange of any Common Share Equivalents) held
by all Holders on the date of the Transfer Notice shall be the denominator.
(iii) If any Holder fails to exercise its option to purchase its
pro rata share of the Remaining Shares, the Company shall give written
notice (a "Reallotment Notice") to each Holder who has fully exercised its
option to purchase a pro rata portion of the Remaining Shares. The
Reallotment Notice shall include all of the information and certifications
required in a Transfer Notice and briefly describe the Holders' rights of
reallotment. The Reallotment Notice shall further identify the Remaining
Shares in respect of which any Holder has failed to exercise its right of
first refusal (or in the case where there has been a prior Reallotment
Period, in respect of which any Holder has failed to exercise its right of
reallotment) (the "Reallotment Shares").
(iv) Each Holder entitled to receive a Reallotment Notice (a
"Participating Holder") shall have an option to purchase, at the same price
and subject to the same material terms and conditions as described in any
Reallotment Notice, all or part of its pro rata share of the Reallotment
Shares described in such Reallotment Notice. Such option shall be
exercisable by each Participating Holder by notifying the Company and the
Transferor in writing, within thirty (30) days after delivery to the
Participating Holder of the Reallotment Notice (a "Reallotment Period").
For purposes of this clause (iv), each Participating Holder's pro rata
share of the Reallotment Shares shall be a fraction of the Reallotment
Shares, of which the number of Equity Securities (assuming the exercise,
conversion and exchange of any Common Share Equivalents) owned by such
Participating Holder on the date of the Transfer Notice shall be the
numerator and the total number of Equity Securities (assuming the exercise,
conversion and exchange of any Common Share Equivalents) held by all
Participating Holders on the date of the Transfer Notice shall be the
denominator.
(v) On expiration of any Reallotment Period, the Company shall
issue a new Reallotment Notice to each of the Holders that have exercised
their right of reallotment in such period, and such Holders shall be given
an additional right of reallotment under clause (iv) above, unless either
(x) the Holders have exercised any rights of first refusal and rights of
reallotment with respect to all the Remaining Shares or (y) no Holder shall
have exercised its right of reallotment during such Reallotment Period.
(vi) Each Holder shall be entitled to apportion Remaining Shares
to be purchased among its partners and affiliates, provided that such
Holder notifies the Transferor of such allocation.
(vii) If any Holder exercises its option under this paragraph (d)
to purchase any Remaining Shares, then payment for the Remaining Shares
shall be by check or wire transfer, against delivery of the Remaining
Shares to be purchased at a place agreed by the parties and at the time of
the scheduled closing therefor, which shall be no later than thirty (30)
days after the expiration of any period for exercise by such Holders of
their right of first refusal with respect to the Remaining Shares and all
periods for exercise by the Holders of any right of reallotment, unless the
Additional Transfer Notice contemplated a later closing with any
prospective third party transferee or unless the value of the purchase
price has not yet been established pursuant to Section 2.2(e).
(e) Valuation of Property.
(i) Should the purchase price specified in the Transfer Notice or
Additional Transfer Notice be payable in property other than cash or
evidences of indebtedness, the Company (or the Holders) shall have the
right to pay the purchase price in the form of cash equal in amount to the
value of such property.
(ii) If the Transferor and the Company (or, failing exercise by
the Company of its option under Section 2.2(b), the Holders) cannot agree
on such cash value within ten (10) days after the Company's receipt of the
Transfer Notice (or the Holders' receipt of the Additional Transfer
Notice), the valuation shall be made by an appraiser of recognized
international reputation and standing selected by the Transferor and the
Company (or the Holders) or, if they cannot agree on an appraiser within
twenty (20) days after the Company's receipt of the Transfer Notice (or the
Holders' receipt of the Additional Transfer Notice), each shall select an
appraiser of recognized international reputation and standing and the two
appraisers shall designate a third appraiser of recognized international
reputation and standing, whose appraisal shall be determinative of such
value.
(iii) The cost of such appraisal shall be borne by the
Transferor.
(iv) If the time for the closing of the Company's purchase (or
the Holders' purchase) has expired but for the determination of the value
of the purchase price offered by the prospective transferee(s), such
closing shall be held on or prior to the fifth (5th) business day after
such valuation shall have been made pursuant to this Section 2.2(e).
2.3 Right of Co-Sale.
(a) To the extent the Company and the Holders do not exercise their
respective rights of first refusal (and any right of reallotment) as to all of
the Offered Shares within the time period stipulated in Section 2.2, then
subject to this Section 2.3, the Transferor may sell the Offered Shares as to
which the Company and the Holders did not exercise their rights of first refusal
(the "CO-SALE SHARES").
(b) Within fifteen (15) days after expiration of the time for exercise
by the Company and the Holders of any rights of first refusal hereunder (and any
right of reallotment) in respect of the Offered Shares, the Transferor shall
give written notice to each Holder which has not exercised a right of first
refusal in respect of the Offered Shares, which notice shall indicate the number
of Co-Sale Shares and advise such Holder of its co-sale rights with respect to
such Co-Sale Shares. Each such Holder (a "SELLING HOLDER") that notifies the
Transferor in writing within fifteen (15) days after receipt of the co-sale
notice shall have a right to participate in any sale by the Transferor of the
Co-Sale Shares on the same terms and conditions as specified in the Transfer
Notice. Such Selling Holder's notice to the Transferor shall indicate the number
of Equity Securities the Selling Holder wishes to sell under its right to
participate.
(c) To the extent one or more of the Holders exercise such right of
participation in accordance with the terms and conditions set forth below, the
number of Equity Securities that the Transferor may sell in the Transfer shall
be correspondingly reduced.
(d) Each Selling Holder may elect to sell up to such number of Equity
Securities equal to (assuming the exercise, conversion and exchange of any
Common Share Equivalents) the product of (i) the aggregate number of Common
Shares covered by the Transfer Notice (including
the number of Common Shares that would be issuable upon the exercise, conversion
or exchange of Common Share Equivalents) by (ii) a fraction, the numerator of
which is the number of Common Shares (including the number of Common Shares that
would be issuable upon the exercise, conversion or exchange of Common Share
Equivalents) owned by the Selling Holder on the date of the Transfer Notice, and
the denominator of which is the total number of Common Shares (including the
number of Common Shares that would be issuable upon the exercise, conversion or
exchange of Common Share Equivalents) owned by the Transferor and all of the
Selling Holders on the date of the Transfer Notice.
(e) Each Selling Holder shall effect its participation in the sale by
promptly delivering to the Transferor for transfer to the prospective purchaser
one or more certificates, properly endorsed for transfer, which represent the
type and number of Equity Securities which such Selling Holder elects to sell;
provided, however that if the prospective third-party purchaser objects to the
delivery of Equity Securities in lieu of Common Shares, such Selling Holder
shall convert such Equity Securities into Common Shares and deliver certificates
corresponding to such Common Shares. The Company agrees to make any such
conversion concurrent with the actual transfer of such shares to the purchaser
and contingent on such transfer.
(f) The share certificate or certificates that a Selling Holder
delivers to the Transferor pursuant to Section 2.3(e) shall be transferred to
the prospective purchaser in consummation of the sale of the Equity Securities
pursuant to the terms and conditions specified in the Transfer Notice, and the
Transferor shall concurrently therewith remit to such Selling Holder that
portion of the sale proceeds to which such Selling Holder is entitled by reason
of its participation in such sale.
(g) To the extent that any prospective purchaser prohibits the
participation of a Selling Holder exercising its co-sale rights hereunder in a
proposed Transfer or otherwise refuses to purchase shares or other securities
from a Selling Holder exercising its co-sale rights hereunder, the Transferor
shall not sell to such prospective purchaser any Equity Securities unless and
until, simultaneously with such sale, the Transferor shall purchase such shares
or other securities from such Selling Holder for the same consideration and on
the same terms and conditions as the proposed transfer described in the Transfer
Notice.
2.4 Non-Exercise of Rights.
(a) To the extent that the Company and the Holders have not exercised
their rights to purchase the Offered Shares within the time periods specified in
Section 2.2 and the Holders have not exercised their rights to participate in
the sale of the Offered Shares within the time periods specified in Section 2.3,
the Transferor shall have a period of sixty (60) days from the expiration of
such rights in which to sell the Offered Shares to any third-party transferee
identified in the Transfer Notice so long as (i) the terms and conditions
(including the purchase price) of such sale are no more favorable than those
specified in the Transfer Notice and (ii) such third-party transferee shall have
executed a binding instrument, in form and substance acceptable to a Holder
Majority, assuming all the rights and obligations of the Transferor as a
Neptunus Party under this Agreement, including, without limitation, the
obligations under this Section 2 with respect to any transfer of Equity
Securities by a Neptunus Party. Within fifteen (15) days of entering into any
agreement to sell Offered Shares to a third-party transferee under this Section
2.4, the Transferor shall furnish each Holder with a copy of all agreements
relating to such sale.
(b) In the event the Transferor does not consummate the sale or
disposition of the
Offered Shares or the Remaining Shares within sixty (60) days from the
expiration of such rights, the Company's first refusal rights and the Holders'
first refusal rights and co-sale rights shall continue to be applicable to any
subsequent disposition of the Offered Shares or the Remaining Shares by the
Transferor until such rights lapse in accordance with the terms of this
Agreement.
(c) The exercise or non-exercise of the rights of the Company and the
Holders under this Section 2 to purchase Equity Securities from a Transferor or
participate in the sale of Equity Securities by a Transferor shall not adversely
affect their rights to make subsequent purchases from the Neptunus Parties of
Equity Securities or subsequently participate in sales of Equity Securities by
the Neptunus Parties hereunder.
2.5 Transfers of ManagerCo Shares. Notwithstanding the provisions of
Section 2.2 and Section 2.3, the rights of first refusal and co-sale of the
Holders shall not apply to any transfer to NeptunusBVI of Equity Securities held
as of the date hereof by ManagerCo (the "ManagerCo Shares") pursuant to that
certain Agreement, dated October 6, 2004, between NeptunusBVI and ManagerCo. The
parties hereto acknowledge that NeptunusBVI may subsequently seek to sell all or
part of the ManagerCo Shares to a third party and agree that they shall procure
to cause the Company's Board of Directors to approve such sale so long as (i)
the terms thereof comply with the terms of this Agreement, the Redemption
Agreement, and the Voting Agreement, (ii) it shall be established to the
reasonable satisfaction of a Holder Majority that the Person acquiring the
ManagerCo Shares from NeptunusBVI will be the ultimate beneficial owner of such
shares, and (iii) it shall be established to the reasonable satisfaction of a
Holder Majority that the Person acquiring the ManagerCo Shares is reputable and
creditworthy.
2.6 Prohibited Transfers.
(a) In the event any Neptunus Party should sell any Equity Securities
in contravention of the co-sale rights of the Holders under Section 2.3 (a
"PROHIBITED TRANSFER"), the Holders, in addition to such other remedies as may
be available at law, in equity or hereunder, shall have the put option provided
below, and such Neptunus Party shall be bound by the applicable provisions of
such option.
(b) In the event of a Prohibited Transfer, each Holder shall have the
right to sell to the Neptunus Party the type and number of Equity Securities
equal to the number of Equity Securities such Holder would have been entitled to
transfer to the third-party transferee(s) under Section 2.3 hereof had the
Prohibited Transfer been effected pursuant to and in compliance with the terms
hereof. Such sale shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to the
Neptunus Party shall be equal to the price per share paid by the
third-party transferee(s) to the Neptunus Party in the Prohibited Transfer.
The Neptunus Party shall also reimburse each Holder for any and all fees
and expenses, including legal fees and expenses, incurred pursuant to the
exercise or the attempted exercise of such Holder's rights under Section 2.
(ii) Within ninety (90) days after the later of the dates on
which the Holder
(A) received notice of the Prohibited Transfer or (B) otherwise
becomes aware of
the Prohibited Transfer, such Holder shall, if exercising the option
created hereby, deliver to the Neptunus Party the certificate or
certificates representing shares to be sold under this Section 2.6 by such
Holder, each certificate to be properly endorsed for transfer.
(iii) The Neptunus Party shall, upon receipt of the certificate
or certificates for the shares to be sold by a Holder, pursuant to this
Section 2.6, pay the aggregate purchase price therefor and the amount of
reimbursable fees and expenses, as specified in clause (i), in cash or by
other means acceptable to the Holder.
(iv) Notwithstanding the foregoing, any attempt by a Neptunus
Party to transfer Equity Securities in violation of this Section 2 shall be
void, and the Company agrees it will not effect such a transfer nor will it
treat any alleged transferee(s) as the holder of such shares without the
written consent of a majority in interest of the Holders.
SECTION 3 RESTRICTIONS ON SHARE TRANSFER BY HOLDERS
3.1 Rights of First Offer.
(a) If at any time a Holder (an "OFFERING HOLDER") proposes to
transfer any of its Equity Securities (the "AVAILABLE SECURITIES"), then before
offering such Available Securities to any third party that is not either a
Holder or an affiliate of a Holder, the Offering Holder shall give each of the
Neptunus Parties and the other Holders written notice (the "OFFERING NOTICE") of
the Offering Holder's intent to transfer the Available Securities, which
Offering Notice shall include a description of the Available Securities.
(b) Each of the Neptunus Parties and the other Holders shall have a
right, within ten (10) days after delivery of the Offering Notice, to make an
offer in writing (a "Purchase Offer") to purchase all, but not less than all, of
the Available Securities. Any Purchase Offer shall set forth the consideration
and the material terms and conditions upon which the party making the Purchase
Offer proposes to acquire the Available Securities. Within ten (10) days of
receiving a timely Purchase Offer, the Offering Holder shall accept or decline
the Purchase Offer in writing, and prior to expiration of such 10-day period,
the Purchase Offer shall not be rescinded.
(c) If the Offering Holder shall accept a Purchase Offer, then the
Offering Holder and the party making such Purchase Offer shall use their good
faith efforts to conclude, within sixty (60) days after the date of the Offering
Notice, a sale between them of the Available Securities pursuant to the terms
and conditions of the Purchase Offer. If the Offering Holder and the party
making the Purchase Offer have not timely concluded the sale of the Available
Securities within such 60-day period, the Purchase Offer shall be deemed to have
been rescinded, and neither the party making such Purchase Offer or the Offering
Holder shall have any further obligation to consummate a sale of the Available
Securities pursuant to the terms and conditions of such Purchase Offer.
(d) In respect of any Offering Notice for Available Securities,
following the Release of such Available Securities from the right of first offer
contained in this Section 3, the Offering Holder may either withdraw its
intention to sell the Available Securities or, for a period of 180 days from the
date of the Release, the Offering Holder shall have the right to solicit an
offer from a third party to purchase the Available Securities; provided that the
terms and conditions of any sale of the Available Securities to a third party
shall be more favorable to the Offering Holder than the terms
and conditions contained in any timely Purchase Offer. If the Offering Holder
has not concluded a binding sale and purchase agreement for the Available
Securities within such 180-day period, the Offering Holder shall not further
offer the Available Securities to any third party without first again permitting
the Neptunus Parties and the other Holders to exercise their right of first
offer under this Section 3. In respect of any Offering Notice for Available
Securities, "Release" shall mean the earlier of (i) the date that the 10-day
period for making Purchase Offers hereunder shall expire without the Offering
Holder having received a Purchase Offer, (ii) the date that the Offering Holder
shall have declined to accept all timely Purchase Offers or (iii) the date that
any Purchase Offer accepted by the Offering Holder may subsequently be
rescinded.
SECTION 4 PRE-EMPTIVE RIGHT
4.1 General. The Company hereby grants to each Holder a pre-emptive right
to purchase up to a pro rata share of any New Securities which the Company may,
from time to time, propose to sell and issue. A Holder's "pro rata share," for
purposes of this pre-emptive right, shall be determined according to the number
of Common Shares (assuming the exercise, conversion or exchange of any Common
Share Equivalents) owned by such Holder immediately prior to the issuance of the
New Securities in relation to the total number of Common Shares (assuming the
exercise, conversion or exchange of any Common Share Equivalents) outstanding
immediately prior to the issuance of the New Securities. Each Holder shall
further have a right of over-allotment such that, if any Holder fails to
exercise its right hereunder to purchase its full pro rata share of any New
Securities, any other Holder may purchase any remaining New Securities on a pro
rata basis, determined according to the number of Common Shares (assuming the
exercise, conversion or exchange of any Common Share Equivalents) held by such
other Holder immediately prior to the issuance of the New Securities, in
relation to the number of Common Shares (assuming the exercise, conversion or
exchange of any Common Share Equivalents) held immediately prior to the issuance
of the New Securities by all Holders exercising such right of over-allotment.
4.2 Exercise of Right. In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Holder written notice (an
"Issuance Notice") of such intention, describing the type of New Securities, and
their price and the general terms upon which the Company proposes to issue the
same. Each Holder shall have thirty (30) days after any such Issuance Notice is
delivered to exercise its pre-emptive right under this Section 4 to purchase up
to its pro rata share of such New Securities, for the price and upon the terms
specified in the Issuance Notice, by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased in the exercise
of such right. Upon expiration of such thirty-day period, the Company shall give
each Holder which has exercised its pre-emptive right to purchase its full pro
rata share of such New Securities further written notice, describing any New
Securities with respect to which any Holder has not exercised its pre-emptive
right. Each Holder entitled to receive such notice shall have thirty (30) days
after such further notice is delivered to exercise its right of over-allotment
under this Section 4, for the price and upon the terms specified in the Issuance
Notice, by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased in the exercise of such right of
over-allotment.
4.3 Sales by the Company. In connection with any proposed issuance of New
Securities,
for sixty (60) days after the expiration of any period for exercise by the
Holders of their pre-emptive right and any right of over-allotment under this
Section 4 in respect of such proposed issuance, the Company may sell any New
Securities with respect to which the Holders have not exercised such rights, at
a price and upon terms no more favorable to the purchasers thereof than
specified in the Issuance Notice so long as each of the purchasers of such New
Securities shall have executed a binding instrument, in form and substance
acceptable to a Holder Majority, acceding to all the rights and agreeing to be
bound by all the obligations of a Neptunus Party under this Agreement,
including, without limitation, the obligations under Section 2 with respect to
any transfer of Equity Securities by a Neptunus Party. In the event the Company
has not sold such New Securities within such 60-day period, the Company shall
not thereafter issue or sell any New Securities, without first again offering
such securities to the Holders in the manner provided in Section 4.2 above.
SECTION 5 ASSIGNMENTS AND TRANSFERS
This Agreement and the rights and obligations of the parties hereunder
shall inure to the benefit of, and be binding upon, their respective successors,
assigns and legal representatives. The rights of any Holder hereunder are only
assignable (i) by such Holder to any other Holder, (ii) to a partner or
affiliate of such Holder, or (iii) to an assignee or transferee who holds such
aggregate number of Equity Securities (assuming the exercise, conversion and
exchange of any Common Share Equivalents) after the assignment or transfer as
are equivalent to 6,000,000 Common Shares (as adjusted for stock splits, reverse
stock splits, stock dividends, recapitalizations and the like). Except as
provided above or as required by Section 2.4(a) or Section 4.3, this Agreement
and the rights and obligations of any party hereunder shall not otherwise be
assigned without the mutual written consent of the other parties.
SECTION 6 LEGEND
Each existing or replacement certificate for shares now owned or hereafter
acquired by the Neptunus Parties shall bear the following legend upon its face:
"THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN SHARE RESTRICTION AGREEMENT BY AND AMONG THE
COMPANY AND CERTAIN HOLDERS OF SHARES OF THE COMPANY. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
COMPANY."
The above restrictions on share transfer should also be recorded in a notation
on the share register in the Company's stock books.
SECTION 7 MISCELLANEOUS
7.1 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Hong Kong, without regard to conflicts of laws
principles thereunder.
7.2 Notices. All notices, claims, certificates, requests, demands and other
communications under this Agreement shall be made in writing and shall be
delivered to any party hereto by hand or sent by facsimile, or sent, postage
prepaid, by reputable overnight courier services at the address given for such
party on the signature pages hereof (or at such other address for such party as
shall be specified by like notice), and shall be deemed given when so delivered
by hand, or if sent by facsimile, upon receipt of a confirmed transmittal
receipt, or if sent by overnight courier, five (5) calendar days after delivery
to or pickup by the overnight courier service.
7.3 Term. This Agreement shall terminate upon the closing of a Qualified
IPO.
7.4 Entire Agreement. This Agreement contains the entire understanding of
the parties hereto with respect to the subject matter hereof, supersedes all
other agreements between or among any of the parties with respect to the subject
matter hereof.
7.5 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of each of the parties hereto. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon the parties and
their respective successors and assigns.
7.6 Ownership. Each Neptunus Party represents and warrants that he or it is
the sole legal and beneficial owner of the Equity Securities subject to this
Agreement and that no other person has any interest in such shares.
7.7 Severability. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
7.8 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
the other party may reasonably request to give effect to the terms and intent of
this Agreement.
7.9 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
7.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.11 Language. The governing version of this Agreement is the English
language version. Any translation of this Agreement into Chinese or any other
language is for the convenience of the parties only.
7.12 Dispute Resolution.
(a) Any dispute, controversy or claim (each, a "DISPUTE") arising out
of or relating to this Agreement, or the interpretation, breach, termination or
validity hereof, shall be resolved at the first instance through consultation
between the parties to such Dispute. Such consultation shall begin immediately
after any party has delivered written notice to any other party to the Dispute
requesting such consultation.
(b) If the Dispute is not resolved within sixty (60) days following
the date on which such notice is given, the Dispute shall be submitted to
arbitration upon the request of any party to the Dispute with notice to each
other party to the Dispute (the "ARBITRATION NOTICE").
(c) The arbitration shall be conducted in Hong Kong under the auspices
of the Hong Kong International Arbitration Centre (the "CENTRE"). There shall be
three (3) arbitrators. The claimants in the Dispute shall collectively choose
one arbitrator, and the respondents shall collectively choose one arbitrator.
The Secretary General of the Centre shall select the third arbitrator, who shall
be qualified to practice law in Hong Kong. If any of the members of the arbitral
tribunal have not been appointed within thirty (30) days after the Arbitration
Notice is given, the relevant appointment shall be made by the Secretary General
of the Centre.
(d) The arbitration proceedings shall be conducted in English and
Chinese. The arbitration tribunal shall apply the Arbitration Rules of the
United Nations Commission on International Trade Law, as in effect at the time
of the arbitration. However, if such rules are in conflict with the provisions
of this Section 7.12, including the provisions concerning the appointment of
arbitrator, the provisions of this Section 7.12 shall prevail.
(e) Each party to the arbitration shall cooperate with each other
party to the arbitration in making full disclosure of an providing complete
access to all information and documents requested by such other party in
connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on such party.
(f) The award of the arbitration tribunal shall be final and binding
upon the parties, and the prevailing party may apply to a court of competent
jurisdiction for enforcement of such award.
(g) The arbitrator shall decide any dispute submitted by the parties
to the arbitration strictly in accordance with the substantive law of Hong Kong
and shall not apply any other substantive law.
(h) Any party to the Dispute shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
(i) During the course of the arbitration tribunal's adjudication of
the dispute, this Agreement shall continue to be performed except with respect
to the part in dispute and under adjudication.
7.13 No Third Party Beneficiary. Nothing in this Agreement is intended to
confer upon any Person other than the parties hereto and their respective
successors and permitted assigns any rights, benefits, or obligations hereunder.
IN WITNESS WHEREOF the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the first date written above.
CHINA NEPSTAR CHAIN DRUGSTORE LTD.
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
----------------------------------------
[Print Name of Investor]
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
----------------------------------------
[Print Name of Investor]
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
SCHEDULE A - NEPTUNUS PARTIES
1. China Neptunus Drugstore Holding Ltd., an international business company
organized and existing under the laws of the British Virgin Islands
Class/Series of Stock: Common Shares
Number of Shares: 86,200,000
2. China Star Chain Ltd., an international business company organized and
existing under the laws of the British Virgin Islands
Class/Series of Stock: Common Shares
Number of Shares: 7,200,000
SCHEDULE B - INVESTORS
1. GS Capital Partners 2000, L.P., a limited partnership organized and existing
under the laws of the State of Delaware.
2. GS Capital Partners 2000 Offshore, L.P., a limited partnership organized and
existing under the laws of the Cayman Islands.
3. GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, an entity organized and
existing under the laws of Germany.
4. GS Capital Partners 2000 Employee Fund, L.P., a limited partnership organized
and existing under the laws of the State of Delaware.
5. Xxxxxxx Xxxxx Direct Investment Fund 2000, L.P., a limited partnership
organized and existing under the laws of the State of Delaware.
EXHIBIT G - FORM OF VOTING AGREEMENT
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "AGREEMENT"), dated October 6, 2004, is entered into
by and among China Nepstar Chain Drugstore Ltd., a limited company organized and
existing under the laws of the Cayman Islands (the "COMPANY"), China Neptunus
Drugstore Holding Ltd., an international business company organized and existing
under the laws of the British Virgin Islands ("NEPTUNUSBVI"), China Star Chain
Ltd., an international business company organized and existing under the laws of
the British Virgin Islands ("MANAGERCO"), and each of the parties set forth in
Schedule A (the "INVESTORS").
RECITALS
WHEREAS the parties hereto have entered into a certain Securities Purchase
Agreement, dated October 6, 2004 (as the same may be amended from time to time,
the "SECURITIES PURCHASE AGREEMENT"), pursuant to which the Investors are to
invest in the Company by purchasing certain Series A-1 Preferred Shares, par
value US$0.0001 per share (the "SERIES A-1 PREFERRED SHARES"), of the Company
and certain Series A-2 Preferred Shares, par value US$0.0001 per share (together
with the Series A-1 Preferred Shares, the "SERIES A PREFERRED SHARES"), of the
Company;
WHEREAS it is a condition precedent to the Investors' investment in the
Company under the Securities Purchase Agreement that the Company, the Investors,
NeptunusBVI and ManagerCo enter into this Agreement;
WHEREAS the Company, NeptunusBVI and ManagerCo seek to induce the Investors
to consummate their investment in the Company as contemplated in the Securities
Purchase Agreement, and to such ends, seek to satisfy the conditions precedent
to such investment by entering into this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual covenants and agreements set forth herein and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1 INTERPRETATION
1.1 Definitions. Unless otherwise defined in this Agreement, capitalized
terms used in the English version of this Agreement shall have the following
meanings:
"ACCOUNTING PRINCIPLES" shall mean International Financial Reporting
Standards as promulgated from time to time by the IASB (including, without
limitation, standards and interpretations approved by the IASB and
International Accounting Principles issued under previous constitutions
thereof), together with the IASB's pronouncements thereon from time to
time, all as consistently applied.
"AFFILIATE" means, with respect to any given Person, a Person that
Controls, is Controlled by, or is under common Control with the given
Person.
"AUDITORS" means Ernst & Young, or such successor thereto as may be
from time to time duly appointed by the Company's Board of Directors to
audit the Company's annual financial statements.
"COMMON SHARES" shall mean the Company's Common Shares, par value
US$0.0001 per share.
"COMMON SHARE EQUIVALENTS" shall mean warrants, options and rights
exercisable for Common Shares and instruments convertible or exchangeable
for Common Shares.
"COMPETITOR" means, as of any given time, any Person (i) whose main
line of business at such time is the operation of pharmaceutical retail
stores and (ii) who enjoys at such time, whether individually or through an
Affiliate, more than a 20% interest in the equity or proceeds in or from an
enterprise (whether in the form of a limited liability company, joint stock
company, joint venture, partnership, cooperative arrangement, enterprise,
trust, unincorporated organization or any other entity or organization)
operating pharmaceutical retail stores in the PRC.
"CONSTITUTIONAL DOCUMENTS" means, with respect to any Person, the
Certificate of Incorporation, Memorandum of Association, Articles of
Association, Joint Venture Agreement, or similar constitutive documents for
such Person.
"CONTROL" means, when used with respect to any Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise, and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"EARNOUT WARRANT" means those certain warrants issued by the Company
pursuant to the Securities Purchase Agreement and any succeeding warrant of
like tenor issued pursuant to any Earnout Warrant.
"EBIT" means, with reference to any year, net income (or net loss) for
such year, less any amount credited in arriving at such net income amount
in respect of any extraordinary gain, plus the sum of all amounts deducted
in arriving at such net income amount in respect of (i) interest charges
(net of interest income) accrued on any indebtedness for borrowed money at
the rates applicable to such indebtedness for such year and (ii) Taxes
accrued for such year, all as computed for the Company and the Group
Companies on a consolidated basis in accordance with the Accounting
Principles and as certified by the Auditors.
"EBIT REALIZATION" means, with reference to any year, such percentage
as equals the ratio of EBIT for such year to RMBY30,000,000.
"EBITDA" means, with reference to any year, net income (or net loss)
for such year, less any amount credited in arriving at such net income
amount in respect of any extraordinary gain, plus the sum of all amounts
deducted in arriving at such net income amount in respect of (i) interest
charges (net of interest income) accrued on any indebtedness for borrowed
money at the rates applicable to such indebtedness for such year, (ii)
depreciation of fixed assets and amortization of intangible assets for such
year, and (iii) Taxes accrued for such year, all as computed for the
Company and the Group Companies on a consolidated basis in accordance with
the Accounting Principles and as certified by the Auditors.
"EBITDA REALIZATION" means, with reference to any year, such
percentage as equals the ratio of EBITDA for such year to RMBY80,000,000.
"ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise.
"EQUITY SECURITIES" shall mean any Common Shares or Common Share
Equivalents.
"GROUP COMPANY" means any Person that is not a natural Person and that
is Controlled by the Company.
"GS CAPITAL PARTNERS" means GS Capital Partners 2000, L.P., a limited
partnership organized and existing under the laws of the State of Delaware.
"HOLDERS" shall mean the Investors, together with the permitted
transferees and assigns of any Holder's rights hereunder.
"HOLDER MAJORITY" means, for any given time, Holders representing a
majority in voting power of the Equity Securities then held by all Holders.
"IASB" means the International Accounting Standards Board.
"IPO" means a firm-commitment underwritten initial public offering of
the Company's Common Shares on the New York Stock Exchange, the Nasdaq
Stock Market's National Market System, the Main Board of the Hong Kong
Stock Exchange or any other exchange of the recognized international
reputation and standing duly approved by the Company's Board of Directors.
"LIABILITIES" means, with respect to any Person, liabilities owing by
such Person of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due.
"MILESTONE WARRANT" means that certain warrant, dated the date of the
execution date of the Securities Purchase Agreement, granted by the Company
to the NeptunusBVI.
"NET REVENUE" means, with respect to any year, revenues for such year,
exclusive of any value-added Tax, less any returns, discounts or allowances
for such year, all as computed for the Company and the Group Companies on a
consolidated basis in accordance with the Accounting Principles and as
certified by the Auditors.
"NET REVENUE REALIZATION" means, with reference to any year, such
percentage as equals the ratio of Net Revenue for such year to
RMBY1,320,000,000.
"PERSON" means any natural person, limited liability company, joint
stock company, joint venture, partnership, enterprise, trust,
unincorporated organization or any other entity or organization.
"PRC" means the People's Republic of China, but solely for purposes of
this Agreement, excluding the Hong Kong Special Administrative Region, the
Macau Special Administrative Region and the islands of Taiwan.
"QUALIFIED IPO" means an IPO that values the Company at no less than
US$250,000,000 immediately prior to the IPO and that results in aggregate
proceeds to the Company of US$50,000,000, net of Selling Expenses.
"REDEMPTION AGREEMENT" means that certain Redemption Agreement, to be
entered into on or around the date hereof, among the Company, Ankeen
Enterprises Limited, NeptunusBVI, ManagerCo and the Investors, as the same
may be amended from time to time.
"SELLING EXPENSES" means, with respect to the issue or sale of any
securities, any expenses payable directly or indirectly by the Company and
any underwriting, brokerage or similar commissions, compensation, discounts
or concessions paid or allowed by the Company in connection with such issue
or sale.
"TAXES" means any national, provincial or local income, sales and use,
excise, franchise, real and personal property, gross receipt, capital
stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or charge imposed by any Government
Entity, any interest and penalties (civil or criminal) related thereto or
to the nonpayment thereof, and any loss or Tax Liability incurred in
connection with the determination, settlement or litigation of any
Liability arising therefrom.
"TAX RETURNS" means any tax return, declaration, reports, estimates,
claim for refund, claim for extension, information returns, or statements
relating to Taxes, including any schedule or attachment thereto.
"TRUE-UP SUBSCRIPTION AGREEMENT" means that certain Subscription
Agreement, dated the date hereof, between the Company and NeptunusBVI.
1.2 Interpretation. For all purposes of this Agreement, except as otherwise
expressly herein provided, (i) the terms defined in Section 1 shall have the
meanings assigned to them in Section 1 and include the plural as well as the
singular, (ii) all accounting terms not otherwise defined herein have the
meanings assigned under the Accounting Principles, (iii) all references in this
Agreement to designated "Sections" and other subdivisions are to the designated
Sections and other subdivisions of the body of this Agreement, (iv) pronouns of
either gender or neuter shall include, as appropriate, the other pronoun forms,
(v) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section or
other subdivision, and (vi) all references in this Agreement to designated
Schedules, Exhibits and Annexes are to the Schedules, Exhibits and Annexes
attached to this Agreement.
SECTION 2 BOARD OF DIRECTORS
2.1 Board Size. The parties hereto shall take such action as is necessary
such that the Board of Directors for each of the Company and the Group Companies
shall consist of five (5) directors. In the case of any Group Company where, as
of the date hereof, the Board of Directors does not consist of five (5)
directors, the Company shall take such action as is necessary to remedy such
situation within thirty (30) days after the date hereof.
2.2 Board Composition.
(a) Subject to paragraph (b) below, the composition of the Board of
Directors for each of the Company and the Group Companies shall be determined as
follows:
(1) For so long as the Holders shall continue to hold any Equity
Securities, a Holder Majority shall have the right to nominate, from time to
time, individuals to occupy two of the five positions on the Board of Directors
of each of the Company and the Group Companies; provided that for so long as GS
Capital Partners shall continue to hold any Equity Securities, (i) it shall have
the right to nominate, from time to time, individuals to occupy one of the five
positions on the Board of Directors of each of the Company and the Group
Companies and (ii) a Holder Majority shall have the right to nominate, from time
to time, individuals to occupy only one of the five positions on the Board of
Directors of each of the Company and the Group Companies.
(2) For so long as NeptunusBVI shall continue to hold any Equity
Securities, NeptunusBVI shall have the right to nominate, from time to time,
individuals to occupy two of the five positions on the Board of Directors of
each of the Company and the Group Companies.
(3) For so long as both NeptunusBVI and the Holders shall continue to hold
Equity Securities, the Chief Executive Officer of the Company shall occupy one
of the five positions on the Board of Directors of each of the Company and the
Group Companies.
(4) The balance, if any, of the positions on the Board of Directors of any
of the Company or the Group Companies shall be agreed by shareholders of the
Company representing a majority in voting power of the Company's Equity
Securities.
(b) From the occurrence of a Work-Out Trigger, the composition of the Board
of Directors of each of the Company and the Group Companies shall be determined
as follows:
(1) For so long as GS Capital Partners shall continue to hold any Equity
Securities, it shall have the right to nominate, from time to time, individuals
to occupy one of the five positions on the Board of Directors of each of the
Company and the Group Companies.
(2) For so long as the Holders shall continue to hold any Equity
Securities, a Holder Majority shall have the right to nominate, from time to
time, individuals to occupy the balance of the positions on the Board of
Directors of each of the Company and the Group Companies.
(3) From such time as there shall cease to be Holders holding any Equity
Securities, the positions on the Board of Directors of any of the Company or the
Group Companies shall be agreed by shareholders of the Company representing a
majority in voting power of the Company's Equity Securities.
2.3 Election and Removal of Directors.
(a) Upon the death, resignation, removal or incapacity of any director
nominated as of right hereunder to the Board of Directors of any of the Company
or the Group Companies by any party hereto, such party shall be entitled to
nominate such director's replacement to the applicable Board of Directors. Upon
the death, resignation, removal or incapacity of any director nominated as of
right hereunder to the Board of Directors of any of the Company or the Group
Companies by a Holder Majority, a Holder Majority shall be entitled to nominate
such director's replacement to the
applicable Board of Directors. Any director nominated as of right hereunder by
any party hereto to the Board of Directors of any of the Company or the Group
Companies shall be removed from office upon motion by such party. Any director
nominated as of right hereunder by a Holder Majority to the Board of Directors
of any of the Company or the Group Companies shall be removed from office upon
motion by a Holder Majority. Except as provided in paragraph (c) below, (i) no
director appointed by any party as of right hereunder shall be removed from the
Board of Directors of any of the Company or the Group Companies unless the
appointing party consents to the removal and (ii) no director appointed by a
Holder Majority as of right hereunder shall be removed from the Board of
Directors of any of the Company or the Group Companies unless a Holder Majority
consents to the removal.
(b) Each party agrees to vote all Equity Securities owned by it in favor of
the election of any director nominated to the Board of Directors of the Company
pursuant to this Section 2. The Company agrees to take such action, and each
other party hereto agrees to procure the Company to take such action, as is
necessary to cause the election of any director nominated to the Board of
Directors of any Group Company pursuant to this Section 2. Upon a motion to
remove any director from the Board of Directors of the Company in accordance
with this Section 2, each party agrees to vote all Equity Securities owned
thereby to effect removal of such director from the Board of Directors of the
Company. Upon a motion to remove any director from the Board of Directors of any
Group Company in accordance with this Section 2, the Company agrees to take such
action, and each other party hereto agrees to procure the Company to take such
action, as is necessary to cause the removal of such director from the
applicable Board of Directors.
(c) Any director nominated by a party hereto as of right hereunder to a
position on the Board of Directors of any of the Company or the Group Companies,
following such time as the party shall cease to hold the right hereunder to
nominate individuals to occupy such position, shall be promptly removed
therefrom as if a motion had been duly made for such removal under this Section
2. Any director nominated by a Holder Majority as of right hereunder to a
position on the Board of Directors of any of the Company or the Group Companies,
following such time as a Holder Majority shall cease to hold the right hereunder
to nominate individuals to occupy such position, shall be promptly removed
therefrom as if a motion had been duly made for such removal under this Section
2.
(d) For so long as Section 2.2(a)(3) shall continue to apply, (i) the
acting Chief Executive Officer of the Company shall continue to serve on the
Board of Directors of each of the Company and the Group Companies and shall not
be removed from such position and (ii) upon the death, resignation, removal or
incapacity of the Chief Executive Officer of the Company, each party agrees to
vote all Equity Securities owned by it, and the Company agrees to take such
action as is necessary, such that the succeeding Chief Executive Officer shall
be elected to the Board of Directors of each of the Company and the Group
Companies in place of the departing Chief Executive Officer.
(e) Xxxxx X.X. Xxxx shall hereby be deemed nominated to the Board of
Directors of the Company by GS Capital Partners. Xxxxxxxxx Xxx shall hereby be
deemed nominated to the Board of Directors of the Company by a Holder Majority.
Xxxxx Xxxxx, Xxxx Xxxxxx and Qian Shunyao shall hereby be deemed nominated to
the Board of Directors of the Company by NeptunusBVI.
2.4 Work-Out Trigger. For purposes of this Agreement, a "WORK-OUT TRIGGER"
shall be deemed to have occurred in any of the following events: (i) the average
of Net Revenue Realization, EBITDA Realization and EBIT Realization, as
certified by the Auditors for the year ending December 31, 2005, is less than
70%; (ii) the Auditors shall have failed to certify Net
Revenue Realization, EBITDA Realization and EBIT Realization for the year ending
December 31, 2005 within ninety (90) days after the end of such year or (iii)
the Company shall fail to timely pay any amount that shall become due and
payable under the Redemption Agreement in respect of the repurchase of Series A
Preferred Shares.
SECTION 3 PROTECTIVE PROVISIONS
Notwithstanding anything to the contrary in the Constitutional Documents of
the Company or any Group Company, the parties hereto shall ensure that none of
the Company or the Group Companies shall take any of the actions described below
unless approved in a resolution adopted by the affirmative vote of (or consented
to in writing by) the holders of more than fifty percent (50%) in voting power
of the Series A Preferred Shares then issued and outstanding:
(1) A material change to the objectives and principal business of the
Company or any Group Company outside the retailing of pharmaceuticals.
(2) Any change in the number of directors permitted to serve on the Board
of Directors of the Company or any Group Company other than as required by
Section 2.1.
(3) The winding up, dissolution or liquidation of any of the Company or the
Group Companies.
(4) The issuance, sale, offer to sell, redemption or acquisition by the
Company or any Group Company of any equity interest therein or equity
derivatives, including any options, warrants or other interests representing, or
convertible into, an equity interest therein or a right to obtain an equity
interest therein or rights equivalent thereto, except: (i) securities issued
upon conversion of the Series A Preferred Shares; (ii) securities to be issued
under the Securities Purchase Agreement; (iii) securities issued pursuant to any
Earnout Warrant; (iv) securities issued pursuant to the Milestone Warrant; (v)
securities issued pursuant to the True-Up Subscription Agreement or (vi) the
repurchase of Series A Preferred Shares pursuant to the Redemption Agreement.
(5) The payment or declaration of a distribution or dividend with respect
to any of the share capital of the Company or any Group Company except for (i)
any redemption of the Series A Preferred Shares pursuant to the Redemption
Agreement, (ii) any distribution payable with respect to the Series A Preferred
Shares upon conversion thereof, whether in the way of payment for fractional
shares or otherwise; or (iii) any distribution or dividend with respect to which
the sole recipient of any proceeds therefrom will be the Company or any Group
Company.
(6) The alteration or re-organization of the share capital of the Company
or any Group Company, including, without limitation, any increase, reduction or
cancellation of authorized share capital or any consolidation, subdivision or
conversion of, or any alteration of the rights in respect of, any share capital.
(7) Except as specifically contemplated in the Securities Purchase
Agreement and the ancillary documents thereto, the entry into any transaction or
series of transactions between (or the termination, extension, continuation
after expiry, renewal, amendment, variation or waiver of any term under
agreement with respect to any transaction or series of transactions) (i) which
is between, the Company or any Group Company, on the one hand, and the holder of
any equity interest in the Company or any Group Company (other than with respect
to any equity interest held therein by the
Company or another Group Company), or any director, officer or employee of the
Company or any Group Company, or any director, officer or employee of the
Company's Affiliates, on the other hand, and (ii) which is not in the ordinary
course of business or for which the aggregate value exceeds the equivalent of
RMBY1,000,000.
(8) The adoption of the annual budget, operating plan for each of the
Company and the Group Companies.
(9) The selection of, and any change in, the Company's Auditors or the
auditors for any Group Company.
(10) The selection of, and any change in, any Person retained by the
Company or any Group Company (other than employees hired thereby in the ordinary
course) to provide Tax advisory services thereto or to assist in the preparation
of Tax Returns therefor.
(11) Any significant change in the accounting principles of the Company or
any Group Company, except as required by applicable laws or regulations.
(12) The timing and circumstances of any proposed initial public offering
by the Company or any Group Company other than a Qualified IPO.
(13) The sale, transfer, lease, assignment, parting with or disposal by the
Company or any Group Company, whether directly or indirectly, of all or
substantially all of the property, assets or revenues of the Company or such
Group Company. except as required by the Redemption Agreement.
(14) The merger, consolidation, reorganization, or amalgamation of the
Company or any Group Company with or into any other Person or any scheme of
arrangement or other business combination with or into any other Person
(15) The purchase or other acquisition by any of the Company or the Group
Companies, or any combination of the foregoing, of another Person or all (or
substantially all) of the business and/or assets of another Person.
(16) The adoption of any amendment to the Constitutional Documents of the
Company or any Group Company.
(17) The appointment or removal of any senior member of management for any
of the Company or the Group Companies, including, without limitation, the chief
executive officer, chief financial officer or chief operating officer of the
Company or any Group Company.
(18) As among all the employees of the Company and the Group Companies, any
increase in the compensation of any of the five most highly compensated
employees by more than 15% in any twelve-month period, whether in the form of
cash, shares, options or other cash or non-cash consideration.
(19) Any capital commitment on the part of any of the Company or the Group
Companies, or any combination of the foregoing (i) in excess of RMBY5,000,000
where incurred in a single transaction or a series of related transactions or
(ii) in excess of RMBY15,000,000 where taken together with all other capital
commitments undertaken by the Company and the Group Companies within the
immediately preceding twelve-month period.
(20) Any borrowing by any of the Company or the Group Companies, or any
combination of the foregoing, whether in a single transaction or a series of
related transactions, which exceeds the equivalent of RMBY5,000,000. For
purposes of this paragraph, "borrowing" shall include money raised in any
transaction or series of related transactions on acceptances or deposits or by
discounting, factoring, finance leases, hire purchase, sale and lease-back, sale
and repurchase and any other financing arrangements which are intended to
achieve the same or substantially similar commercial effect.
(21) The creation of any mortgage, charge, pledge, lien or other
encumbrance with respect to assets of any of the Company or the Group Companies
other than in the ordinary course of business or as imposed by operation of law.
(22) The giving of any guarantee or indemnity in excess of the equivalent
of RMBY1,000,000 by any of the Company or the Group Companies, or any
combination of the foregoing.
(23) The commencement or settlement of litigation involving the Company or
any Group Company.
(24) The formation of any committee of the Board of Directors of the
Company or any Group Company and any changes to the powers granted to any such
committee.
(25) The entry into transaction or series of related transactions pursuant
to which the Company, directly or indirectly, gives up Control over any Group
Company.
(26) The establishment of any new Group Company or subsidiary by, or entry
into any joint venture by, any of the Company or the Group Companies.
(27) The re-domestication, continuance or removal of the Company or any
Group Company to any other jurisdiction.
(28) The prescription of any regulation in general meeting that would limit
the powers of the Board of Directors of any of the Company or the Group
Companies.
(29) The entry into any transaction or series of related transactions by
any of the Company or the Group Companies, or by any combination of the
foregoing, which has as an objective and/or the effect of securing a tax benefit
therefor.
(30) The tax-motivated restructuring of any of the Company or the Group
Companies, or of any combination of the foregoing, or of the business,
operations or practices thereof.
SECTION 4 ASSIGNMENTS AND TRANSFERS; NO THIRD PARTY BENEFICIARIES
4.1 Prohibition on Transfer of Shares. None of the parties hereto shall
sell, assign, transfer, pledge, hypothecate, or otherwise encumber or dispose of
in any way, all or any part of any interest in any Equity Securities now or
hereafter owned or held thereby unless the Person to whom such Equity Securities
are sold, assigned, transferred, pledged, hypothecated or otherwise encumbered
or disposed of shall have entered into a binding instrument, in form and
substance satisfactory to a Holder Majority, acceding to the terms of this
Agreement as if it were an original party hereto. Any sale, assignment,
transfer, pledge, hypothecation or other encumbrance or disposition of any of
the
capital shares of the Company not made in conformance with this Agreement shall
be null and void, shall not be recorded on the books of the Company, and shall
not be recognized by the Company.
4.2 Assignment. This Agreement and the rights and obligations of the
parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives. The rights of any
Holder hereunder shall be assignable by such Holder (i) to any other Holder,
(ii) to a partner or Affiliate of such Holder, or (iii) to an assignee or
transferee who holds such aggregate number of Equity Securities (assuming the
exercise, conversion and exchange of any Common Share Equivalents) after the
assignment or transfer as are equivalent to 6,000,000 Common Shares (as adjusted
for stock splits, reverse stock splits, stock dividends, recapitalizations and
the like). Except as provided above or as required by Section 4.1, this
Agreement and the rights and obligations of any party hereunder shall not
otherwise be assigned without the mutual written consent of the other parties.
SECTION 5 LEGEND
Each existing or replacement certificate for capital shares of the Company now
owned or hereafter acquired by any party hereto shall bear the following legend
upon its face:
"THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN VOTING AGREEMENT BY AND AMONG THE COMPANY AND
CERTAIN OTHER PARTIES. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY."
The above restrictions on share transfer should also be recorded in a notation
on the Company's share register.
SECTION 6 MISCELLANEOUS
6.1 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Hong Kong Special Administrative Region,
without regard to conflicts of laws principles thereunder.
6.2 Termination. This Agreement shall terminate upon the closing of a
Qualified IPO. The rights of a Holder Majority under Section 3(4), Section 3(8),
Section 3(12), Section 3(15), Section 3(17), Section 3(18), Section 3(19),
Section 3(20), Section 3(21), Section 3(22), Section 3(23) and Section 3(26)
shall terminate at such time as Holders that qualify as Competitors shall hold
aggregate Equity Securities representing a majority in voting power of the
Equity Security then held by all Holders.
6.3 Dispute Resolution.
(a) Any dispute, controversy or claim (each, a "DISPUTE") arising out of or
relating to this Agreement, or the interpretation, breach, termination or
validity hereof, shall be resolved at the first instance through consultation
between the parties to such Dispute. Such consultation shall begin immediately
after any party has delivered written notice to any other party to the Dispute
requesting such consultation.
(b) If the Dispute is not resolved within sixty (60) days following the
date on which such notice is given, the Dispute shall be submitted to
arbitration upon the request of any party to the Dispute with notice to each
other party to the Dispute (the "ARBITRATION NOTICE").
(c) The arbitration shall be conducted in Hong Kong under the auspices of
the Hong Kong International Arbitration Centre (the "CENTRE"). There shall be
three (3) arbitrators. The claimants in the Dispute shall collectively choose
one arbitrator, and the respondents shall collectively choose one arbitrator.
The Secretary General of the Centre shall select the third arbitrator, who shall
be qualified to practice law in the Hong Kong Special Administrative Region. If
any of the members of the arbitral tribunal have not been appointed within
thirty (30) days after the Arbitration Notice is given, the relevant appointment
shall be made by the Secretary General of the Centre.
(d) The arbitration proceedings shall be conducted in English and Chinese.
The arbitration tribunal shall apply the Arbitration Rules of the United Nations
Commission on International Trade Law, as in effect at the time of the
arbitration. However, if such rules are in conflict with the provisions of this
Section 6.3, including the provisions concerning the appointment of arbitrator,
the provisions of this Section 6.3 shall prevail.
(e) Each party to the arbitration shall cooperate with each other party to
the arbitration in making full disclosure of and providing complete access to
all information and documents requested by such other party in connection with
such arbitration proceedings, subject only to any confidentiality obligations
binding on such party.
(f) The award of the arbitration tribunal shall be final and binding upon
the parties, and the prevailing party may apply to a court of competent
jurisdiction for enforcement of such award.
(g) The arbitrators shall decide any dispute submitted by the parties to
the arbitration tribunal strictly in accordance with the substantive law of the
Hong Kong Special Administrative Region and shall not apply any other
substantive law.
(h) Any party to the Dispute shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
(i) During the course of the arbitration tribunal's adjudication of the
dispute, this Agreement shall continue to be performed except with respect to
the part in dispute and under adjudication.
6.4 Language. The governing version of this Agreement is the English
language version. Any translation of this Agreement into Chinese or any other
language is for the convenience of the parties hereto only.
6.5 Amendments. Except as otherwise permitted herein, this Agreement and
its provisions may be amended, changed, waived, discharged or terminated only by
a writing signed by each of the parties hereto.
6.6 Notices. All notices, claims, certificates, requests, demands and other
communications under this Agreement shall be made in writing and shall be
delivered to any party hereto by hand or sent by facsimile, or sent, postage
prepaid, by reputable overnight courier services at the address given for such
party on the signature pages hereof (or at such other address for such party as
shall
be specified by like notice), and shall be deemed given when so delivered by
hand, or if sent by facsimile, upon receipt of a confirmed transmittal receipt,
or if sent by overnight courier, five (5) calendar days after delivery to or
pickup by the overnight courier service.
6.7 Further Assurances. Each party hereto shall do and perform, or cause to
be done and performed, all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party may reasonably request to give effect to the terms and intent of
this Agreement. In the event of any conflict or inconsistency between any of the
terms of this Agreement and any of the terms of the Constitutional Documents for
any of the Company or the Group Companies, the terms of this Agreement shall
prevail, and accordingly, the parties hereto shall exercise all voting and other
rights and powers to procure any required alteration to such Constitutional
Documents to resolve such conflict or inconsistency.
6.8 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior written or oral understandings or agreements.
6.9 Severability. If any provision of this Agreement shall be held invalid
or unenforceable to any extent, the remainder of this Agreement shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
6.10 Remedies Cumulative. The rights and remedies available under this
Agreement or otherwise available shall be cumulative of all other rights and
remedies and may be exercised successively.
6.11 Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.12 No Third Party Beneficiary. Nothing in this Agreement is intended to
confer upon any Person other than the parties hereto and their respective
successors and permitted assigns any rights, benefits, or obligations hereunder.
[The remainder of this page has been left intentionally blank.]
IN WITNESS WHEREOF the parties hereto have executed, or caused their duly
authorized representatives to execute, this Agreement as of the first date
written above.
CHINA NEPSTAR CHAIN DRUGSTORE LTD.
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
CHINA NEPTUNUS DRUGSTORE HOLDING LTD.
----------------------------------------
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
CHINA STAR CHAIN LTD.
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
----------------------------------------
[Print Name of Investor]
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
SCHEDULE A - INVESTORS
1 GS Capital Partners 2000, L.P., a limited partnership organized and existing
under the laws of the State of Delaware.
2 GS Capital Partners 2000 Offshore, L.P., a limited partnership organized and
existing under the laws of the Cayman Islands.
3 GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, an entity organized and
existing under the laws of Germany.
4 GS Capital Partners 2000 Employee Fund, L.P., a limited partnership organized
and existing under the laws of the State of Delaware.
5 Xxxxxxx Xxxxx Direct Investment Fund 2000, L.P., a limited partnership
organized and existing under the laws of the State of Delaware.
EXHIBIT H - FORM OF CLAWBACK RIGHTS AGREEMENT
CLAWBACK RIGHTS AGREEMENT
THIS CLAWBACK RIGHTS AGREEMENT (this "AGREEMENT"), dated October 6, 2004,
is entered into by and among China Nepstar Chain Drugstore Ltd., an exempted
company organized and existing under the laws of the Cayman Islands (the
"COMPANY"), China Neptunus Drugstore Holding Ltd., an international business
company organized and existing under the laws of the British Virgin Islands
("NEPTUNUSBVI"), Xxxxx Xxxxx (CHINESE CHARACTERS), of 28th Floor, Tower A,
Neptunus Building, Nanyou Avenue, Nanshan District, Shenzhen, Guangdong
Province, the People's Republic of China, and each of the parties set forth in
Schedule A (the "INVESTORS").
RECITALS
WHEREAS, as of the date hereof, Neptunus BVI holds 86,200,000 of the
Company's Common Shares;
WHEREAS NeptunusBVI has been established by Xx. Xxxxx to invest in and hold
an interest in the Company and, subject to the terms and conditions of this
Agreement, it is intended that, as of any given time, Xx. Xxxxx should be the
ultimate beneficial owner of all the Nepstar Shares (the "AGREED BENEFICIAL
INTEREST");
WHEREAS the Company, NeptunusBVI and the Investors are parties to a
Securities Purchase Agreement, dated October 6, 2004 (the "SECURITIES PURCHASE
AGREEMENT");
WHEREAS it is a condition precedent under the Securities Purchase Agreement
that the Company, NeptunusBVI and Xx. Xxxxx enter into this Agreement;
WHEREAS the Company, NeptunusBVI and Xx. Xxxxx seek to induce the Investors
to consummate their investment in the Company as contemplated in the Securities
Purchase Agreement, and to such ends, seek to satisfy the conditions precedent
to such investment by entering into this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual covenants and agreements set forth herein and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1 INTERPRETATION
1.1 Definitions. Unless otherwise defined in this Agreement, capitalized
terms used in this Agreement shall have the following meanings:
"ACCOUNTING PRINCIPLES" shall mean International Financial Reporting
Standards as promulgated from time to time by the IASB (including, without
limitation, standards and interpretations approved by the IASB and
International Accounting Principles issued under previous constitutions
thereof), together with the IASB's pronouncements thereon from time to
time, all as consistently applied.
"AFFILIATE" means, with respect to any given Person, a Person that
Controls, is Controlled by, or is under common Control with the given
Person.
"AGREED BENEFICIAL OWNER" means, as of the date hereof, Xxxxx Xxxxx
and, subsequently, such Person as Xxxxx Xxxxx may transfer all of his
interest in NeptunusBVI in accordance with Section 3.
"ANCILLARY DOCUMENTS" has the meaning ascribed thereto in the
Securities Purchase Agreement.
"COMMON SHARES" means the Common Shares, par value US$0.0001 per
share, of the Company.
"COMMON SHARE EQUIVALENTS" means warrants, options and rights
exercisable for Common Shares and instruments convertible or exchangeable
for Common Shares.
"CONTROL" means, when used with respect to any Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise, and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"DEBTOR RELIEF LAW" means any laws relating to the liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or
similar debtor relief in any applicable jurisdiction from time to time in
effect and affecting the rights of creditors generally.
"ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise.
"EQUITY SECURITIES" means any Common Shares or Common Share
Equivalents.
"HOLDERS" means, the Investors, together with the permitted
transferees and assigns of any Holder.
"HOLDER MAJORITY" means, for any given time, Holders representing a
majority in voting power of the Series A Preferred Shares then held by all
Holders.
"HONG KONG" means the Hong Kong Special Administrative Region.
"IASB" means the International Accounting Standards Board.
"IPO" means a firm-commitment underwritten initial public offering of
the Company's Common Shares on the New York Stock Exchange, the Nasdaq
Stock Market's National Market System, the Main Board of the Hong Kong
Stock Exchange or any other exchange of the recognized international
reputation and standing duly approved by the Company's Board of Directors.
"LIABILITIES" means, with respect to any Person, liabilities owing by
such Person of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due.
"NEPSTAR SHARES" means, as of any given time, all Common Shares of the
Company held by NeptunusBVI.
"PERSON" means any natural person, limited liability company, joint
stock company, joint venture, partnership, enterprise, trust,
unincorporated organization or any other entity or organization.
"PRC" means the People's Republic of China, solely for purposes of
this Agreement, excluding Hong Kong, the Macau Special Administrative
Region and the islands of Taiwan.
"QUALIFIED IPO" means an IPO that values the Company at no less than
US$250,000,000 immediately prior to the IPO and that results in aggregate
proceeds to the Company of US$50,000,000, net of Selling Expenses.
"SELLING EXPENSES" means, with respect to the issue or sale of any
securities, any expenses payable directly or indirectly by the Company and
any underwriting, brokerage or similar commissions, compensation, discounts
or concessions paid or allowed by the Company in connection with such issue
or sale.
"SERIES A PREFERRED SHARES" means the Series A-1 Preferred Shares, par
value US$0.0001 per share, of the Company and the Series A-2 Preferred
Shares, par value US$0.0001 per share, of the Company.
1.2 Interpretation. For all purposes of this Agreement, except as herein
otherwise expressly provided, (i) the terms defined in Section 1 shall have the
meanings assigned to them in Section 1 and include the plural as well as the
singular, (ii) all accounting terms not otherwise defined herein have the
meanings assigned under the Accounting Principles, (iii) all references in this
Agreement to designated "Sections" and other subdivisions are to the designated
Sections and other subdivisions of the body of this Agreement, (iv) pronouns of
either gender or neuter shall include, as appropriate, the other pronoun forms,
(v) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section or
other subdivision, and (vi) all references in this Agreement to designated
Schedules, Exhibits and Annexes are to the Schedules, Exhibits and Annexes
attached to this Agreement.
SECTION 2 PROHIBITION ON TRANSFERS OR INDEBTEDNESS
2.1 Transfer of Interest. Except as provided in Section 3, the Agreed
Beneficial Owner will not sell, assign, transfer, pledge, hypothecate, or
otherwise permit to be encumbered or dispose of in any way, all or any part of
any interest in NeptunusBVI now or hereafter owned or held by the Agreed
Beneficial Owner. Any sale, assignment, transfer, pledge, hypothecation or other
encumbrance or disposition of any interest in NeptunusBVI not made in
conformance with this Agreement shall be null and void, shall not be recorded on
the books of NeptunusBVI, and shall not
be recognized by NeptunusBVI.
2.2 Indebtedness. NeptunusBVI shall not create, incur, assume, guaranty or
otherwise suffer to exist any Liability other than (i) pursuant to this
Agreement, the Securities Purchase Agreement, or the Ancillary Documents or (ii)
any Liability for legal fees or other amounts incurred in the ordinary course to
maintain NeptunusBVI as a company in good standing in the British Virgin Islands
which Liability is discharged within thirty (30) days of becoming due and
payable.
SECTION 3 PERMITTED TRANSFERS.
Notwithstanding anything to the contrary in Section 2.1, Xx. Xxxxx may
transfer all, but not less than all, his interest in NeptunusBVI to Shenzhen
Neptunus Health Chain Stores Co., Ltd. (CHINESE CHARACTERS) ("NEPTUNUS CHAIN
STORE") so long as Neptunus Chain Store shall enter into binding instrument, in
form and substance reasonably satisfactory to a Holder Majority assuming all the
rights and obligations of Xx. Xxxxx as the Agreed Beneficial Owner hereunder.
SECTION 4 CLAWBACK
4.1 Clawback Right. Subject to the terms and conditions under this Section,
NeptunusBVI hereby grants the Holders a right (a "CLAWBACK RIGHT") to purchase
all, but not less than all, the Nepstar Shares at a price equal to the aggregate
par value thereof (the "CLAWBACK PRICE") following the occurrence of an Event of
Default.
4.2 Optional Exercise.
(a) The Clawback Right granted under this Section may be exercised by
a Holder Majority delivering written notice (a "CLAWBACK EXERCISE NOTICE") to
NeptunusBVI, together with a certified or bank cashier's check for not less than
the Clawback Price, not later than the date one (1) year after the first date
that NeptunusBVI shall give written notice to each Holder of the occurrence of
an Event of Default. At such time as an Holder Majority delivers a Clawback
Exercise Notice to NeptunusBVI, the Holder Majority shall also deliver a copy of
such notice to the Company and to each other Holder.
(b) Upon delivery of a Clawback Exercise Notice by a Holder Majority
and payment of the Clawback Price to NeptunusBVI, notwithstanding that the
Company's register of members may not have been updated or that share
certificates may not immediately be delivered to the Holders, (i) the Nepstar
Shares shall be deemed to have been transferred to the Holders pro rata,
according to the respective number of Common Shares held thereby (assuming the
exercise, conversion or exchange of any Common Share Equivalents) at the date of
the Clawback Exercise Notice, and each Holder shall be deemed to be the holder
of record of the applicable number of Nepstar Shares, and (ii) NeptunusBVI shall
be deemed to have transferred all rights that it may have with respect to the
Nepstar Shares, shall no longer have any rights as a holder thereof and shall
promptly deliver all certificates evidencing the Nepstar Shares, together with
duly executed instruments of transfer with respect thereto, to such Person as is
designated in the Clawback Exercise Notice to represent the Holders in such
respect.
(c) The Holder Majority exercising the Clawback Rights hereunder shall
have a right to seek reimbursement from each other Holder for a pro rata portion
of the Clawback Price paid by
the Holder Majority to NeptunusBVI, determined according to the respective
number of Common Shares held by the Holders (assuming the exercise, conversion
or exchange of any Common Share Equivalents) at the date of the Clawback
Exercise Notice. Each other Holder shall pay such pro rata portion of the
Clawback Price promptly, and in any event within fifteen (15) days after receipt
of written notice from the Holder Majority requesting payment thereof, payment
to be made in accordance with any payment instructions as shall be set forth in
such notice.
4.3 Automatic Exercise.
(a) Following the occurrence of an Event of Default under Section
4.4(c), the Clawback Right granted hereunder shall be deemed to have been
automatically exercised immediately as of the time of such Event of Default.
From such exercise, notwithstanding that the Company's register of members may
not have been updated or that share certificates may not immediately be
delivered to the Holders, (i) the Nepstar Shares shall be deemed to have been
transferred to the Holders pro rata, according to the respective number of
Common Shares held thereby (assuming the exercise, conversion or exchange of any
Common Share Equivalents) at the time of the Event of Default, and each Holder
shall be deemed to be the holder of record of the applicable number of Nepstar
Shares, and (ii) NeptunusBVI shall be deemed to have transferred all rights that
it may have with respect to the Nepstar Shares, shall no longer have any rights
as a holder thereof and shall promptly deliver to such Person as is indicated in
the Clawback Exercise Notice all certificates evidencing the Nepstar Shares,
together with duly executed instruments of transfer with respect thereto.
(b) Promptly following NeptunusBVI giving notice thereto of an Event
of Default under Section 4.4(c) below, each Holder shall pay NeptunusBVI, at the
principal office of NeptunusBVI, or at such other office or agency as
NeptunusBVI may designate by notice to such Holder in writing, an amount equal
to such Holder's pro rata portion of the Clawback Price, determined according to
the respective number of Common Shares held by the Holders (assuming the
exercise, conversion or exchange of any Common Share Equivalents) at the date of
such Event of Default.
4.4 Event of Default. For purposes of this Agreement, an "EVENT OF DEFAULT"
shall mean the occurrence of any of the circumstances described below, following
the date hereof:
(a) subject to Section 3, (i) the Agreed Beneficial Owner shall cease to
hold its full Agreed Beneficial Interest, (ii) any Person other than
the Agreed Beneficial Owner shall acquire any interest in the equity
securities of NeptunusBVI, whether directly or indirectly, or (iii)
any Person other than the Agreed Beneficial Owner shall Control
NeptunusBVI.
(b) all or any part of Nepstar Shares or the issued and outstanding shares
of NeptunusBVI shall become subject to any Encumbrance (other than any
Encumbrance imposed by this Agreement), and such Encumbrance shall not
be removed within fifteen (15) days of coming into existence.
(c) NeptunusBVI or the Agreed Beneficial Owner institutes or consents to
the institution of any proceeding under any Debtor Relief Law, or
makes anassignment for the benefit of creditors; or applies for or
consents to the appointment of any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer for it or
for all or any material part of its property; or any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar
officer is appointed without the application or consent of
NeptunusBVI or the Agreed Beneficial Owner and the appointment
continues undischarged or unstayed for thirty (30) calendar days; or
any proceeding under any Debtor Relief Law relating to NeptunusBVI or
the Agreed Beneficial Owner or to all or any material part of the
property thereof is instituted without the consent thereof and
continues undismissed or unstayed for thirty (30) calendar days, or an
order for relief is entered in any such proceeding; or
(d) NeptunusBVI or the Agreed Beneficial Owner shall be in breach of any
of its obligations under this Agreement and shall not remedy such
breach within fifteen (15) days after any Holder has delivered written
notice to NeptunusBVI thereof.
4.5 Notice. Promptly following the occurrence of an Event of Default, and
in any event within three (3) days thereafter, NeptunusBVI shall deliver written
notice of the Event of Default to each of the Holders and the Company.
4.6 Additional Shares or Substituted Securities. In the event of the
declaration of a share dividend, a spin-off, a share split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Nepstar Shares, the Clawback Right under this Section 4 shall apply mutatis
mutandis to any new, substituted or additional securities that by reason of such
transaction are distributed with respect to any Nepstar Share, or into which
such Nepstar Share thereby becomes convertible.
SECTION 5 INFORMATION RIGHTS
5.1 Disclosure of Beneficial Ownership. In furtherance of the intent of
this Agreement:
(a) On the date hereof, NeptunusBVI shall provide the Company with
evidence reasonably satisfactory to the Company that the Agreed Beneficial Owner
owns its full Agreed Beneficial Interest.
(b) Within fifteen (15) days after such time as any of the Company or
the Holders may give written notice requesting such evidence, NeptunusBVI shall
provide the Company or such Holder with evidence reasonably satisfactory to the
Company or such Holder that no Event of Default has occurred.
The right granted to the Company and the Holders under paragraph (b) above may
be exercised as often as may be reasonably requested by the Company or any
Holder.
5.2 Other Information Rights. NeptunusBVI shall permit any representative
designated by any of the Company or the Holders to inspect any of the properties
or assets of NeptunusBVI, including, without limitation, NeptunusBVI's books of
account and register of members, and to discuss its affairs, finances and
accounts with its officers or employees, all at such reasonable times and as
often as may be reasonably requested.
5.3 Accuracy of Records. NeptunusBVI will at all times keep records with
respect to its issued and outstanding share capital (and any warrants, options
and rights exercisable for its share capital and instruments convertible or
exchangeable for its share capital) which are as accurate, complete and
comprehensive as those customarily maintained by a reasonably prudent company.
SECTION 6 MISCELLANEOUS
6.1 Termination. This Agreement shall terminate upon the closing of a
Qualified IPO.
6.2 Binding Effect; Assignment. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors and permitted assigns. The rights of
any Holder hereunder shall be assignable by such Holder (i) to any other Holder,
(ii) to a partner or Affiliate of such Holder, or (iii) to an assignee or
transferee who holds such aggregate number of Equity Securities (assuming the
exercise, conversion and exchange of any Common Share Equivalents) after the
assignment or transfer as are equivalent to 6,000,000 Common Shares (as adjusted
for stock splits, reverse stock splits, stock dividends, recapitalizations and
the like). Except as provided above and in Section 3, this Agreement and the
rights and obligations of any party hereunder shall not otherwise be assigned
without the mutual written consent of the other parties.
6.3 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Hong Kong, without regard to conflicts of laws
principles thereunder.
6.4 Dispute Resolution.
(a) Any dispute, controversy or claim (each, a "DISPUTE") arising out
of or relating to this Agreement, or the interpretation, breach, termination or
validity hereof, shall be resolved at the first instance through consultation
between the parties to such Dispute. Such consultation shall begin immediately
after any party has delivered written notice to any other party to the Dispute
requesting such consultation.
(b) If the Dispute is not resolved within sixty (60) days following
the date on which such notice is given, the Dispute shall be submitted to
arbitration upon the request of any party to the Dispute with notice to each
other party to the Dispute (the "ARBITRATION NOTICE").
(c) The arbitration shall be conducted in Hong Kong under the auspices
of the Hong Kong International Arbitration Centre (the "CENTRE"). There shall be
three (3) arbitrators. The claimants in the Dispute shall collectively choose
one arbitrator, and the respondents shall collectively choose one arbitrator.
The Secretary General of the Centre shall select the third arbitrator, who shall
be qualified to practice law in Hong Kong. If any of the members of the arbitral
tribunal have not been appointed within thirty (30) days after the Arbitration
Notice is given, the relevant appointment shall be made by the Secretary General
of the Centre.
(d) The arbitration proceedings shall be conducted in English and
Chinese. The arbitration tribunal shall apply the Arbitration Rules of the
United Nations Commission on International Trade Law, as in effect at the time
of the arbitration. However, if such rules are in conflict with the provisions
of this Section 6.4, including the provisions concerning the appointment of
arbitrator, the provisions of this Section 6.4 shall prevail.
(e) Each party to the arbitration shall cooperate with each other
party to the arbitration in making full disclosure of and providing complete
access to all information and documents requested by such other party in
connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on such party.
(f) The award of the arbitration tribunal shall be final and binding
upon the parties, and the prevailing party may apply to a court of competent
jurisdiction for enforcement of such award.
(g) The arbitrator shall decide any dispute submitted by the parties
to the arbitration strictly in accordance with the substantive law of Hong Kong
and shall not apply any other substantive law.
(h) Any party to the Dispute shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
(i) During the course of the arbitration tribunal's adjudication of
the dispute, this Agreement shall continue to be performed except with respect
to the part in dispute and under adjudication.
6.5 Language. The governing version of this Agreement is the English
language version. Any translation of this Agreement into Chinese or any other
language is for the convenience of the parties only.
6.6 Amendments. Except as otherwise permitted herein, this Agreement and
its provisions may be amended, changed, waived, discharged or terminated only by
a writing signed by each of the parties hereto.
6.7 Notices. All notices, claims, certificates, requests, demands and other
communications under this Agreement shall be made in writing and shall be
delivered to any party hereto by hand or sent by facsimile, or sent, postage
prepaid, by reputable overnight courier services at the address given for such
party on the signature pages hereof (or at such other address for such party as
shall be specified by like notice), and shall be deemed given when so delivered
by hand, or if sent by facsimile, upon receipt of a confirmed transmittal
receipt, or if sent by overnight courier, five (5) calendar days after delivery
to or pickup by the overnight courier service.
6.8 Further Assurances. Each party hereto shall do and perform, or cause to
be done and performed, all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party hereto may reasonably request to give effect to the terms and
intent of this Agreement.
6.9 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior written or oral understandings or agreements.
6.10 Severability. If any provision of this Agreement shall be held invalid
or unenforceable to any extent, the remainder of this Agreement shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
6.11 Remedies Cumulative. The rights and remedies available under this
Agreement or otherwise available shall be cumulative of all other rights and
remedies and may be exercised successively.
6.12 Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.13 No Third Party Beneficiary. Nothing in this Agreement is intended to
confer upon any Person other than the parties hereto and their respective
successors and permitted assigns any rights,
benefits, or obligations hereunder.
[The remainder of this page has been left intentionally blank.]
IN WITNESS WHEREOF the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the first date written above.
CHINA NEPSTAR CHAIN DRUGSTORE LTD.
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
XXXXX XXXXX
----------------------------------------
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
CHINA NEPTUNUS DRUGSTORE HOLDING LTD.
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
----------------------------------------
[Print Name of Investor]
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
SCHEDULE A - INVESTORS
1. GS Capital Partners 2000, L.P., a limited partnership organized and existing
under the laws of the State of Delaware.
2. GS Capital Partners 2000 Offshore, L.P., a limited partnership organized and
existing under the laws of the Cayman Islands.
3. GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, an entity organized and
existing under the laws of Germany.
4. GS Capital Partners 2000 Employee Fund, L.P., a limited partnership organized
and existing under the laws of the State of Delaware.
5. Xxxxxxx Sachs Direct Investment Fund 2000, L.P., a limited partnership
organized and existing under the laws of the State of Delaware.
EXHIBIT I - FORM OF CLAWBACK RIGHTS AGREEMENT
CLAWBACK RIGHTS AGREEMENT
THIS CLAWBACK RIGHTS AGREEMENT (this "AGREEMENT"), dated October 6, 2004,
is entered into by and among China Nepstar Chain Drugstore Ltd., an exempted
company organized and existing under the laws of the Cayman Islands (the
"COMPANY"), China Star Chain Ltd., an international business company organized
and existing under the laws of the British Virgin Islands ("MANAGERCO"), Xxx Xxx
(CHINESE CHARACTERS), of 15th Floor, Tower A, Neptunus Building, Nanyou Avenue,
Nanshan District, Shenzhen, Guangdong Province, the People's Republic of China,
and each of the parties set forth in Schedule A (the "INVESTORS").
RECITALS
WHEREAS, as of the date hereof, ManagerCo holds 7,200,000 of the Company's
Common Shares;
WHEREAS ManagerCo has been established by Xx. Xxx to invest in and hold an
interest in the Company and, subject to the terms and conditions of this
Agreement, it is intended that, as of any given time, Xx. Xxx should be the
ultimate beneficial owner of all such interest in the Company (the "AGREED
BENEFICIAL INTEREST");
WHEREAS the Company, ManagerCo and the Investors are parties to a
Securities Purchase Agreement, dated October 6, 2004 (the "SECURITIES PURCHASE
AGREEMENT");
WHEREAS it is a condition precedent under the Securities Purchase Agreement
that the Company, ManagerCo and Xx. Xxx enter into this Agreement;
WHEREAS the Company, ManagerCo and Xx. Xxx seek to induce the Investors to
consummate their investment in the Company as contemplated in the Securities
Purchase Agreement, and to such ends, seek to satisfy the conditions precedent
to such investment by entering into this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual covenants and agreements set forth herein and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1 INTERPRETATION
1.1 Definitions. Unless otherwise defined in this Agreement, capitalized
terms used in this Agreement shall have the following meanings:
"ACCOUNTING PRINCIPLES" shall mean International Financial Reporting
Standards as promulgated from time to time by the IASB (including, without
limitation, standards and interpretations approved by the IASB and
International Accounting Principles issued under previous constitutions
thereof), together with the IASB's pronouncements thereon from time to
time, all as consistently applied.
"AFFILIATE" means, with respect to any given Person, a Person that
Controls, is
Controlled by, or is under common Control with the given Person.
"AGREED BENEFICIAL OWNER" means, as of the date hereof, Xxx Xxx.
"ANCILLARY DOCUMENTS" has the meaning ascribed thereto in the
Securities Purchase Agreement.
"COMMON SHARES" means the Common Shares, par value US$0.0001 per
share, of the Company.
"COMMON SHARE EQUIVALENTS" means warrants, options and rights
exercisable for Common Shares and instruments convertible or exchangeable
for Common Shares.
"CONTROL" means, when used with respect to any Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise, and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"DEBTOR RELIEF LAW" means any laws relating to the liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or
similar debtor relief in any applicable jurisdiction from time to time in
effect and affecting the rights of creditors generally.
"ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise.
"EQUITY SECURITIES" means any Common Shares or Common Share
Equivalents.
"HOLDERS" means, the Investors, together with the permitted
transferees and assigns of any Holder.
"HOLDER MAJORITY" means, for any given time, Holders representing a
majority in voting power of the Series A Preferred Shares then held by all
Holders.
"HONG KONG" means the Hong Kong Special Administrative Region.
"IASB" means the International Accounting Standards Board.
"IPO" means a firm-commitment underwritten initial public offering of
the Company's Common Shares on the New York Stock Exchange, the Nasdaq
Stock Market's National Market System, the Main Board of the Hong Kong
Stock Exchange or any other exchange of the recognized international
reputation and standing duly approved by the Company's Board of Directors.
"LIABILITIES" means, with respect to any Person, liabilities owing by
such Person of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to
become due.
"NEPSTAR SHARES" means, as of any given time, all Common Shares of the
Company held by ManagerCo.
"PERSON" means any natural person, limited liability company, joint
stock company, joint venture, partnership, enterprise, trust,
unincorporated organization or any other entity or organization.
"PRC" means the People's Republic of China, solely for purposes of
this Agreement, excluding Hong Kong, the Macau Special Administrative
Region and the islands of Taiwan.
"QUALIFIED IPO" means an IPO that values the Company at no less than
US$250,000,000 immediately prior to the IPO and that results in aggregate
proceeds to the Company of US$50,000,000, net of Selling Expenses.
"SELLING EXPENSES" means, with respect to the issue or sale of any
securities, any expenses payable directly or indirectly by the Company and
any underwriting, brokerage or similar commissions, compensation, discounts
or concessions paid or allowed by the Company in connection with such issue
or sale.
"SERIES A PREFERRED SHARES" means the Series A-1 Preferred Shares, par
value US$0.0001 per share, of the Company and the Series A-2 Preferred
Shares, par value US$0.0001 per share, of the Company.
1.2 Interpretation. For all purposes of this Agreement, except as herein
otherwise expressly provided, (i) the terms defined in Section 1 shall have the
meanings assigned to them in Section 1 and include the plural as well as the
singular, (ii) all accounting terms not otherwise defined herein have the
meanings assigned under the Accounting Principles, (iii) all references in this
Agreement to designated "Sections" and other subdivisions are to the designated
Sections and other subdivisions of the body of this Agreement, (iv) pronouns of
either gender or neuter shall include, as appropriate, the other pronoun forms,
(v) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section or
other subdivision, and (vi) all references in this Agreement to designated
Schedules, Exhibits and Annexes are to the Schedules, Exhibits and Annexes
attached to this Agreement.
SECTION 2 PROHIBITION ON TRANSFERS OR INDEBTEDNESS
2.1 Transfer of Interest. The Agreed Beneficial Owner will not sell,
assign, transfer, pledge, hypothecate, or otherwise permit to be encumbered or
dispose of in any way, all or any part of any interest in ManagerCo now or
hereafter owned or held by the Agreed Beneficial Owner. Any sale, assignment,
transfer, pledge, hypothecation or other encumbrance or disposition of any
interest in ManagerCo not made in conformance with this Agreement shall be null
and void, shall not be recorded on the books of ManagerCo, and shall not be
recognized by ManagerCo.
2.2 Indebtedness. ManagerCo shall not create, incur, assume, guaranty or
otherwise suffer to exist any Liability other than (i) pursuant to this
Agreement, the Securities Purchase Agreement, or the Ancillary Documents or (ii)
any Liability for legal fees or other amounts incurred in the
ordinary course to maintain ManagerCo as a company in good standing in the
British Virgin Islands which Liability is discharged within thirty (30) days of
becoming due and payable.
SECTION 3 CLAWBACK
3.1 Clawback Right. Subject to the terms and conditions under this Section,
ManagerCo hereby grants the Holders a right (a "CLAWBACK RIGHT") to purchase
all, but not less than all, the Nepstar Shares at a price equal to the aggregate
par value thereof (the "CLAWBACK PRICE") following the occurrence of an Event of
Default.
3.2 Optional Exercise.
(a) The Clawback Right granted under this Section may be exercised by
a Holder Majority delivering written notice (a "CLAWBACK EXERCISE NOTICE") to
ManagerCo, together with a certified or bank cashier's check for not less than
the Clawback Price, not later than the date one (1) year after the first date
that ManagerCo shall give written notice to each Holder of the occurrence of an
Event of Default. At such time as an Holder Majority delivers a Clawback
Exercise Notice to ManagerCo, the Holder Majority shall also deliver a copy of
such notice to the Company and to each other Holder.
(b) Upon delivery of a Clawback Exercise Notice by a Holder Majority
and payment of the Clawback Price to ManagerCo, notwithstanding that the
Company's register of members may not have been updated or that share
certificates may not immediately be delivered to the Holders, (i) the Nepstar
Shares shall be deemed to have been transferred to the Holders pro rata,
according to the respective number of Common Shares held thereby (assuming the
exercise, conversion or exchange of any Common Share Equivalents) at the date of
the Clawback Exercise Notice, and each Holder shall be deemed to be the holder
of record of the applicable number of Nepstar Shares, and (ii) ManagerCo shall
be deemed to have transferred all rights that it may have with respect to the
Nepstar Shares, shall no longer have any rights as a holder thereof and shall
promptly deliver all certificates evidencing the Nepstar Shares, together with
duly executed instruments of transfer with respect thereto, to such Person as is
designated in the Clawback Exercise Notice to represent the Holders in such
respect.
(c) The Holder Majority exercising the Clawback Rights hereunder shall
have a right to seek reimbursement from each other Holder for a pro rata portion
of the Clawback Price paid by the Holder Majority to ManagerCo, determined
according to the respective number of Common Shares held by the Holders
(assuming the exercise, conversion or exchange of any Common Share Equivalents)
at the date of the Clawback Exercise Notice. Each other Holder shall pay such
pro rata portion of the Clawback Price promptly, and in any event within fifteen
(15) days after receipt of written notice from the Holder Majority requesting
payment thereof, payment to be made in accordance with any payment instructions
as shall be set forth in such notice.
3.3 Automatic Exercise.
(a) Following the occurrence of an Event of Default under Section
3.4(c), the Clawback Right granted hereunder shall be deemed to have been
automatically exercised immediately as of the time of such Event of Default.
From such exercise, notwithstanding that the Company's register of members may
not have been updated or that share certificates may not immediately be
delivered to the Holders, (i) the Nepstar Shares shall be deemed to have been
transferred to the Holders pro rata, according to the respective number of
Common Shares held thereby (assuming the exercise, conversion or exchange of any
Common Share Equivalents) at the time of the Event of
Default, and each Holder shall be deemed to be the holder of record of the
applicable number of Nepstar Shares, and (ii) ManagerCo shall be deemed to have
transferred all rights that it may have with respect to the Nepstar Shares,
shall no longer have any rights as a holder thereof and shall promptly deliver
to such Person as is indicated in the Clawback Exercise Notice all certificates
evidencing the Nepstar Shares, together with duly executed instruments of
transfer with respect thereto.
(b) Promptly following ManagerCo giving notice thereto of an Event of
Default under Section 3.4(c) below, each Holder shall pay ManagerCo, at the
principal office of ManagerCo, or at such other office or agency as ManagerCo
may designate by notice to such Holder in writing, an amount equal to such
Holder's pro rata portion of the Clawback Price, determined according to the
respective number of Common Shares held by the Holders (assuming the exercise,
conversion or exchange of any Common Share Equivalents) at the date of such
Event of Default.
3.4 Event of Default. For purposes of this Agreement, an "EVENT OF DEFAULT"
shall mean the occurrence of any of the circumstances described below, following
the date hereof:
(a) (i) the Agreed Beneficial Owner shall cease to hold its full Agreed
Beneficial Interest, (ii) any Person other than the Agreed Beneficial
Owner shall acquire any interest in the equity securities of
ManagerCo, whether directly or indirectly, or (iii) any Person other
than the Agreed Beneficial Owner shall Control ManagerCo.
(b) all or any part of Nepstar Shares or the issued and outstanding shares
of ManagerCo shall become subject to any Encumbrance (other than any
Encumbrance imposed by this Agreement), and such Encumbrance shall not
be removed within fifteen (15) days of coming into existence.
(c) ManagerCo or the Agreed Beneficial Owner institutes or consents to the
institution of any proceeding under any Debtor Relief Law, or makes an
assignment for the benefit of creditors; or applies for or consents to
the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any
material part of its property; or any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer is appointed
without the application or consent of ManagerCo or the Agreed
Beneficial Owner and the appointment continues undischarged or
unstayed for thirty (30) calendar days; or any proceeding under any
Debtor Relief Law relating to ManagerCo or the Agreed Beneficial Owner
or to all or any material part of the property thereof is instituted
without the consent thereof and continues undismissed or unstayed for
thirty (30) calendar days, or an order for relief is entered in any
such proceeding; or
(d) ManagerCo or the Agreed Beneficial Owner shall be in breach of any of
its obligations under this Agreement and shall not remedy such breach
within fifteen (15) days after any Holder has delivered written notice
to ManagerCo thereof.
3.5 Notice. Promptly following the occurrence of an Event of Default, and
in any event within three (3) days thereafter, ManagerCo shall deliver written
notice of the Event of Default to each of the Holders and the Company.
3.6 Additional Shares or Substituted Securities. In the event of the
declaration of a share dividend, a spin-off, a share split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Nepstar Shares, the Clawback Right under this Section 3 shall apply
mutatis mutandis to any new, substituted or additional securities that by reason
of such transaction are distributed with respect to any Nepstar Share, or into
which such Nepstar Share thereby becomes convertible.
SECTION 4 INFORMATION RIGHTS
4.1 Disclosure of Beneficial Ownership. In furtherance of the intent of
this Agreement:
(a) On the date hereof, ManagerCo shall provide the Company with
evidence reasonably satisfactory to the Company that the Agreed Beneficial Owner
owns its full Agreed Beneficial Interest.
(b) Within fifteen (15) days after such time as any of the Company or
the Holders may give written notice requesting such evidence, ManagerCo shall
provide the Company or such Holder with evidence reasonably satisfactory to the
Company or such Holder that no Event of Default has occurred.
The right granted to the Company and the Holders under paragraph (b) above may
be exercised as often as may be reasonably requested by the Company or any
Holder.
4.2 Other Information Rights. ManagerCo shall permit any representative
designated by any of the Company or the Holders to inspect any of the properties
or assets of ManagerCo, including, without limitation, ManagerCo's books of
account and register of members, and to discuss its affairs, finances and
accounts with its officers or employees, all at such reasonable times and as
often as may be reasonably requested.
4.3 Accuracy of Records. ManagerCo will at all times keep records with
respect to its issued and outstanding share capital (and any warrants, options
and rights exercisable for its share capital and instruments convertible or
exchangeable for its share capital) which are as accurate, complete and
comprehensive as those customarily maintained by a reasonably prudent company.
SECTION 5 MISCELLANEOUS
5.1 Termination. This Agreement shall terminate upon the closing of a
Qualified IPO.
5.2 Binding Effect; Assignment. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors and permitted assigns. The rights of
any Holder hereunder shall be assignable by such Holder (i) to any other Holder,
(ii) to a partner or Affiliate of such Holder, or (iii) to an assignee or
transferee who holds such aggregate number of Equity Securities (assuming the
exercise, conversion and exchange of any Common Share Equivalents) after the
assignment or transfer as are equivalent to 6,000,000 Common Shares (as adjusted
for stock splits, reverse stock splits, stock dividends, recapitalizations and
the like). Except as provided above, this Agreement and the rights and
obligations of any party hereunder shall not otherwise be assigned without the
mutual written consent of the other parties.
5.3 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Hong Kong, without regard to conflicts of laws
principles thereunder.
5.4 Dispute Resolution.
(a) Any dispute, controversy or claim (each, a "DISPUTE") arising out
of or relating to
this Agreement, or the interpretation, breach, termination or validity hereof,
shall be resolved at the first instance through consultation between the parties
to such Dispute. Such consultation shall begin immediately after any party has
delivered written notice to any other party to the Dispute requesting such
consultation.
(b) If the Dispute is not resolved within sixty (60) days following
the date on which such notice is given, the Dispute shall be submitted to
arbitration upon the request of any party to the Dispute with notice to each
other party to the Dispute (the "ARBITRATION NOTICE").
(c) The arbitration shall be conducted in Hong Kong under the auspices
of the Hong Kong International Arbitration Centre (the "CENTRE"). There shall be
three (3) arbitrators. The claimants in the Dispute shall collectively choose
one arbitrator, and the respondents shall collectively choose one arbitrator.
The Secretary General of the Centre shall select the third arbitrator, who shall
be qualified to practice law in Hong Kong. If any of the members of the arbitral
tribunal have not been appointed within thirty (30) days after the Arbitration
Notice is given, the relevant appointment shall be made by the Secretary General
of the Centre.
(d) The arbitration proceedings shall be conducted in English and
Chinese. The arbitration tribunal shall apply the Arbitration Rules of the
United Nations Commission on International Trade Law, as in effect at the time
of the arbitration. However, if such rules are in conflict with the provisions
of this Section 5.4, including the provisions concerning the appointment of
arbitrator, the provisions of this Section 5.4 shall prevail.
(e) Each party to the arbitration shall cooperate with each other
party to the arbitration in making full disclosure of and providing complete
access to all information and documents requested by such other party in
connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on such party.
(f) The award of the arbitration tribunal shall be final and binding
upon the parties, and the prevailing party may apply to a court of competent
jurisdiction for enforcement of such award.
(g) The arbitrators shall decide any dispute submitted by the parties
to the arbitration tribunal strictly in accordance with the substantive law of
Hong Kong and shall not apply any other substantive law.
(h) Any party to the Dispute shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
(i) During the course of the arbitration tribunal's adjudication of
the dispute, this Agreement shall continue to be performed except with respect
to the part in dispute and under adjudication.
5.5 Language. The governing version of this Agreement is the English
language version. Any translation of this Agreement into Chinese or any other
language is for the convenience of the parties only.
5.6 Amendments. Except as otherwise permitted herein, this Agreement and
its provisions may be amended, changed, waived, discharged or terminated only by
a writing signed by each of the parties hereto.
5.7 Notices. All notices, claims, certificates, requests, demands and other
communications under this Agreement shall be made in writing and shall be
delivered to any party hereto by hand or sent by facsimile, or sent, postage
prepaid, by reputable overnight courier services at the address given for such
party on the signature pages hereof (or at such other address for such party as
shall be specified by like notice), and shall be deemed given when so delivered
by hand, or if sent by facsimile, upon receipt of a confirmed transmittal
receipt, or if sent by overnight courier, five (5) calendar days after delivery
to or pickup by the overnight courier service.
5.8 Further Assurances. Each party hereto shall do and perform, or cause to
be done and performed, all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party hereto may reasonably request to give effect to the terms and
intent of this Agreement.
5.9 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior written or oral understandings or agreements.
5.10 Severability. If any provision of this Agreement shall be held invalid
or unenforceable to any extent, the remainder of this Agreement shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
5.11 Remedies Cumulative. The rights and remedies available under this
Agreement or otherwise available shall be cumulative of all other rights and
remedies and may be exercised successively.
5.12 Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
5.13 No Third Party Beneficiary. Nothing in this Agreement is intended to
confer upon any Person other than the parties hereto and their respective
successors and permitted assigns any rights, benefits, or obligations hereunder.
[The remainder of this page has been left intentionally blank.]
IN WITNESS WHEREOF the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the first date written above.
CHINA NEPSTAR CHAIN DRUGSTORE LTD.
By:
-------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
-----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
XXX XXX
----------------------------------------
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
-----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
CHINA NEPTUNUS DRUGSTORE HOLDING LTD.
By:
-------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
-----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
----------------------------------------
[Print Name of Investor]
By:
-------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
-----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
SCHEDULE A - INVESTORS
1. GS Capital Partners 2000, L.P., a limited partnership organized and existing
under the laws of the State of Delaware.
2. GS Capital Partners 2000 Offshore, L.P., a limited partnership organized and
existing under the laws of the Cayman Islands.
3. GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, an entity organized and
existing under the laws of Germany.
4. GS Capital Partners 2000 Employee Fund, L.P., a limited partnership organized
and existing under the laws of the State of Delaware.
5. Xxxxxxx Sachs Direct Investment Fund 2000, L.P., a limited partnership
organized and existing under the laws of the State of Delaware.
EXHIBIT J - FORM OF SPONSOR AGREEMENT
SPONSOR AGREEMENT
THIS SPONSOR AGREEMENT (this "AGREEMENT"), dated October 6, 2004, is
entered into by and among Shenzhen Neptunus Group Corporation (CHINESE
CHARACTERS), a foreign invested company limited by shares organized and existing
under the laws of the People's Republic of China ("NEPTUNUS GROUP"), and each of
the parties set forth in Schedule A (the "INVESTORS").
RECITALS
WHEREAS China Nepstar Chain Drugstore Ltd., an exempted company organized
and existing under the laws of the Cayman Islands (the "COMPANY"), has been
established by Neptunus Group as a holding company and Neptunus Group has caused
its subsidiary, Shenzhen Neptunus Health Chain Stores Co. Ltd. (CHINESE
CHARACTERS) ("NEPTUNUS CHAIN STORE") to transfer to the Company all interest in
the business and assets of Neptunus Chain Store related to the operation of
pharmaceutical retail outlets in the PRC (the "RESTRUCTURING");
WHEREAS Neptunus Group holds an indirect beneficial interest in a majority
of the issued and outstanding share capital of the Company through an
arrangement with Xxxxx Xxxxx (CHINESE CHARACTERS), of 27th Floor, Tower A,
Neptunus Building, Nanyou Avenue, Nanshan District, Shenzhen, Guangdong
Province, the People's Republic of China;
WHEREAS Neptunus Group, the Investors, and the Company are parties to a
Securities Purchase Agreement, dated October 6, 2004 (as the same may be amended
from time to time, the "SECURITIES PURCHASE AGREEMENT"), pursuant to which the
Investors are to invest in the Company by purchasing certain Series A-1
Preferred Shares, par value US$0.0001 per share (the "SERIES A-1 PREFERRED
SHARES"), of the Company and certain Series A-2 Preferred Shares, par value
US$0.0001 per share (together with the Series A-1 Preferred Shares, the "SERIES
A PREFERRED SHARES"), of the Company;
WHEREAS the Investors seek certain assurances that Neptunus Group and its
Affiliates will not compete with the Company or disclose any confidential
information of the Company;
WHEREAS the Investors further seek assurances that, in connection with any
subsequent sale of substantially all the Company's business and assets, the
manner in which the Restructuring was effected will not have a negative impact
on the Investors' returns by giving rise to taxable income from such sale which
exceeds any appreciation in the value of the Company;
WHEREAS it is a condition precedent to the Investors' investment in the
Company under the Securities Purchase Agreement that Neptunus Group enter into
this Agreement;
WHEREAS Neptunus Group seeks to induce the Investors to consummate their
investment in the Company as contemplated in the Securities Purchase Agreement
and, to such ends, seeks to satisfy the conditions precedent to such investment
by entering into this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual covenants and agreements set forth herein and for other good and valuable
consideration,
the adequacy of which is hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1 INTERPRETATION
1.1 Definitions. Unless otherwise defined in this Agreement, capitalized
terms used herein shall have the following meanings:
"AFFILIATE" means, with respect to any given Person, a Person that
Controls, is Controlled by, or is under common Control with the given
Person.
"APPLICABLE LAW" means, with respect to any Person, any and all
provisions of any constitution, treaty, statute, law, regulation,
ordinance, code, rule, judgment, rule of common law, order, decree, award,
injunction, governmental approval, concession, grant, franchise, license,
agreement, directive, requirement, or other governmental restriction or any
similar form of decision of, or determination by, or any interpretation or
administration of any of the foregoing by, any Government Entity, whether
in effect as of the date hereof or thereafter and in each case as amended,
applicable to such Person or its subsidiaries or their respective assets.
"COMMON SHARES" means the Company's Common Shares, par value US$0.0001
per share.
"COMMON SHARE EQUIVALENTS" means warrants, options and rights
exercisable for Common Shares and instruments convertible or exchangeable
for Common Shares.
"COMPETITIVE BUSINESS" has the meaning ascribed thereto in Section
2.1.
"CONSENT" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice
to, any Person, including any Government Entity.
"CONTROL" means, when used with respect to any Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise, and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"EARNOUT WARRANT" means those certain warrants, of even date herewith,
granted by the Company to the Investors pursuant to the Securities Purchase
Agreement and any succeeding warrant of like tenor issued pursuant to any
Earnout Warrant.
"ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise.
"EQUITY SECURITIES" means any Common Shares or Common Share
Equivalents.
"GOVERNMENT ENTITY" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government.
"GROUP COMPANY" means any Person that is not a natural person and that
is Controlled by the Company.
"HOLDERS" means the Investors, together with the permitted transferees
and assigns of any Holder's rights hereunder.
"HONG KONG" means the Hong Kong Special Administrative Region.
"INDEMNIFIABLE LOSS" means, with respect to any Holder, any action,
cost, damage, disbursement, expense, Liability, loss, deficiency,
diminution in value, obligation, penalty or settlement of any kind or
nature. Notwithstanding anything to the contrary provided in the preceding
sentence, "Indemnifiable Loss" shall include, but shall not be limited to,
(i) interest or other carrying costs, penalties, legal, accounting and
other professional fees and expenses reasonably incurred in the
investigation, collection, prosecution and defense of claims and amounts
paid in settlement, that may be imposed on or otherwise incurred or
suffered by an indemnified party, and (ii) any Taxes that may be payable by
such indemnified party by reason of the indemnification of any
Indemnifiable Loss hereunder, other than Taxes that would have been payable
notwithstanding the event giving rise to indemnification.
"LIABILITIES" means, with respect to any Person, liabilities owing by
such Person of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due.
"MILESTONE WARRANT" means that certain Warrant, of even date herewith,
warrants, granted by the Company to NeptunusBVI and any succeeding warrant
of like tenor issued pursuant to any Milestone Warrant.
"NEPTUNUSBVI" means China Neptunus Drugstore Holding Ltd., an
international business company organized and existing under the laws of the
British Virgin Islands.
"PERSON" means any natural person, limited liability company, joint
stock company, joint venture, partnership, enterprise, trust,
unincorporated organization or any other entity or organization.
"PRC" means the People's Republic of China, solely for purposes of
this Agreement, excluding Hong Kong, the Macau Special Administrative
Region and the islands of Taiwan.
"PRE-MONEY VALUATION" means, as of any given date, the amount
determined according to the following formula:
FS
Pre-Money Valuation = US$15,000,000 x ------------
T1S + EWS
where:
FS = an amount equal to sum of (i) the number of Common Shares issued
and outstanding as of the date hereof, (ii) the number of Common
Shares subscribed to under the True-Up Subscription Agreement, and
(iii) the maximum number of Common Shares which may be issued
under the Milestone Warrant;
T1S = the number of Series A-1 Preferred Shares issuable at the Tranche
1 Closing; and
EWS = the sum of all Series A-1 Preferred Shares issued or issuable
pursuant to Earnout Warrants as of such given date.
"QUALIFYING INCOME" means, with respect to any sale by the Company of
substantially all its business and assets, the excess of (i) the gross
consideration received by the Company in such sale, without giving effect
to any Taxes which may be payable in respect thereto, over (ii) the sum of
(x) all amounts invested by Holders in the Company from time to time on and
after the date hereof and (y) the Pre-Money Valuation.
"TAXES" means any national, provincial or local income, sales and use,
excise, franchise, real and personal property, gross receipt, capital
stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or charge imposed by any Government
Entity, any interest and penalties (civil or criminal) related thereto or
to the nonpayment thereof, and any loss or Tax Liability incurred in
connection with the determination, settlement or litigation of any
Liability arising therefrom.
"TRADE SECRETS" means proprietary, confidential or non-public
processes, designs, drawings, specifications, technology, formulae,
databases, algorithms, models, methods, research and development, know-how,
manufacturing and production processes and techniques, information about
business plans and strategies, marketing ideas and concepts, especially
with respect to unannounced products and services, present and future
product plans, pricing, volume estimates, financial data, product
enhancement information, business plans, marketing plans, sales strategies,
customer information (including customers' applications and environments),
market testing information, development plans, customer requirements,
configurations, plans, apparatus, sketches, data, prototypes, inventions,
discoveries, concepts, ideas, technical data and other technical and
business proprietary non-public information, which are relating to the
business of the Company or any Group Company as presently conducted or as
conducted at any time during the Non-Compete Period. "Trade Secrets" shall
not include any information which is generally available to and known by
the public, other than a result of a disclosure directly or indirectly by
Neptunus Group or by any of its Affiliates other than the Company or the
Group Companies.
"TRANCHE 1 CLOSING" has the meaning ascribed thereto in the Securities
Purchase Agreement.
"TRUE-UP SUBSCRIPTION AGREEMENT" means that certain Subscription
Agreement, dated the date hereof, between the Company and NeptunusBVI.
1.2 Interpretation. For all purposes of this Agreement, except as otherwise
expressly herein provided, (i) the terms defined in this Section 1 shall have
the meanings assigned to them in this
Section 1 and include the plural as well as the singular, (ii) all references in
this Agreement to designated "Sections" and other subdivisions are to the
designated Sections and other subdivisions of the body of this Agreement, (iii)
pronouns of either gender or neuter shall include, as appropriate, the other
pronoun forms, (iv) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision, (v) all references in this Agreement to designated
Schedules, Exhibits and Annexes are to the Schedules, Exhibits and Annexes
attached to this Agreement and (vi) any formula that purports to calculate the
excess of one value over another shall be deemed to yield a value equal to zero
if there is no excess.
SECTION 2 NON-COMPETITION
2.1 General Provisions. Except as provided in Section 2.2 below, for so
long as Neptunus Group, Xxxxx Xxxxx or any Affiliate of the foregoing shall
continue to hold any interest in the equity of the Company, and for three (3)
years thereafter (the "NON-COMPETE PERIOD"), Neptunus Group agrees that neither
it nor its Affiliates (other than the Company or any Group Company) shall at any
time, directly or indirectly, (i) own, manage, operate or control, or be
connected in any manner with the ownership, management, operation, or control of
any Person that engages in, a business or any activity that is the same as,
similar to or in competition with the Company or any Group Company in the PRC as
presently conducted or as conducted at any time during the Non-Compete Period (a
"COMPETITIVE BUSINESS"); (ii) interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between the Company or any Group
Company, on the one hand, and any customer or prospective customer, supplier,
lessee or employee (including without limitation the customers and suppliers
prior to the date of the Tranche 1 Closing) of the Company or any Group Company,
on the other hand; (iii) solicit employment for or of any employee of the
Company or any Group Company, or otherwise intentionally induce any Person to
leave the employ of the Company or any Group Company; (iv) lend or allow its
name or reputation to be used by or in connection with any Competitive Business;
or (v) render advice to any Competitive Business.
2.2 Exceptions. Notwithstanding anything to the contrary in Section 2.1,
nothing in this Agreement shall restrict (i) Weifang Minkang Medical Chain Store
Co., Ltd. (CHINESE CHARACTERS) ("MINKANG") from operating retail drugstores
located in Weifang, Shandong Province, the PRC or (ii) Neptunus Group or its
Affiliates from, directly or indirectly, holding an interest in the equity of
Minkang so long as Minkang continues to operate any retail drugstores solely in
Weifang, Shandong Province, the PRC.
SECTION 3 CONFIDENTIALITY
3.1 Trade Secrets. During the Non-Compete Period, Neptunus Group agrees
that it will keep confidential, and will cause each of its Affiliates other than
the Company and the Group Companies to keep confidential, all Trade Secrets.
3.2 Disclosure under Legal Compulsion. If Neptunus Group or any of its
Affiliates other than the Company and the Group Companies is requested or
required (by oral question, interrogatory, request for information or documents,
subpoena, civil investigative demand or similar process) to disclose any Trade
Secrets, it shall promptly notify each of the Holders of such request or
requirement and shall cooperate with the Holders so that the Holders may seek an
appropriate protective order or other appropriate remedy. If, in the absence of
a protective order or
the receipt of a waiver hereunder, Neptunus Group or such Affiliate is, in the
reasonable opinion of its legal counsel, compelled to disclose the Trade Secrets
or else stand liable for contempt of a competent Government Entity or suffer
other censure or material legal penalty, it may disclose only so much of the
Trade Secrets to the Person compelling disclosure as is required by Applicable
Law. Neptunus Group or such Affiliate, as the case may be, shall exercise its
commercially reasonable efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded to such Trade Secrets.
SECTION 4 CERTAIN TAX MATTERS
Neptunus Group hereby represents, warrants and covenants that, in
connection with any sale by the Company of substantially all its business or
assets, the Holders will not suffer any reduction of proceeds as a result of
Taxes payable under the laws of the PRC other than against Qualifying Income
from such sale.
SECTION 5 INDEMNITY
5.1 Indemnity. Neptunus Group hereby agrees to indemnify and hold harmless
each Holder from and against any and all Indemnifiable Losses suffered by such
Holder, directly or indirectly, as a result of, or based upon or arising from
any breach of this Agreement.
5.2 Procedure.
(a) Each Holder shall be entitled to select its own counsel in defense of
any action, suit, proceeding or alternative dispute resolution mechanism,
whether civil, criminal, administrative, investigative or other (each, a
"CLAIM"), that may cause Indemnifiable Losses to such Holder. Neptunus Group
shall advance all reasonable expenses, including attorneys' fees and all other
related costs, expenses and obligations incurred in connection with
investigating or defending against a Claim (collectively, the "DEFENSE
EXPENSES"). Defense Expenses shall be paid by Neptunus Group to a Holder as they
are incurred, but in any event no later than fifteen (15) days after a written
request and supporting documentation are supplied by such Holder to Neptunus
Group.
(b) If a Claim is asserted by any third party against a Holder, such Holder
may request Neptunus Group to defend the Claim on behalf of the Holder by a
written notice. If Neptunus Group fails to defend the Holder upon such request,
a recovery against the Holder suffered by it shall be conclusive in its favor
against Neptunus Group.
(c) All payments to be made by Neptunus Group to a Holder hereunder shall
be made in U.S. Dollars, in immediately available funds to a bank account
designated by such Holder. Neptunus Group covenants and agrees that (i) it has
full authority and resources to make any payment hereunder to or for the account
of an Holder in U.S. Dollars if so required; and (ii) it shall make all payments
hereunder irrespective of and without deduction for, any counterclaim, defense,
recoupment, or set-off.
SECTION 6 REPRESENTATIONS AND WARRANTIES
Neptunus Group represents, warrants and covenants to each Investor that:
(a) It is duly organized and validly existing under the laws of the
jurisdiction of its
formation and has the corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted and to perform each of its obligations under this Agreement.
(b) Any corporate action necessary on the part of Neptunus Group and its
officers, directors and shareholders has been taken for the authorization,
execution, and delivery by it of this Agreement and the performance of its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of Neptunus Group, enforceable in accordance with the terms hereof,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other remedies in the
nature of equitable remedies.
(c) The execution, delivery, and performance by Neptunus Group of this
Agreement requires no Consent of any third party and (i) will not result in any
violation of, be in conflict with, or constitute a default under, with or
without the passage of time or the giving of notice, any provision of its
constitutional documents as in effect at the date hereof, any Applicable Law, or
any material contract or obligation to which it is a party or by which it is
bound, or (ii) accelerate or constitute an event entitling the holder of any
indebtedness of Neptunus Group to accelerate the maturity of any such
indebtedness or to increase the rate of interest presently in effect with
respect to such indebtedness, or (iii) result in the creation of any Encumbrance
upon any of the properties or assets of Neptunus Group.
(d) No breach or default, alleged breach or default, or event which would
(with the passage of time, notice or both) constitute a breach or default under
any agreement, undertaking or instrument to which Neptunus Group is a party or
by which Neptunus Group may be bound (including, inter alia this Agreement) has
occurred, or as a result of this Agreement, or the performance hereof, will
occur.
(e) No litigation, arbitration or administrative proceedings are at present
current or pending, or to the knowledge of Neptunus Group, threatened, which
would have a material adverse effect upon the ability of Neptunus Group to
fulfill its obligations hereunder.
SECTION 7 MISCELLANEOUS
7.1 Binding Effect; Assignment. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors and permitted assigns. The rights of
any Holder hereunder shall be assignable by such Holder (i) to any other Holder,
(ii) to a partner or Affiliate of such Holder; or (iii) to an assignee or
transferee who holds such aggregate number of Equity Securities (assuming the
exercise, conversion and exchange of any Common Share Equivalents) after the
assignment or transfer as are equivalent to 6,000,000 Common Shares (as adjusted
for stock splits, reverse stock splits, stock dividends, recapitalizations and
the like). Except as provided above, this Agreement and the rights and
obligations of any party hereunder shall not otherwise be assigned without the
mutual written consent of the other parties.
7.2 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Hong Kong, without regard to conflicts of laws
principles thereunder.
7.3 Dispute Resolution.
(a) Any dispute, controversy or claim (each, a "DISPUTE") arising out of or
relating to this Agreement, or the interpretation, breach, termination or
validity hereof, shall be resolved at the first instance through consultation
between the parties to such Dispute. Such consultation shall begin immediately
after any party has delivered written notice to any other party to the Dispute
requesting such consultation.
(b) If the Dispute is not resolved within sixty (60) days following the
date on which such notice is given, the Dispute shall be submitted to
arbitration upon the request of any party to the Dispute with notice to each
other party to the Dispute (the "ARBITRATION NOTICE").
(c) The arbitration shall be conducted in Hong Kong under the auspices of
the Hong Kong International Arbitration Centre (the "CENTRE"). There shall be
three (3) arbitrators. The claimants in the Dispute shall collectively choose
one arbitrator, and the respondents shall collectively choose one arbitrator.
The Secretary General of the Centre shall select the third arbitrator, who shall
be qualified to practice law in Hong Kong. If any of the members of the arbitral
tribunal have not been appointed within thirty (30) days after the Arbitration
Notice is given, the relevant appointment shall be made by the Secretary General
of the Centre.
(d) The arbitration proceedings shall be conducted in English and Chinese.
The arbitration tribunal shall apply the Arbitration Rules of the United Nations
Commission on International Trade Law, as in effect at the time of the
arbitration. However, if such rules are in conflict with the provisions of this
Section 7.3, including the provisions concerning the appointment of arbitrator,
the provisions of this Section 7.3 shall prevail.
(e) Each party to the arbitration shall cooperate with each other party to
the arbitration in making full disclosure of and providing complete access to
all information and documents requested by such other party in connection with
such arbitration proceedings, subject only to any confidentiality obligations
binding on such party.
(f) The award of the arbitration tribunal shall be final and binding upon
the parties, and the prevailing party may apply to a court of competent
jurisdiction for enforcement of such award.
(g) The arbitrator shall decide any dispute submitted by the parties to the
arbitration strictly in accordance with the substantive law of Hong Kong and
shall not apply any other substantive law.
(h) Any party to the Dispute shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
(i) During the course of the arbitration tribunal's adjudication of the
dispute, this Agreement shall continue to be performed except with respect to
the part in dispute and under adjudication.
7.4 Language. The governing version of this Agreement is the English
language version. Any translation of this Agreement into Chinese or any other
language is for the convenience of the parties only.
7.5 Amendments. Except as otherwise permitted herein, this Agreement and
its provisions may be amended, changed, waived, discharged or terminated only by
a writing signed by each of the parties.
7.6 Notices. All notices, claims, certificates, requests, demands and other
communications under this Agreement shall be made in writing and shall be
delivered to any party hereto by hand or sent by facsimile, or sent, postage
prepaid, by reputable overnight courier services at the address given for such
party on the signature pages hereof (or at such other address for such party as
shall be specified by like notice), and shall be deemed given when so delivered
by hand, or if sent by facsimile, upon receipt of a confirmed transmittal
receipt, or if sent by overnight courier, five (5) calendar days after delivery
to or pickup by the overnight courier service.
7.7 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
the other party may reasonably request to give effect to the terms and intent of
this Agreement.
7.8 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior written or oral understandings or agreements.
7.9 Severability. If any provision of this Agreement shall be held invalid
or unenforceable to any extent, the remainder of this Agreement shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
7.10 Remedies Cumulative. The rights and remedies available under this
Agreement or otherwise available shall be cumulative of all other rights and
remedies and may be exercised successively.
7.11 Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.12 No Third Party Beneficiary. Nothing in this Agreement is intended to
confer upon any Person other than the parties hereto and their respective
successors and permitted assigns any rights, benefits, or obligations hereunder.
[The remainder of this page has been left intentionally blank.]
IN WITNESS WHEREOF the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the first date written above.
SHENZHEN NEPTUNUS GROUP CORPORATION
By:
-------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
-----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
----------------------------------------
[Print Name of Investor]
By:
-------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
-----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
SCHEDULE A - INVESTORS
1 GS Capital Partners 2000, L.P., a limited partnership organized and existing
under the laws of the State of Delaware.
2 GS Capital Partners 2000 Offshore, L.P., a limited partnership organized and
existing under the laws of the Cayman Islands.
3 GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, an entity organized and
existing under the laws of Germany.
4 GS Capital Partners 2000 Employee Fund, L.P., a limited partnership organized
and existing under the laws of the State of Delaware.
5 Xxxxxxx Xxxxx Direct Investment Fund 2000, L.P., a limited partnership
organized and existing under the laws of the State of Delaware.
EXHIBIT K - FORM OF INDEMNITY AGREEMENT
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "AGREEMENT"), dated October 6, 2004, is
entered into by and among Shenzhen Neptunus Group Corporation (CHINESE
CHARACTERS), a foreign invested company limited by shares organized and existing
under the laws of the People's Republic of China ("NEPTUNUS GROUP"), China
Nepstar Chain Drugstore Ltd., an exempted company organized and existing under
the laws of the Cayman Islands (the "COMPANY"), each of the parties set forth in
Schedule A (the "EXISTING SUBSIDIARIES"), and each of the parties set forth in
Schedule B (the "INVESTORS").
RECITALS
WHEREAS Neptunus Group, the Company, the Existing Subsidiaries, and the
Investors are parties to a Securities Purchase Agreement, dated October 6, 2004
(the "SECURITIES PURCHASE AGREEMENT");
WHEREAS it is a condition precedent under the Securities Purchase Agreement
that Neptunus Group, the Company and the Existing Subsidiaries enter into this
Agreement;
WHEREAS Neptunus Group, the Company and the Existing Subsidiaries seek to
induce the Investors to consummate their investment in the Company as
contemplated in the Securities Purchase Agreement, and to such ends, seek to
satisfy the conditions precedent to such investment by entering into this
Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual covenants and agreements set forth herein and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1 INTERPRETATION
1.1 Definitions. Unless otherwise defined in this Agreement, capitalized
terms used herein shall have the following meanings:
"AFFILIATE" means, with respect to any given Person, a Person that
Controls, is Controlled by, or is under common Control with the given
Person.
"APPLICABLE LAW" means, with respect to any Person, any and all
provisions of any constitution, treaty, statute, law, regulation,
ordinance, code, rule, judgment, rule of common law, order, decree, award,
injunction, governmental approval, concession, grant, franchise, license,
agreement, directive, requirement, or other governmental restriction or any
similar form of decision of, or determination by, or any interpretation or
administration of any of the foregoing by, any Government Entity, whether
in effect as of the date hereof or thereafter and in each case as amended,
applicable to such Person or its subsidiaries or their respective assets.
"COMMON SHARES" shall mean the Common Shares, par value US$0.0001 per
share, of the Company.
"COMMON SHARE EQUIVALENTS" shall mean warrants, options and rights
exercisable for Common Shares and instruments convertible or exchangeable
for Common Shares.
"CONSENT" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice
to, any Person, including any Government Entity.
"CONTROL" means, when used with respect to any Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise, and the terms "Controlling" and "Controlled" have meanings
correlative to the foregoing.
"ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise.
"EQUITY SECURITIES" shall mean any Common Shares or Common Share
Equivalents.
"GOVERNMENT ENTITY" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government.
"HOLDERS" means the Investors, together with the permitted transferees
and assigns of any Holder's rights hereunder.
"HONG KONG" means the Hong Kong Special Administrative Region.
"INDEMNIFIABLE LOSS" means, with respect to any Indemnified Party, any
action, cost, damage, disbursement, expense, Liability, loss, deficiency,
diminution in value, obligation, penalty or settlement of any kind or
nature. Notwithstanding anything to the contrary provided in the preceding
sentence, "Indemnifiable Loss" shall include, but shall not be limited to,
(i) interest or other carrying costs, penalties, legal, accounting and
other professional fees and expenses reasonably incurred in the
investigation, collection, prosecution and defense of claims and amounts
paid in settlement, that may be imposed on or otherwise incurred or
suffered by such Indemnified Party, and (ii) any Taxes that may be payable
by such Indemnified Party by reason of the indemnification of any
Indemnifiable Loss hereunder, other than Taxes that would have been payable
notwithstanding the event giving rise to indemnification.
"INDEMNIFIED PARTY" has the meaning ascribed thereto in Sections 2.1.
"LIABILITIES" means, with respect to any Person, liabilities owing by
such Person of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to
become due.
"PERSON" means any natural person, limited liability company, joint
stock company, joint venture, partnership, enterprise, trust,
unincorporated organization or any other entity or organization.
"PRC" means the People's Republic of China, but solely for purposes of
this Agreement, excluding Hong Kong, the Macau Special Administrative
Region and the islands of Taiwan.
"TAXES" means any national, provincial or local income, sales and use,
excise, franchise, real and personal property, gross receipt, capital
stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or charge imposed by any Government
Entity, any interest and penalties (civil or criminal) related thereto or
to the nonpayment thereof, and any loss or Tax Liability incurred in
connection with the determination, settlement or litigation of any
Liability arising therefrom.
"TRANCHE 1 CLOSING" has the meaning ascribed thereto in the Securities
Purchase Agreement.
1.2 Interpretation. For all purposes of this Agreement, except as otherwise
expressly herein provided, (i) the terms defined in this Section 1 shall have
the meanings assigned to them in this Section 1 and include the plural as well
as the singular, (ii) all references in this Agreement to designated "Sections"
and other subdivisions are to the designated Sections and other subdivisions of
the body of this Agreement, (iii) pronouns of either gender or neuter shall
include, as appropriate, the other pronoun forms, (iv) the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Section or other subdivision, and
(v) all references in this Agreement to designated Schedules, Exhibits and
Annexes are to the Schedules, Exhibits and Annexes attached to this Agreement.
SECTION 2 INDEMNITY
2.1 Indemnity. Neptunus Group hereby agrees to indemnify and hold harmless
each Holder, the Company, and each of the Existing Subsidiaries (each, an
"INDEMNIFIED PARTY"), from and against any and all Indemnifiable Losses suffered
by such Indemnified Party, directly or indirectly, as a result of, or based upon
or arising from (i) any underpayment or underfunding of any social benefits that
the Company or any of the Existing Subsidiaries may be, or may have been,
required by Applicable Law to pay or fund to or on behalf of any of the prior or
continuing employees thereof prior to the date of the Tranche 1 Closing; (ii)
failure by the Company or any of the Existing Subsidiaries to pay any
value-added Tax prior to the date of the Tranche 1 Closing; or (iii) entry by
the Company or any of the Existing Subsidiaries prior to the date of the Tranche
1 Closing into multiple lease contracts with concurrent terms for a single
business premises where there is a discrepancy between such multiple leases in
terms of rental or other material terms.
2.2 Procedure.
(a) Each Indemnified Party shall be entitled to select its own counsel
in defense of any action, suit, proceeding or alternative dispute resolution
mechanism, whether civil, criminal, administrative, investigative or other
(each, a "CLAIM") that may cause Indemnifiable Losses to such Indemnified Party.
Neptunus Group shall advance all reasonable expenses, including
attorneys' fees and all other related costs, expenses and obligations incurred
in connection with investigating or defending against a Claim (collectively, the
"DEFENSE EXPENSES"). Defense Expenses shall be paid by Neptunus Group to the
Indemnified Party as they are incurred but in any event no later than fifteen
(15) days after a written request and supporting documentation are supplied by
such Indemnified Party to Neptunus Group.
(b) If a Claim is asserted by any third party against an Indemnified
Party, such Indemnified Party may request Neptunus Group to defend the Claim on
behalf of the Indemnified Party by a written notice. If Neptunus Group fails to
defend the Indemnified Party upon such request, a recovery against the
Indemnified Party shall be conclusive in its favor against Neptunus Group,
provided, however, that, if Neptunus Group has not received reasonable notice of
the Claim or is not allowed to control its defense, judgment against the
Indemnified Party shall only constitute presumptive evidence against Neptunus
Group.
(c) All payments to be made by Neptunus Group to an Indemnified Party
hereunder shall be made in immediately available funds to a bank account
designated by such Indemnified Party. All payments to be made to the Company or
any Holder hereunder shall be made in U.S. Dollars. Neptunus Group covenants and
agrees that (i) it has full authority and resources to make any payment
hereunder to or for the account of the Company or any Holder in U.S. Dollars if
so required; and (ii) it shall make all payments hereunder irrespective of and
without deduction for, any counterclaim, defense, recoupment, or set-off.
SECTION 3 REPRESENTATIONS AND WARRANTIES
Neptunus Group represents, warrants and covenants to each Indemnified Party
that:
(a) It is duly organized and validly existing under the laws of the
jurisdiction of its formation and has the corporate power and authority to own
and operate its properties, to carry on its business as now conducted and as
proposed to be conducted and to perform each of its obligations under this
Agreement.
(b) Any corporate action necessary on the part of Neptunus Group and
its officers, directors and shareholders has been taken for the authorization,
execution, and delivery by it of this Agreement and the performance of its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of Neptunus Group, enforceable in accordance with the terms hereof,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other remedies in the
nature of equitable remedies.
(c) The execution, delivery, and performance by Neptunus Group of this
Agreement requires no Consent of any third party and (i) will not result in any
violation of, be in conflict with, or constitute a default under, with or
without the passage of time or the giving of notice, any provision of its
constitutional documents as in effect at the date hereof, any Applicable Law, or
any material contract or obligation to which it is a party or by which it is
bound, or (ii) accelerate or constitute an event entitling the holder of any
indebtedness of Neptunus Group to accelerate the maturity of any such
indebtedness or to increase the rate of interest presently in effect with
respect to such indebtedness, or (iii) result in the creation of any Encumbrance
upon any of the properties or assets of Neptunus Group.
(d) No breach or default, alleged breach or default, or event which
would (with the
passage of time, notice or both) constitute a breach or default under any
agreement, undertaking or instrument to which Neptunus Group is a party or by
which Neptunus Group may be bound (including, inter alia this Agreement) has
occurred, or as a result of this Agreement, or the performance hereof, will
occur.
(e) No litigation, arbitration or administrative proceedings are at
present current or pending, or to the knowledge of Neptunus Group, threatened,
which would have a material adverse effect upon the ability of Neptunus Group to
fulfill its obligations hereunder.
SECTION 4 MISCELLANEOUS
4.1 Binding Effect; Assignment This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
The rights of any Holder hereunder shall be assignable by such Holder (i) to any
other Holder, (ii) to a partner or Affiliate of such Holder, or (iii) to an
assignee or transferee who holds such aggregate number of Equity Securities
(assuming the exercise, conversion and exchange of any Common Share Equivalents)
after the assignment or transfer as are equivalent to 6,000,000 Common Shares
(as adjusted for stock splits, reverse stock splits, stock dividends,
recapitalizations and the like). Except as provided above, this Agreement and
the rights and obligations of any party hereunder shall not otherwise be
assigned without the mutual written consent of Neptunus Group and each of the
Holders then holding any Equity Securities.
4.2 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Hong Kong, without regard to conflicts of laws
principles thereunder.
4.3 Dispute Resolution.
(a) Any dispute, controversy or claim (each, a "DISPUTE") arising out
of or relating to this Agreement, or the interpretation, breach, termination or
validity hereof, shall be resolved at the first instance through consultation
between the parties to such Dispute. Such consultation shall begin immediately
after any party has delivered written notice to any other party to the Dispute
requesting such consultation.
(b) If the Dispute is not resolved within sixty (60) days following
the date on which such notice is given, the Dispute shall be submitted to
arbitration upon the request of any party to the Dispute with notice to each
other party to the Dispute (the "ARBITRATION NOTICE").
(c) The arbitration shall be conducted in Hong Kong under the auspices
of the Hong Kong International Arbitration Centre (the "CENTRE"). There shall be
three (3) arbitrators. The claimants in the Dispute shall collectively choose
one arbitrator, and the respondents shall collectively choose one arbitrator.
The Secretary General of the Centre shall select the third arbitrator, who shall
be qualified to practice law in Hong Kong. If any of the members of the arbitral
tribunal have not been appointed within thirty (30) days after the Arbitration
Notice is given, the relevant appointment shall be made by the Secretary General
of the Centre.
(d) The arbitration proceedings shall be conducted in English and
Chinese. The arbitration tribunal shall apply the Arbitration Rules of the
United Nations Commission on International Trade Law, as in effect at the time
of the arbitration. However, if such rules are in conflict with the provisions
of this Section 4.3, including the provisions concerning the appointment of
arbitrator, the provisions of this Section 4.3 shall prevail.
(e) Each party to the arbitration shall cooperate with each other
party to the arbitration in making full disclosure of and providing complete
access to all information and documents requested by such other party in
connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on such party.
(f) The award of the arbitration tribunal shall be final and binding
upon the parties, and the prevailing party may apply to a court of competent
jurisdiction for enforcement of such award.
(g) The arbitrator shall decide any dispute submitted by the parties
to the arbitration strictly in accordance with the substantive law of Hong Kong
and shall not apply any other substantive law.
(h) Any party to the Dispute shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
(i) During the course of the arbitration tribunal's adjudication of
the dispute, this Agreement shall continue to be performed except with respect
to the part in dispute and under adjudication.
4.4 Language. The governing version of this Agreement is the English
language version. Any translation of this Agreement into Chinese or any other
language is for the convenience of the parties only.
4.5 Amendments. Except as otherwise permitted herein, this Agreement and
its provisions may be amended, changed, waived, discharged or terminated only by
a writing signed by each of the parties.
4.6 Notices. All notices, claims, certificates, requests, demands and other
communications under this Agreement shall be made in writing and shall be
delivered to any party hereto by hand or sent by facsimile, or sent, postage
prepaid, by reputable overnight courier services at the address given for such
party on the signature pages hereof (or at such other address for such party as
shall be specified by like notice), and shall be deemed given when so delivered
by hand, or if sent by facsimile, upon receipt of a confirmed transmittal
receipt, or if sent by overnight courier, five (5) calendar days after delivery
to or pickup by the overnight courier service.
4.7 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
the other party may reasonably request to give effect to the terms and intent of
this Agreement.
4.8 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior written or oral understandings or agreements.
4.9 Severability. If any provision of this Agreement shall be held invalid
or unenforceable to any extent, the remainder of this Agreement shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
4.10 Remedies Cumulative. The rights and remedies available under this
Agreement or otherwise available shall be cumulative of all other rights and
remedies and may be exercised successively.
4.11 Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
4.12 No Third Party Beneficiary. Nothing in this Agreement is intended to
confer upon any Person other than the parties hereto and their respective
successors and permitted assigns any rights, benefits, or obligations hereunder.
[The remainder of this page has been left intentionally blank.]
IN WITNESS WHEREOF the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the first date written above.
SHENZHEN NEPTUNUS GROUP CORPORATION
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
CHINA NEPSTAR CHAIN DRUGSTORE LTD.
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
----------------------------------------
[Print Name of Investor]
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
----------------------------------------
[Print Name of Investor]
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
SCHEDULE A - EXISTING SUBSIDIARIES
1. Shenzhen Nepstar Commercial Development Co., Ltd. (CHINESE CHARACTERS) a
wholly foreign-owned enterprise organized and existing under the laws of the PRC
2. Shenzhen Neptunus Medical & Pharmaceutical Electronic Technology Co., Ltd.
(CHINESE CHARACTERS) a wholly foreign-owned enterprise organized and existing
under the laws of the PRC
3. Shenzhen Nepstar Medical Co., Ltd. (CHINESE CHARACTERS), a limited liability
company organized and existing under the laws of the PRC
4. Shenzhen Nepstar Health Drugstore Chain Co., Ltd. (CHINESE CHARACTERS), a
limited liability company organized and existing under the laws of the PRC
5. Shanghai Nepstar Drugstore Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the PRC
6. Sichuan Nepstar Health Drugstore Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the PRC
7. Yunnan Jianzhijia Chain Health Drugstore Co., Ltd. (CHINESE CHARACTERS), a
limited liability company organized and existing under the laws of the PRC
8. Jiangsu Nepstar Health Drugstore Chain Co., Ltd. (CHINESE CHARACTERS), a
limited liability company organized and existing under the laws of the PRC
9. Dalian Nepstar Medical Co., Ltd. (CHINESE CHARACTERS), a limited liability
company organized and existing under the laws of the PRC
10. Ningbo Huamei Star Health Drugstore Co., Ltd. (CHINESE CHARACTERS), a
limited liability company organized and existing under the laws of the PRC
11. Hangzhou Nepstar Health Drugstore Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the PRC
12. Guangzhou Nepstar Medical Chain Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the PRC
13. Changzhou Nepstar Health Drugstore Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the PRC
14. Suzhou Nepstar Health Drugstore Co., Ltd. (CHINESE CHARACTERS), a limited
liability company organized and existing under the laws of the PRC
15. Wuxi Nepstar Drug Retail Co., Ltd. (CHINESE CHARACTERS), a limited liability
Company organized and existing under the laws of the PRC
16. Medicine Shoppe Medical Chains Management Consulting (Shenzhen) Co., Ltd.
(CHINESE CHARACTERS), a Sino-foreign equity joint venture organized and existing
under the laws of the PRC
SCHEDULE B - INVESTORS
1. GS Capital Partners 2000, L.P., a limited partnership organized and existing
under the laws of the State of Delaware.
2. GS Capital Partners 2000 Offshore, L.P., a limited partnership organized and
existing under the laws of the Cayman Islands.
3. GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, an entity organized and
existing under the laws of Germany.
4. GS Capital Partners 2000 Employee Fund, L.P., a limited partnership organized
and existing under the laws of the State of Delaware.
5. Xxxxxxx Xxxxx Direct Investment Fund 2000, L.P., a limited partnership
organized and existing under the laws of the State of Delaware.
EXHIBIT L - FORM OF REDEMPTION AGREEMENT
REDEMPTION AGREEMENT
THIS REDEMPTION AGREEMENT (this "AGREEMENT"), dated October 6, 2004, is
entered into by and among China Nepstar Chain Drugstore Ltd., a limited company
organized and existing under the laws of the Cayman Islands (the "COMPANY"),
Ankeen Enterprises Limited, a private company limited by shares organized and
existing under the laws of Hong Kong ("ANKEEN"), China Neptunus Drugstore
Holding Ltd., an international business company organized and existing under the
laws of the British Virgin Islands ("NEPTUNUSBVI"), China Star Chain Ltd., an
international business company organized and existing under the laws of the
British Virgin Islands ("MANAGERCO") and each of the parties set forth in
Schedule A (the "INVESTORS").
RECITALS
WHEREAS the parties hereto have entered into a certain Securities Purchase
Agreement, dated October 6, 2004 (as the same may be amended from time to time,
the "SECURITIES PURCHASE AGREEMENT"), pursuant to which the Investors are to
invest in the Company by purchasing certain Series A-1 Preferred Shares, par
value US$0.0001 per share (the "SERIES A-1 PREFERRED SHARES"), of the Company
and certain Series A-2 Preferred Shares, par value US$0.0001 per share (together
with the Series A-1 Preferred Shares, the "SERIES A PREFERRED SHARES"), of the
Company;
WHEREAS it is a condition precedent to the Investors' investment in the
Company under the Securities Purchase Agreement that the Company, the Investors,
Ankeen, NeptunusBVI and ManagerCo enter into this Agreement;
WHEREAS the Company, Ankeen, NeptunusBVI and ManagerCo seek to induce the
Investors to consummate their investment in the Company as contemplated in the
Securities Purchase Agreement, and to such ends, seek to satisfy the conditions
precedent to such investment by entering into this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual covenants and agreements set forth herein and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1 INTERPRETATION
1.1 Definitions. Unless otherwise defined in this Agreement, capitalized
terms used in this Agreement shall have the following meanings:
"ACCOUNTING PRINCIPLES" shall mean International Financial Reporting
Standards as promulgated from time to time by the IASB (including, without
limitation, standards and interpretations approved by the IASB and
International Accounting Principles issued under previous constitutions
thereof), together with the IASB's pronouncements thereon from time to
time, all as consistently applied.
"AFFILIATE" means, with respect to any given Person, a Person that
Controls, is Controlled by, or is under common Control with the given
Person.
"APPLICABLE LAW" means, with respect to any Person, any and all
provisions of any constitution, treaty, statute, law, regulation,
ordinance, code, rule, judgment, rule of common law, order, decree, award,
injunction, governmental approval, concession, grant, franchise, license,
agreement, directive, requirement, or other governmental restriction or any
similar form of decision of, or determination by, or any interpretation or
administration of any of the foregoing by, any Government Entity, whether
in effect as of the date hereof or thereafter and in each case as amended,
applicable to such Person or its subsidiaries or their respective assets.
"BASE PRICE" has the meaning ascribed thereto in the Company's Amended
and Restated Articles of Association, adopted October 6, 2004, as the same
may be amended from time to time.
"COMMON SHARES" mean the Common Shares, par value US$0.0001 per share,
of the Company.
"COMMON SHARE EQUIVALENTS" means warrants, options and rights
exercisable for Common Shares and instruments convertible or exchangeable
for Common Shares.
"COMPANY" has the meaning ascribed thereto in the preamble hereto.
"COMPETITOR" means, as of any given time, any Person (i) whose main
line of business at such time is the operation of pharmaceutical retail
stores and (ii) who enjoys at such time, whether individually or through an
Affiliate, more than a 20% interest in the equity or proceeds in or from an
enterprise (whether in the form of a limited liability company, joint stock
company, joint venture, partnership, cooperative arrangement, enterprise,
trust, unincorporated organization or any other entity or organization)
operating pharmaceutical retail stores in the PRC.
"CONSENT" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice
to, any Person, including any Government Entity.
"CONTROL" means, when used with respect to any Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise, and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise.
"EQUITY SECURITIES" means any Common Shares or Common Share
Equivalents.
"GOVERNMENT ENTITY" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other
instrumentality of any government.
"GROUP COMPANY" means any Person that is not a natural person and that
is Controlled by the Company.
"HOLDERS" means, the Investors, together with the permitted
transferees and assigns of any Holder.
"HONG KONG" means the Hong Kong Special Administrative Region.
"HOLDER MAJORITY" means, for any given time, Holders representing a
majority in voting power of the Series A Preferred Shares then held by all
Holders.
"IASB" means the International Accounting Standards Board.
"IPO" means a firm-commitment underwritten initial public offering of
the Company's Common Shares on the New York Stock Exchange, the Nasdaq
Stock Market's National Market System, the Main Board of the Hong Kong
Stock Exchange or any other exchange of the recognized international
reputation and standing duly approved by the Company's Board of Directors.
"PARTICIPATING SHAREHOLDERS" means NeptunusBVI, ManagerCo and the
Investors, together with any Person acceding to the obligations of a
Participating Shareholder pursuant to Section 6.1.
"PERSON" means any natural person, limited liability company, joint
stock company, joint venture, partnership, enterprise, trust,
unincorporated organization or any other entity or organization.
"PRC" means the People's Republic of China, but solely for purposes of
this Agreement, excluding Hong Kong, the Macau Special Administrative
Region and the islands of Taiwan.
"QUALIFIED IPO" means an IPO that values the Company at no less than
US$250,000,000 immediately prior to the IPO and that results in aggregate
proceeds to the Company of US$50,000,000, net of Selling Expenses.
"SELLING EXPENSES" means, with respect to the issue or sale of any
securities, any expenses payable directly or indirectly by the Company and
any underwriting, brokerage or similar commissions, compensation, discounts
or concessions paid or allowed by the Company in connection with such issue
or sale.
"TAXES" means any national, provincial or local income, sales and use,
excise, franchise, real and personal property, gross receipt, capital
stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or charge imposed by any Government
Entity, any interest and penalties (civil or criminal) related thereto or
to the nonpayment thereof, and any loss or Tax liability incurred in
connection with the determination, settlement or litigation of any
liability arising therefrom.
"TRANCHE 1 CLOSING" shall have the meaning ascribed thereto in the
Securities Purchase Agreement.
1.2 Interpretation. For all purposes of this Agreement, except as otherwise
herein expressly provided, (i) the terms defined in this Section 1 shall have
the meanings assigned to them in this Section 1 and include the plural as well
as the singular, (ii) all accounting terms not otherwise defined herein have the
meanings assigned under the Accounting Principles, (iii) all references in this
Agreement to designated "Sections" and other subdivisions are to the designated
Sections and other subdivisions of the body of this Agreement, (iv) pronouns of
either gender or neuter shall include, as appropriate, the other pronoun forms,
(v) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section or
other subdivision, and (vi) all references in this Agreement to designated
Schedules, Exhibits and Annexes are to the Schedules, Exhibits and Annexes
attached to this Agreement.
SECTION 2 REDEMPTION OF THE SERIES A PREFERRED SHARES
2.1 Redemption Right. Following the first occurrence of a Redemption Event,
a Holder Majority may require the Company to repurchase all, but not less than
all, the issued and outstanding Series A Preferred Shares at a price per share
(the "REDEMPTION PRICE") as determined in Section 2.2 below. Such right shall be
exercisable after the occurrence of such Redemption Event and prior to October
5, 2014 by delivery of written notice (a "REDEMPTION NOTICE") to the Company and
to each other Holder. A Redemption Notice shall fix a date for redemption (the
"REDEMPTION DATE"), which shall be no later than sixty (60) days after the date
which such notice is delivered to the Company. Each Holder agrees that,
following the due delivery of a Redemption Notice and to the extent such shares
are not previously converted into Common Shares, it shall be obligated to sell
all the Series A Preferred Shares held thereby to the Company at such time and
in accordance with such terms as are provided hereunder.
2.2 Redemption Price. The Redemption Price payable by the Company in
respect of the repurchase of any Series A Preferred Share under this Section 2
shall be the sum of (i) the Base Price for such share at the Redemption Date,
(ii) the amount which would have accrued on such Base Price at the compound
annual rate of 8% from the date of the share's issuance under the Securities
Purchase Agreement up to and including such date as the Redemption Price is paid
with respect to such share, and (iii) any declared but unpaid dividends on the
share. The Redemption Price shall be payable to any Holder at the last address
shown for such Holder in the share registrar of the Company or to such account
as the Holder may specify to the Company in written notice delivered on or prior
to the Redemption Date.
2.3 Redemption Event. For purposes of this Agreement, the occurrence of any
of the following events shall constitute a "REDEMPTION EVENT":
(i) As of the fourth anniversary of the Tranche 1 Closing, the
Investors or their Affiliates shall continue to hold at least 12,000,000
Series A Preferred Shares (as adjusted for stock splits, stock dividends,
reverse stock splits, recapitalizations and the like) and the Company shall
not have completed an IPO;
(ii) Applicable Law shall require, or any Government Entity shall
otherwise impose any obligation on, any of the Company or the Group
Companies, or any combination of the foregoing, to
reorganize their corporate structure, business or operations; or
(iii) Applicable Law shall prevent the Company from carrying out an
IPO or any Government Entity shall otherwise take any action which would
effectively prevent the Company from carrying out an IPO within the
reasonably foreseeable future.
2.4 Redemption Mechanics.
(a) Except as otherwise provided in paragraph (b) below, on or after
the Redemption Date, each Holder shall surrender to the Company, at the
principal office of the Company, or at such other office or agency as the
Company may designate by notice to such Holder in writing, all certificates held
by the Holder representing the Series A Preferred Shares owned thereby. Upon
receipt of any such certificate for Series A Preferred Shares, the Company shall
promptly pay the Redemption Price with respect to such shares to the order of
the Holder whose name appears on such certificate or certificates, and each
surrendered certificate shall be cancelled. In the case of any lost, stolen or
destroyed certificate, the Company shall promptly pay the Redemption Price to
the Holder of the Series A Preferred Shares that would have been evidenced by
such certificate upon such Holder executing an agreement reasonably satisfactory
to the Company to indemnify the Company for any loss incurred by it in
connection with such lost, stolen or destroyed certificate. In the event the
name of the Person appearing on a certificate or certificates surrendered to the
Company by a Holder is other than the name of such Holder, the Company shall
promptly pay such Holder the Redemption Price with respect to the Series A
Preferred Shares evidenced by such certificate or certificates upon the Holder's
title to such shares being established to the reasonable satisfaction of the
Company.
(b) From and after the Redemption Date, unless there shall have been a
default in payment of the Redemption Price, all rights with respect to the
Series A Preferred Shares subject to repurchase pursuant to these provisions
(except the right to receive the Redemption Price therefor in accordance with
paragraph (a) above) shall cease with respect to such shares, and such shares
shall not be transferred on the books of the Company or be deemed to be
outstanding for any purpose whatsoever.
(c) If the funds of the Company legally available for repurchase of
Series A Preferred Shares on the Redemption Date are insufficient to repurchase
all the Series A Preferred Shares required to be repurchased at such date, those
funds which are legally available will be used to repurchase ratably from the
Holders, according to the Base Price of the Series A Preferred Shares held
thereby, the maximum possible number of Series A Preferred Shares. Thereafter,
as additional funds of the Company from time to time become legally available
for the repurchase of Series A Preferred Shares, such funds shall immediately be
applied towards repurchasing ratably from the Holders, according to the Base
Price of the Series A Preferred Shares then held thereby, the balance of any
Series A Preferred Shares which were otherwise required to be repurchased at the
Redemption Date. Notwithstanding anything to the contrary contained herein, any
Series A Preferred Shares with respect to which the Company has failed to pay
the Redemption Price as required shall continue to have all the powers,
designations, preferences and other rights (including, without limitation,
rights to accrue dividends or convert such shares) which such shares had prior
to the Redemption Date, until the Redemption Price shall have been paid in full
with respect to such shares.
(d) Each Holder shall be entitled to retain the certificate or
certificates evidencing any Series A Preferred Shares which the Company has
failed to repurchase hereunder, and in the event only part
of the Series A Preferred Shares evidenced by any certificate are repurchased,
the Company will issue a new certificate to the Holder evidencing the
unpurchased Series A Preferred Shares.
SECTION 3 GUARANTEE
3.1 Guarantee. Ankeen (the "GUARANTOR") hereby irrevocably, absolutely and
unconditionally, guarantees, as principal obligor and not merely as surety, the
full, prompt and complete payment of all amounts payable by the Company under
this Agreement, when and as payment of such amounts shall become due, and
irrevocably and unconditionally undertakes with the Holders that, if and
whenever the Company shall be in default in payment of any such sum whatsoever
under or in connection with the Company's obligations pursuant to this
Agreement, the Guarantor will on first demand make good in U.S. Dollars the
default and pay all sums which may be payable as if the Guarantor, instead of
the Company, were the primary obligor. Without limiting the foregoing, as a
separate and independent covenant, the Guarantor hereby agrees that any sum
expressed to be payable by the Company under this Agreement but which is for any
reason (whether or not now existing and whether or not now known or becoming
known to any party thereto) not recoverable from the Guarantor on the basis of a
guarantee shall nevertheless be recoverable from the Guarantor as if the
Guarantor were the sole principal obligor and shall be paid by the Guarantor to
the Holders on demand in U.S. Dollars.
3.2 Continuing Obligation. The guarantee given under this Section 3 is the
continuing obligation of the Guarantor and shall remain in force until all sums
guaranteed hereunder which may be or become payable have been paid in full. Such
guarantee shall continue to be effective or shall be reinstated, as the case may
be, if at any time payment of any sums guaranteed hereunder must be restored by
any Holder upon the bankruptcy, liquidation or reorganization of the Company or
otherwise.
3.3 Preservation of Guaranty. The obligations of the Guarantor under this
Section 3 shall not be affected by any act, omission, matter, or thing which,
but for this Section 3.3, might operate to release or otherwise exonerate the
Guarantor from its obligations hereunder or otherwise affect such obligations,
including without limitation and whether or not known to the Guarantor or the
Holders, (i) any time or indulgence granted to or composition with the Company
or any other Person; (ii) the taking, variation, compromise, renewal, release of
or refusal or neglect to perfect or enforce any rights, remedies or securities
against the Company or any other Person; (iii) any legal limitation, disability,
incapacity or other circumstances relating to the Company or any other Person or
any amendment or supplement to or variation of the rights and preferences of the
Series A Preferred Shares, the provisions of this Agreement or any other
document or security; (iv) any irregularity, unenforceablity or invalidity of
any obligations of the Company or any other Person with respect to the Series A
Preferred Shares, under this Agreement or under any other document or security;
or (v) the failure of the Company to maintain its corporate existence or the
ownership of substantially all of its assets.
3.4 Waiver. The Guarantor hereby waives diligence, presentment, demand,
protest, notice and any right it may have of first requiring any Holder to
proceed against or enforce any other guaranty or security of, or claim payment
from, the Company or any other Person.
3.5 Non-Competition. After a claim has been made pursuant to this Section 3
and until all sums guaranteed hereunder shall have been paid in full, the
Guarantor shall not (i) be entitled nor shall claim to rank as creditor against
the estate or in the bankruptcy or liquidation of the Company in competition
with any Holder or (ii) receive, claim or have the benefit of any payment or
distribution from or on account of the Company or claim the benefit of any
security or moneys held
by any Holder.
3.6 Additional Security. The guarantee given by the Guarantor under this
Section 3 shall be in addition to and shall not in any way be prejudiced by any
collateral or other security now or hereafter held by any Holder or by any lien
to which any Holder may be entitled.
3.7 Payments.
(a) All payments to be made by the Guarantor under this Section 3
shall be made in immediately available funds, in U.S. Dollars and at the place
or places in and at which the corresponding sums are payable by the Company
under this Agreement. The Guarantor covenants and agrees that it shall pay all
amounts payable hereunder free and clear of, and without deduction or
withholding for or on account of, any Taxes and shall indemnify and hold
harmless each Holder from any Taxes that may be payable by such Holder in
respect of any payment by the Guarantor under this Section 3, other than Taxes
that would have been payable notwithstanding the event giving rise to the
Guarantor's payment obligation hereunder.
(b) All payments to a Holder under this Section 3 shall be made by the
Guarantor irrespective of and without deduction for, any counterclaim, defense,
recoupment, or set-off and shall be final.
(c) The Guarantor hereby represents and warrants that it has full
authority to make all payments hereunder to or for the account of the Holders in
U. S. Dollars.
3.8 Evidence and Demand. A certificate from any Holder setting forth an
amount due thereto from the Company or the Guarantor shall be conclusive
evidence of such amount. Upon the Guarantor's receipt of any such certificate
from a Holder, the Guarantor shall immediately pay the amount specified in such
certificate to the Holder in accordance with the terms of Section 3.7.
3.9 General Undertakings. The Guarantor undertakes that, from and after the
date hereof and for so long as any amount payable or guaranteed under this
Section 3 remains unpaid, it shall obtain and promptly renew from time to time
all Consents as may be required to perform its obligations under this Section 3
or required for the validity or enforceability of this Agreement, shall comply
with the terms of the same and will ensure the availability and transferability
of sufficient foreign exchange to enable it to comply with its obligations under
this Section 3.
3.8 Evidence and Demand. A certificate from any Holder setting forth an
amount due thereto from the Company or the Guarantor shall be conclusive
evidence of such amount. Upon the Guarantor's receipt of any such certificate
from a Holder, the Guarantor shall immediately pay the amount specified in such
certificate to the Holder in accordance with the terms of Section 3.7.
3.9 General Undertakings. The Guarantor undertakes that, from and after the
date hereof and for so long as any amount payable or guaranteed under this
Section 3 remains unpaid, it shall obtain and promptly renew from time to time
all Consents as may be required to perform its obligations under this Section 3
or required for the validity or enforceability of this Agreement, shall comply
with the terms of the same and will ensure the availability and transferability
of sufficient foreign exchange to enable it to comply with its obligations under
this Section 3.
3.10 Negative Pledge.
(a) The Guarantor undertakes that, from and after the date hereof and
so long as any amount payable or guaranteed hereunder is outstanding, the
Guarantor will not, create or permit to exist any Encumbrance on or over any of
its present or future assets or revenues as security for any present or future
loan, debt, guaranty or other obligation (whether of the Guarantor or any other
Person) unless it shall ensure (in a manner satisfactory to a Holder Majority)
that the obligations of the Guarantor hereunder either (i) share equally and
ratably with such loan, debt, guaranty or other obligation thereby secured, or
(ii) receive the benefit of an Encumbrance on other assets or revenues of the
Guarantor equivalent to that granted to such other loan, debt, guaranty or
obligation. However, the foregoing undertaking shall not apply to:
(i) any Encumbrance created or granted to secure indebtedness having a
maturity of not more than one (1) year (other than indebtedness incurred
pursuant to an agreement to extend credit, in one or more advances and
irrespective of the term of individual advances, under which the date of
expiration of the commitment to advance funds or the latest date on which
advances may remain outstanding is more than one (1) year from the date of
such agreement) or any guaranty thereof, it being understood that any
indebtedness initially having a maturity of one (1) year or less which is
extended, renewed or replaced in related transactions by other indebtedness
so as to result in a final maturity of such indebtedness (taken together
with all such other indebtedness) of more than two (2) years shall, as of
the time of the extension, renewal or replacement having such effect cease
to be considered as indebtedness having a maturity of not more than one (1)
year for the purposes hereof; and
(ii) any Encumbrance existing at the date of this Agreement.
(b) The Guarantor undertakes that its obligations hereunder will
constitute direct, unconditional, unsecured, unsubordinated and general
obligations of, and will rank at least pari passu with, all other present and
future outstanding unsecured indebtedness issued, created, assumed or guaranteed
by it.
3.11 Currency Indemnity. The obligations of the Guarantor to make payment
in U.S. Dollars of all amounts due hereunder shall not be discharged or
satisfied by any tender, or any recovery pursuant to any judgment, which is
expressed in or converted into any currency other than U.S. Dollars, except to
the extent such tender or recovery shall result in the actual receipt by the
appropriate party of the full amount of U.S. Dollars due hereunder. The
obligations of the Guarantor to make payments in U.S Dollars as aforesaid shall
be enforceable as an alternative or additional cause of action for the purpose
of recovery in U.S. Dollars of the amount, if any, by which such actual receipt
shall fall short of the full amount of U.S. Dollars due hereunder, and shall not
be affected by the judgment being obtained for any other sums due under this
Section 3.
SECTION 4 COMPULSORY SALE
4.1 Right to Require Compulsory Sale. In the event of any default by the
Company in paying the Redemption Price with respect to any Series A Preferred
Share (a "DEFAULT"), then for so long as such Default is continuing, a Holder
Majority may cause the sale (a "COMPULSORY SALE") of the Company to a third
party ("PROSPECTIVE PURCHASER") in a bona-fide, arms-length transaction and may
distribute the proceeds therefrom to the Participating Shareholders in
accordance with
Section 4.3. Without limiting the generality of the foregoing, in furtherance of
a Compulsory Sale, a Holder Majority (i) may require the sale of all or a
material part of the business, assets and undertakings of any of the Company or
the Group Companies, (ii) may require the continuation of the Company to another
jurisdiction, (iii) may require the merger, amalgamation or consolidation of the
Company with or into another Person, (iv) may require the Participating
Shareholders to sell all the capital shares in the Company held thereby or (v)
may require the Company and/or the Participating Shareholders to take all such
other actions as a Holder Majority may deem appropriate to effect a Compulsory
Sale.
4.2 Further Assurances. Each Participating Shareholder shall do and
perform, or cause to be done and performed, all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as a Holder Majority may request in furtherance of any proposed
Compulsory Sale of the Company, including, without limitation:
(i) Voting all the capital shares of the Company held by such
Participating Shareholder to approve any resolution which may be required
to consummate such Compulsory Sale; and
(ii) Delivering to any representative appointed by a Holder Majority
all certificates evidencing any capital shares of the Company held by such
Participating Shareholder, together with (i) an instrument of transfer,
duly executed in blank and in proper form to permit the disposition of such
shares to a Prospective Purchaser and (ii) a limited power-of-attorney, in
form and substance reasonably satisfactory to a Holder Majority,
authorizing the representative of such Holder Majority to effect the
disposition of such shares to the Prospective Purchaser on such terms and
conditions as shall be agreed between the Holder Majority and the
Prospective Purchaser for the Compulsory Sale. If any Participating Holder
shall fail to deliver such certificate, instrument of transfer and limited
power-of-attorney to the representative of a Holder Majority as required
under this clause, the disposition of any capital shares held by such
Participating Holder may be effected without the Participating
Shareholder's consent or surrender of its certificate.
4.3 Distribution of Proceeds. Upon a Compulsory Sale any proceeds therefrom
payable to the Participating Shareholders shall be distributed promptly among
the Participating Shareholders as follows:
FIRST, to the holders of Series A Preferred Shares (i) pro rata,
according to the Base Price of the Series A Preferred Shares held
thereby, until each such holder shall have received an amount which
equals 150% of the aggregate Base Price of the Series A Preferred
Shares held thereby and (ii) pro rata, according to the amount of any
dividends that have been declared but remain unpaid with respect to
all Series A Preferred Shares held thereby, until all dividends that
have been declared with respect to the Series A Preferred Shares have
been paid; SECOND, to the holders of Common Shares (i) pro rata,
according to the number of Common Shares held thereby, until an
aggregate amount has been paid to such holders collectively which is
equal to the sum of all prior amounts paid with respect to the Series
A Preferred Shares under this Section 4.3 and (ii) pro rata, according
to the amount of any dividends that have been declared but remain
unpaid with respect to all Common Shares held thereby, until all
dividends that have been declared with respect to the Common Shares
have been paid; and THIRD, to all holders pro rata, according to the
number of Common Shares held
thereby (treating any Series A Preferred Shares on an as-if converted
basis).
4.4 Discharge of Obligation to Pay Redemption Price.
(a) If the proceeds paid to a Holder from a Compulsory Sale exceed the
sum of all amounts payable to such Holder in respect of the Redemption Price on
any Series A Preferred Shares outstanding immediately prior to the Compulsory
Sale, then the Company's obligation to pay such Redemption Price to the Holder
shall be deemed discharged; provided that, notwithstanding anything to the
contrary in this Section 4.4, the Company's obligation to pay the Redemption
Price with respect to any Series A Preferred Share shall continue to be
effective or shall be reinstated, as the case may be, if at any time (i) all or
any part of the proceeds paid to any Holder from a Compulsory Sale must be
restored by such Holder upon the bankruptcy, liquidation or reorganization of
the Company or otherwise and (ii) as a consequence, the resulting proceeds to
such Holder from the Compulsory Sale shall be less than the sum of all amounts
that were payable to such Holder in respect of the Redemption Price on any
Series A Preferred Shares outstanding immediately prior to the Compulsory Sale.
(b) To the extent the proceeds paid to a Holder from a Compulsory Sale
are less than the sum of all amounts payable to such Holder in respect of the
Redemption Price on any Series A Preferred Shares outstanding immediately prior
to the Compulsory Sale, the Company undertakes to pay such deficiency to the
Holder regardless of whether the Holder shall continue to hold the Series A
Preferred Shares following consummation of the Compulsory Sale.
SECTION 5 REPRESENTATIONS AND WARRANTIES
Each of the Company, Ankeen, ManagerCo and NeptunusBVI (collectively, the
"WARRANTORS") jointly and severally represent, warrant and covenant to each of
the Investors that:
(a) It is duly organized and validly existing under the laws of the
jurisdiction of its formation and has the corporate power and authority to own
and operate its properties, to carry on its business as now conducted and as
proposed to be conducted and to perform each of its obligations under this
Agreement.
(b) All corporate action necessary on the part of such Warrantor and
its officers, directors and shareholders has been taken for the authorization,
execution, and delivery by such Warrantor of this Agreement and the performance
by the Warrantor of its obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of the Warrantor, enforceable in accordance
with its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other remedies
in the nature of equitable remedies.
(c) The execution, delivery, and performance by such Warrantor of this
Agreement requires no Consent of any third party and (i) will not result in any
violation of, be in conflict with, or constitute a default under, with or
without the passage of time or the giving of notice, any provision of its
constitutional documents as in effect at the date hereof, any Applicable Law, or
any material contract or obligation to which it is a party or by which it is
bound, or (ii) accelerate or constitute an event entitling the holder of any
indebtedness of the Warrantor to accelerate the maturity of any such
indebtedness or to increase the rate of interest presently in effect with
respect to such indebtedness, or (iii) result in the creation of any Encumbrance
upon any of the properties
or assets of the Warrantor.
(d) No breach or default, alleged breach or default, or event which
would (with the passage of time, notice or both) constitute a breach or default
under any agreement, undertaking or instrument to which the Warrantor is a party
or by which the Warrantor may be bound (including, inter alia this Agreement)
has occurred, or as a result of this Agreement, or the performance hereof, will
occur.
(e) Except such Consents as are described in Schedule B of this
Agreement, no Consent is required of any Government Entity on the part of such
Warrantor, nor is advisable, in connection with the execution, delivery,
performance, validity and enforceability of this Agreement. All Consents
described in Schedule B of this Agreement have been duly secured and are in full
force and effect as of the date hereof, and the Warrantor is in compliance with
the terms of each such Consent.
(f) No litigation, arbitration or administrative proceedings are at
present current or pending, or to the knowledge of such Warrantor, threatened,
which would have a material adverse effect upon the ability of the Warrantor to
fulfill its obligations hereunder.
SECTION 6 ASSIGNMENTS AND TRANSFERS; NO THIRD PARTY BENEFICIARIES
6.1 Prohibition on Transfer of Shares. Except in a Compulsory Sale, none of
the Participating Shareholders shall sell, assign, transfer, pledge,
hypothecate, or otherwise encumber or dispose of in any way, all or any part of
any interest in the capital shares of the Company now or hereafter owned or held
thereby unless the Person to whom such capital shares are sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of shall
have entered into a binding instrument, in form and substance satisfactory to a
Holder Majority, acceding to all of the terms of this Agreement and undertaking
to observe all of the obligations of a Participating Shareholder hereunder. Any
sale, assignment, transfer, pledge, hypothecation or other encumbrance or
disposition of any of the capital shares of the Company not made in conformance
with this Agreement shall be null and void, shall not be recorded on the books
of the Company, and shall not be recognized by the Company.
6.2 Assignment. This Agreement and the rights and obligations of the
parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives. The rights of any
Holder hereunder are only assignable (i) by such Holder to any other Holder,
(ii) to a partner or affiliate of such Holder, or (iii) to an assignee or
transferee who holds such aggregate number of Equity Securities (assuming the
exercise, conversion and exchange of any Common Share Equivalents) after the
assignment or transfer as are equivalent to 6,000,000 Common Shares (as adjusted
for stock splits, reverse stock splits, stock dividends, recapitalizations and
the like). Except as provided above or as required by Section 6.1, this
Agreement and the rights and obligations of any party hereunder shall not
otherwise be assigned without the mutual written consent of the other parties.
SECTION 7 LEGEND
Each existing or replacement certificate for capital shares of the Company
now owned or hereafter acquired by the Participating Shareholders shall bear the
following legend upon its face:
"THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN REDEMPTION AGREEMENT BY AND AMONG THE COMPANY
AND CERTAIN OTHER PARTIES. COPIES OF SUCH AGREEMENT MAY BE OBTAINED
UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY."
The above restrictions on share transfer should also be recorded in a notation
on the Company's share register.
SECTION 8 MISCELLANEOUS
8.1 Termination. This Agreement shall terminate upon the earlier of (i) the
closing of a Qualified IPO, (ii) such date as all Series A Preferred Shares
shall have been repurchased by the Company or converted into Common Shares; and
(iii) so long as a Holder Majority has not previously delivered a Redemption
Notice, such time as Competitors shall hold aggregate Equity Securities
representing a majority in voting power of the Equity Securities then held by
all Holders. Notwithstanding anything to the contrary herein, the obligations of
the Guarantor under Section 3 and the provisions of this Section 8 shall survive
the termination of this Agreement. No termination of this Agreement shall
relieve any party hereto of any liability for breach of this Agreement or for
any misrepresentation hereunder, nor shall such termination be deemed to
constitute a waiver of any available remedy (including specific performance if
available) for any such breach or misrepresentation.
8.2 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Hong Kong, without regard to conflicts of laws
principles thereunder.
8.3 Dispute Resolution.
(a) Any dispute, controversy or claim (each, a "DISPUTE") arising out
of or relating to this Agreement, or the interpretation, breach, termination or
validity hereof, shall be resolved at the first instance through consultation
between the parties to such Dispute. Such consultation shall begin immediately
after any party has delivered written notice to any other party to the Dispute
requesting such consultation.
(b) If the Dispute is not resolved within sixty (60) days following
the date on which such notice is given, the Dispute shall be submitted to
arbitration upon the request of any party to the Dispute with notice to each
other party to the Dispute (the "ARBITRATION NOTICE").
(c) The arbitration shall be conducted in Hong Kong under the auspices
of the Hong Kong International Arbitration Centre (the "CENTRE"). There shall be
three (3) arbitrators. The claimants in the Dispute shall collectively choose
one arbitrator, and the respondents shall collectively choose one arbitrator.
The Secretary General of the Centre shall select the third arbitrator, who shall
be qualified to practice law in the Hong Kong Special Administrative Region. If
any of the members of the arbitral tribunal have not been appointed within
thirty (30) days after the Arbitration Notice is given, the relevant appointment
shall be made by the Secretary General of the Centre.
(d) The arbitration proceedings shall be conducted in English and
Chinese. The arbitration tribunal shall apply the Arbitration Rules of the
United Nations Commission on
International Trade Law, as in effect at the time of the arbitration. However,
if such rules are in conflict with the provisions of this Section 8.3, including
the provisions concerning the appointment of arbitrator, the provisions of this
Section 8.3 shall prevail.
(e) Each party to the arbitration shall cooperate with each other
party to the arbitration in making full disclosure of and providing complete
access to all information and documents requested by such other party in
connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on such party.
(f) The award of the arbitration tribunal shall be final and binding
upon the parties, and the prevailing party may apply to a court of competent
jurisdiction for enforcement of such award.
(g) The arbitrator shall decide any dispute submitted by the parties
to the arbitration strictly in accordance with the substantive law of Hong Kong
and shall not apply any other substantive law.
(h) Any party to the Dispute shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
(i) During the course of the arbitration tribunal's adjudication of
the dispute, this Agreement shall continue to be performed except with respect
to the part in dispute and under adjudication.
8.4 Language. The governing version of this Agreement is the English
language version. Any translation of this Agreement into Chinese or any other
language is for the convenience of the parties only.
8.5 Amendments. Except as otherwise permitted herein, this Agreement and
its provisions may be amended, changed, waived, discharged or terminated only by
a writing signed by each of the parties hereto.
8.6 Notices. All notices, claims, certificates, requests, demands and other
communications under this Agreement shall be made in writing and shall be
delivered to any party hereto by hand or sent by facsimile, or sent, postage
prepaid, by reputable overnight courier services at the address given for such
party on the signature pages hereof (or at such other address for such party as
shall be specified by like notice), and shall be deemed given when so delivered
by hand, or if sent by facsimile, upon receipt of a confirmed transmittal
receipt, or if sent by overnight courier, five (5) calendar days after delivery
to or pickup by the overnight courier service.
8.7 Further Assurances. Each party hereto shall do and perform, or cause to
be done and performed, all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party may reasonably request to give effect to the terms and intent of
this Agreement.
8.8 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior written or oral understandings or agreements.
8.9 Severability. If any provision of this Agreement shall be held invalid
or unenforceable to any extent, the remainder of this Agreement shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
8.10 Remedies Cumulative. The rights and remedies available under this
Agreement or otherwise available shall be cumulative of all other rights and
remedies and may be exercised successively.
8.11 Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.12 No Third Party Beneficiary. Nothing in this Agreement is intended to
confer upon any Person other than the parties hereto and their respective
successors and permitted assigns any rights, benefits, or obligations hereunder.
[The remainder of this page has been left intentionally blank.]
IN WITNESS WHEREOF the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the first date written above.
CHINA NEPSTAR CHAIN DRUGSTORE LTD.
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
ANKEEN ENTERPRISES LIMITED
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
CHINA NEPTUNUS DRUGSTORE HOLDING LTD.
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
CHINA STAR CHAIN LTD.
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
-----------------------------
[Print Name of Investor]
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
SCHEDULE A - INVESTORS
1. GS Capital Partners 2000, L.P., a limited partnership organized and existing
under the laws of the State of Delaware.
2. GS Capital Partners 2000 Offshore, L.P., a limited partnership organized and
existing under the laws of the Cayman Islands.
3. GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, an entity organized and
existing under the laws of Germany.
4. GS Capital Partners 2000 Employee Fund, L.P., a limited partnership organized
and existing under the laws of the State of Delaware.
5. Xxxxxxx Xxxxx Direct Investment Fund 2000, L.P., a limited partnership
organized and existing under the laws of the State of Delaware.
SCHEDULE B - CONSENTS
None
EXHIBIT M - FORM OF GUARANTEE AGREEMENT
GUARANTEE AGREEMENT
THIS GUARANTEE AGREEMENT (this "AGREEMENT"), dated October 6, 2004, is
entered into by and among Shenzhen Neptunus Group Corporation (CHINESE
CHARECTERS), a foreign invested company limited by shares organized and existing
under the laws of the People's Republic of China ("NEPTUNUS GROUP"), and each of
the parties set forth in Schedule A (the "INVESTORS").
RECITALS
WHEREAS the parties hereto have entered into a certain Securities Purchase
Agreement, dated October 6, 2004 (as the same may be amended from time to time,
the "SECURITIES PURCHASE AGREEMENT"), together with China Nepstar Chain
Drugstore Ltd. (the "COMPANY") and certain other parties;
WHEREAS it is a condition precedent to the Investors' investment in the
Company under the Securities Purchase Agreement that the Neptunus Group enter
into this Agreement;
WHEREAS the Neptunus Group seeks to induce the Investors to consummate
their investment in the Company as contemplated in the Securities Purchase
Agreement, and to such ends, seek to satisfy the conditions precedent to such
investment by entering into this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual covenants and agreements set forth herein and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1 INTERPRETATION
1.1 Definitions. Unless otherwise defined in this Agreement, capitalized
terms used in this Agreement shall have the following meanings:
"ACCOUNTING PRINCIPLES" shall mean International Financial Reporting
Standards as promulgated from time to time by the IASB (including, without
limitation, standards and interpretations approved by the IASB and
International Accounting Principles issued under previous constitutions
thereof), together with the IASB's pronouncements thereon from time to
time, all as consistently applied.
"AFFILIATE" means, with respect to any given Person, a Person that
Controls, is Controlled by, or is under common Control with the given
Person.
"AGREEMENT" has the meaning ascribed thereto in the preamble hereto.
"APPLICABLE LAW" means, with respect to any Person, any and all
provisions of any constitution, treaty, statute, law, regulation,
ordinance, code, rule, judgment, rule of common law, order, decree, award,
injunction, governmental approval, concession, grant, franchise, license,
agreement, directive, requirement, or other governmental restriction or any
similar form of decision of, or determination by, or any interpretation or
administration
of any of the foregoing by, any Government Entity, whether in effect as of
the date hereof or thereafter and in each case as amended, applicable to
such Person or its subsidiaries or their respective assets.
"COMMON SHARES" mean the Common Shares, par value US$0.0001 per share,
of the Company.
"COMMON SHARE EQUIVALENTS" means warrants, options and rights
exercisable for Common Shares and instruments convertible or exchangeable
for Common Shares.
"COMPANY" has the meaning ascribed thereto in the preamble hereto.
"CONSENT" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice
to, any Person, including any Government Entity.
"CONTROL" means, when used with respect to any Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise, and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise.
"EQUITY SECURITIES" means any Common Shares or Common Share
Equivalents.
"GOVERNMENT ENTITY" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government.
"HOLDERS" means, the Investors, together with the permitted
transferees and assigns of any Holder.
"HONG KONG" means the Hong Kong Special Administrative Region.
"HOLDER MAJORITY" means, for any given time, Holders representing a
majority in voting power of the Series A Preferred Shares then held by all
Holders.
"IASB" means the International Accounting Standards Board.
"INVESTOR" has the meaning ascribed thereto in the preamble hereto.
"PERSON" means any natural person, limited liability company, joint
stock company, joint venture, partnership, enterprise, trust,
unincorporated organization or any other entity or organization.
"REDEMPTION AGREEMENT" means that certain Redemption Agreement, of
event date herewith, among the Company, Ankeen Enterprises Limited, China
Neptunus Drugstore Holding Ltd., China Star Chain Ltd. and the Investors.
"REDEMPTION NOTICE" has the meaning ascribed thereto in the Redemption
Agreement.
"SERIES A PREFERRED SHARES" means the Series A-1 Preferred Shares, par
value US$0.0001 per share, of the Company and the Series A-2 Preferred
Shares, par value US$0.0001 per share, of the Company.
"TAXES" means any national, provincial or local income, sales and use,
excise, franchise, real and personal property, gross receipt, capital
stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or charge imposed by any Government
Entity, any interest and penalties (civil or criminal) related thereto or
to the nonpayment thereof, and any loss or Tax liability incurred in
connection with the determination, settlement or litigation of any
liability arising therefrom.
1.2 Interpretation. For all purposes of this Agreement, except as otherwise
herein expressly provided, (i) the terms defined in this Section 1 shall have
the meanings assigned to them in this Section 1 and include the plural as well
as the singular, (ii) all accounting terms not otherwise defined herein have the
meanings assigned under the Accounting Principles, (iii) all references in this
Agreement to designated "Sections" and other subdivisions are to the designated
Sections and other subdivisions of the body of this Agreement, (iv) pronouns of
either gender or neuter shall include, as appropriate, the other pronoun forms,
(v) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section or
other subdivision, and (vi) all references in this Agreement to designated
Schedules, Exhibits and Annexes are to the Schedules, Exhibits and Annexes
attached to this Agreement.
SECTION 2 GUARANTEE
2.1 Guarantee. Neptunus Group (the "GUARANTOR") hereby irrevocably,
absolutely and unconditionally, guarantees, as principal obligor and not merely
as surety, the full, prompt and complete payment of all amounts payable by the
Company under the Redemption Agreement, when and as payment of such amounts
shall become due, and irrevocably and unconditionally undertakes with the
Holders that, if and whenever the Company shall be in default in payment of any
such sum whatsoever under or in connection with the Company's obligations
pursuant to the Redemption Agreement, the Guarantor will on first demand make
good in U.S. Dollars the default and pay all sums which may be payable as if the
Guarantor, instead of the Company, were the primary obligor. Without limiting
the foregoing, as a separate and independent covenant, the Guarantor hereby
agrees that any sum expressed to be payable by the Company under the Redemption
Agreement but which is for any reason (whether or not now existing and whether
or not now known or becoming known to any party thereto) not recoverable from
the Guarantor on the basis of a guarantee shall nevertheless be recoverable from
the Guarantor as if the Guarantor were the sole principal obligor and shall be
paid by the Guarantor to the Holders on demand in U.S. Dollars.
2.2 Continuing Obligation. The guarantee given under this Agreement is the
continuing obligation of the Guarantor and shall remain in force until all sums
guaranteed hereunder which
may be or become payable have been paid in full. Such guarantee shall continue
to be effective or shall be reinstated, as the case may be, if at any time
payment of any sums guaranteed hereunder must be restored by any Holder upon the
bankruptcy, liquidation or reorganization of the Company or otherwise.
2.3 Preservation of Guaranty. The obligations of the Guarantor under this
Agreement shall not be affected by any act, omission, matter, or thing which,
but for this Section 2.3, might operate to release or otherwise exonerate the
Guarantor from its obligations hereunder or otherwise affect such obligations,
including without limitation and whether or not known to the Guarantor or the
Holders, (i) any time or indulgence granted to or composition with the Company
or any other Person; (ii) the taking, variation, compromise, renewal, release of
or refusal or neglect to perfect or enforce any rights, remedies or securities
against the Company or any other Person; (iii) any legal limitation, disability,
incapacity or other circumstances relating to the Company or any other Person or
any amendment or supplement to or variation of the rights and preferences of the
Series A Preferred Shares, the provisions of the Redemption Agreement, this
Agreement or any other document or security; (iv) any irregularity,
unenforceablity or invalidity of any obligations of the Company or any other
Person with respect to the Series A Preferred Shares, under the Redemption
Agreement or under any other document or security; or (v) the failure of the
Company to maintain its corporate existence or the ownership of substantially
all of its assets.
2.4 Waiver. The Guarantor hereby waives diligence, presentment, demand,
protest, notice and any right it may have of first requiring any Holder to
proceed against or enforce any other guaranty or security of, or claim payment
from, the Company or any other Person.
2.5 Non-Competition. After a claim has been made pursuant to this Agreement
and until all sums guaranteed hereunder shall have been paid in full, the
Guarantor shall not (i) be entitled nor shall claim to rank as creditor against
the estate or in the bankruptcy or liquidation of the Company in competition
with any Holder or (ii) receive, claim or have the benefit of any payment or
distribution from or on account of the Company or claim the benefit of any
security or moneys held by any Holder.
2.6 Additional Security. The guarantee given by the Guarantor under this
Agreement shall be in addition to and shall not in any way be prejudiced by any
collateral or other security now or hereafter held by any Holder or by any lien
to which any Holder may be entitled.
2.7 Payments.
(a) All payments to be made by the Guarantor under this Agreement
shall be made in immediately available funds, in U.S. Dollars and at the place
or places in and at which the corresponding sums are payable by the Company
under the Redemption Agreement. The Guarantor covenants and agrees that it shall
pay all amounts payable hereunder free and clear of, and without deduction or
withholding for or on account of, any Taxes and shall indemnify and hold
harmless each Holder from any Taxes that may be payable by such Holder in
respect of any payment by the Guarantor under this Agreement, other than Taxes
that would have been payable notwithstanding the event giving rise to the
Guarantor's payment obligation hereunder.
(b) All payments to a Holder under this Agreement shall be made by the
Guarantor irrespective of and without deduction for, any counterclaim, defense,
recoupment, or set-off and shall be final.
(c) The Guarantor hereby represents and warrants that it has full
authority to make all payments hereunder to or for the account of the Holders in
U.S. Dollars subject to securing any Consents described in Schedule B.
2.8 Evidence and Demand. A certificate from any Holder setting forth an
amount due thereto from the Company or the Guarantor shall be conclusive
evidence of such amount. Upon the Guarantor's receipt of any such certificate
from a Holder, the Guarantor shall immediately pay the amount specified in such
certificate to the Holder in accordance with the terms of Section 2.7.
2.9 General Undertakings. The Guarantor undertakes that, from and after the
date hereof and for so long as any amount payable or guaranteed under this
Agreement remains unpaid, it shall use best efforts to obtain and promptly renew
from time to time all Consents as may be required to perform its obligations
under this Agreement or required for the validity or enforceability of this
Agreement, shall comply with the terms of the same and will ensure the
availability and transferability of sufficient foreign exchange to enable it to
comply with its obligations under this Agreement.
2.10 Negative Pledge.
(a) The Guarantor undertakes that, from and after the date hereof and
so long as any amount payable or guaranteed hereunder is outstanding, the
Guarantor will not, create or permit to exist any Encumbrance on or over any of
its present or future assets or revenues as security for any present or future
loan, debt, guaranty or other obligation (whether of the Guarantor or any other
Person) unless it shall ensure (in a manner satisfactory to a Holder Majority)
that the obligations of the Guarantor hereunder either (i) share equally and
ratably with such loan, debt, guaranty or other obligation thereby secured, or
(ii) receive the benefit of an Encumbrance on other assets or revenues of the
Guarantor equivalent to that granted to such other loan, debt, guaranty or
obligation. However, the foregoing undertaking shall not apply to:
(i) any Encumbrance created or granted to secure indebtedness having a
maturity of not more than one (1) year (other than indebtedness incurred
pursuant to an agreement to extend credit, in one or more advances and
irrespective of the term of individual advances, under which the date of
expiration of the commitment to advance funds or the latest date on which
advances may remain outstanding is more than one (1) year from the date of
such agreement) or any guaranty thereof, it being understood that any
indebtedness initially having a maturity of one (1) year or less which is
extended, renewed or replaced in related transactions by other indebtedness
so as to result in a final maturity of such indebtedness (taken together
with all such other indebtedness) of more than two (2) years shall, as of
the time of the extension, renewal or replacement having such effect cease
to be considered as indebtedness having a maturity of not more than one (1)
year for the purposes hereof; and
(ii) any Encumbrance existing at the date of this Agreement.
(b) The Guarantor undertakes that its obligations hereunder will
constitute direct, unconditional, unsecured, unsubordinated and general
obligations of, and will rank at least pari passu with, all other present and
future outstanding unsecured indebtedness issued, created, assumed or guaranteed
by it.
2.11 Currency Indemnity. The obligations of the Guarantor to make payment
in U.S. Dollars of all amounts due hereunder shall not be discharged or
satisfied by any tender, or any recovery pursuant to any judgment, which is
expressed in or converted into any currency other than
U.S. Dollars, except to the extent such tender or recovery shall result in the
actual receipt by the appropriate party of the full amount of U.S. Dollars due
hereunder. The obligations of the Guarantor to make payments in U.S Dollars as
aforesaid shall be enforceable as an alternative or additional cause of action
for the purpose of recovery in U.S. Dollars of the amount, if any, by which such
actual receipt shall fall short of the full amount of U.S. Dollars due
hereunder, and shall not be affected by the judgment being obtained for any
other sums due under this Agreement.
SECTION 3 REPRESENTATIONS AND WARRANTIES
Neptunus Group represents, warrants and covenants to each of the Investors
that:
(a) It is duly organized and validly existing under the laws of the
jurisdiction of its formation and has the corporate power and authority to own
and operate its properties, to carry on its business as now conducted and as
proposed to be conducted and to perform each of its obligations under this
Agreement.
(b) All corporate action necessary on the part of Neptunus Group and
its officers, directors and shareholders has been taken for the authorization,
execution, and delivery by Neptunus Group of this Agreement and the performance
by Neptunus Group of its obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of Neptunus Group, enforceable in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally, and (ii) as limited by
laws relating to the availability of specific performance, injunctive relief or
other remedies in the nature of equitable remedies.
(c) The execution, delivery, and performance by Neptunus Group of this
Agreement requires no Consent of any third party and (i) will not result in any
violation of, be in conflict with, or constitute a default under, with or
without the passage of time or the giving of notice, any provision of its
constitutional documents as in effect at the date hereof, any Applicable Law, or
any material contract or obligation to which it is a party or by which it is
bound, or (ii) accelerate or constitute an event entitling the holder of any
indebtedness of Neptunus Group to accelerate the maturity of any such
indebtedness or to increase the rate of interest presently in effect with
respect to such indebtedness, or (iii) result in the creation of any Encumbrance
upon any of the properties or assets of Neptunus Group.
(d) No breach or default, alleged breach or default, or event which
would (with the passage of time, notice or both) constitute a breach or default
under any agreement, undertaking or instrument to which Neptunus Group is a
party or by which Neptunus Group may be bound (including, inter alia this
Agreement) has occurred, or as a result of this Agreement, or the performance
hereof, will occur.
(e) Except such Consents as are described in Schedule B of this
Agreement, no Consent is required of any Government Entity on the part of
Neptunus Group, nor is advisable, in connection with the execution, delivery,
performance, validity and enforceability of this Agreement. Neptunus Group shall
file all appropriate applications for obtaining all Consents described in
Schedule B of this Agreement with fifteen (15) days after the date of this
Agreement and shall use best efforts to secure all such Consents as soon as
possible.
(f) No litigation, arbitration or administrative proceedings are at
present current or pending, or to the knowledge of Neptunus Group, threatened,
which would have a material adverse
effect upon the ability of Neptunus Group to fulfill its obligations hereunder.
SECTION 4 MISCELLANEOUS
4.1 Assignment. This Agreement and the rights and obligations of the
parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives. The rights of any
Holder hereunder are only assignable (i) by such Holder to any other Holder,
(ii) to a partner or affiliate of such Holder, or (iii) to an assignee or
transferee who holds such aggregate number of Equity Securities (assuming the
exercise, conversion and exchange of any Common Share Equivalents) after the
assignment or transfer as are equivalent to 6,000,000 Common Shares (as adjusted
for stock splits, reverse stock splits, stock dividends, recapitalizations and
the like). Except as provided above, this Agreement and the rights and
obligations of any party hereunder shall not otherwise be assigned without the
mutual written consent of the other parties.
4.2 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Hong Kong, without regard to conflicts of laws
principles thereunder.
4.3 Dispute Resolution.
(a) Any dispute, controversy or claim (each, a "DISPUTE") arising out
of or relating to this Agreement, or the interpretation, breach, termination or
validity hereof, shall be resolved at the first instance through consultation
between the parties to such Dispute. Such consultation shall begin immediately
after any party has delivered written notice to any other party to the Dispute
requesting such consultation.
(b) If the Dispute is not resolved within sixty (60) days following
the date on which such notice is given, the Dispute shall be submitted to
arbitration upon the request of any party to the Dispute with notice to each
other party to the Dispute (the "ARBITRATION NOTICE").
(c) The arbitration shall be conducted in Hong Kong under the auspices
of the Hong Kong International Arbitration Centre (the "CENTRE"). There shall be
three (3) arbitrators. The claimants in the Dispute shall collectively choose
one arbitrator, and the respondents shall collectively choose one arbitrator.
The Secretary General of the Centre shall select the third arbitrator, who shall
be qualified to practice law in the Hong Kong Special Administrative Region. If
any of the members of the arbitral tribunal have not been appointed within
thirty (30) days after the Arbitration Notice is given, the relevant appointment
shall be made by the Secretary General of the Centre.
(d) The arbitration proceedings shall be conducted in English and
Chinese. The arbitration tribunal shall apply the Arbitration Rules of the
United Nations Commission on International Trade Law, as in effect at the time
of the arbitration. However, if such rules are in conflict with the provisions
of this Section 4.3, including the provisions concerning the appointment of
arbitrator, the provisions of this Section 4.3 shall prevail.
(e) Each party to the arbitration shall cooperate with each other
party to the arbitration in making full disclosure of and providing complete
access to all information and documents requested by such other party in
connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on such party.
(f) The award of the arbitration tribunal shall be final and binding
upon the parties, and the prevailing party may apply to a court of competent
jurisdiction for enforcement of such award.
(g) The arbitrator shall decide any dispute submitted by the parties
to the arbitration strictly in accordance with the substantive law of Hong Kong
and shall not apply any other substantive law.
(h) Any party to the Dispute shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
(i) During the course of the arbitration tribunal's adjudication of
the dispute, this Agreement shall continue to be performed except with respect
to the part in dispute and under adjudication.
4.4 Language. The governing version of this Agreement is the English
language version. Any translation of this Agreement into Chinese or any other
language is for the convenience of the parties only.
4.5 Amendments. Except as otherwise permitted herein, this Agreement and
its provisions may be amended, changed, waived, discharged or terminated only by
a writing signed by each of the parties hereto.
4.6 Notices. All notices, claims, certificates, requests, demands and other
communications under this Agreement shall be made in writing and shall be
delivered to any party hereto by hand or sent by facsimile, or sent, postage
prepaid, by reputable overnight courier services at the address given for such
party on the signature pages hereof (or at such other address for such party as
shall be specified by like notice), and shall be deemed given when so delivered
by hand, or if sent by facsimile, upon receipt of a confirmed transmittal
receipt, or if sent by overnight courier, five (5) calendar days after delivery
to or pickup by the overnight courier service.
4.7 Further Assurances. Each party hereto shall do and perform, or cause to
be done and performed, all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party may reasonably request to give effect to the terms and intent of
this Agreement.
4.8 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior written or oral understandings or agreements.
4.9 Severability. If any provision of this Agreement shall be held invalid
or unenforceable to any extent, the remainder of this Agreement shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
4.10 Remedies Cumulative. The rights and remedies available under this
Agreement or otherwise available shall be cumulative of all other rights and
remedies and may be exercised successively.
4.11 Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
4.12 No Third Party Beneficiary. Nothing in this Agreement is intended to
confer upon any Person other than the parties hereto and their respective
successors and permitted assigns any rights,
benefits, or obligations hereunder.
[The remainder of this page has been left intentionally blank.]
IN WITNESS WHEREOF the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the first date written above.
SHENZHEN NEPTUNUS GROUP CORPORATION
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
-----------------------------
[Print Name of Investor]
By:
------------------------------------
Name:
Capacity:
Address for notice:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Tel:
-----------------------------------
Fax:
-----------------------------------
SCHEDULE A - INVESTORS
1. GS Capital Partners 2000, L.P., a limited partnership organized and existing
under the laws of the State of Delaware.
2. GS Capital Partners 2000 Offshore, L.P., a limited partnership organized and
existing under the laws of the Cayman Islands.
3. GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, an entity organized and
existing under the laws of Germany.
4. GS Capital Partners 2000 Employee Fund, L.P., a limited partnership organized
and existing under the laws of the State of Delaware.
5. Xxxxxxx Xxxxx Direct Investment Fund 2000, L.P., a limited partnership
organized and existing under the laws of the State of Delaware.
SCHEDULE B - CONSENTS
1. Approval with respect to the guarantee hereunder of State Administration of
Foreign Exchange, obtained pursuant to the Administrative Measures on Providing
Security in Favor of Offshore Institutions by Domestic Institutions (CHINESE
CHARECTERS), promulgated by the People's Bank of China on August 21, 1996 and
effective as of October 1, 1996 and other foreign exchange regulations
promulgated by the People's Bank of China or State Administration of Foreign
Exchange from time to time;
2. Registration with respect to the guarantee hereunder with State
Administration of Foreign Exchange Shenzhen Branch, to be conducted within
fifteen (15) days after the execution of the Agreement pursuant to the
Administrative Measures on Providing Security in Favor of Offshore Institutions
by Domestic Institutions (CHINESE CHARECTERS), promulgated by the People's Bank
of China on August 21, 1996 and effective as of October 1, 1996 and other
foreign exchange regulations promulgated by the People's Bank of China or State
Administration of Foreign Exchange from time to time.