CHINA BIOPHARMACEUTICALS HOLDINGS, INC.
CHINA BIOPHARMACEUTICALS CORPORATION
RACP PHARMACEUTICAL HOLDINGS LTD.
and
RIMASIA CAPITAL PARTNERS, L.P.
CONDITIONAL STOCK PURCHASE AGREEMENT
Dated May 16, 2006
Paul, Hastings, Xxxxxxxx & Xxxxxx
22nd Floor, Bank of China Xxxxx
Xxx Xxxxxx Xxxx, Xxxx Xxxx
TABLE OF CONTENTS
ARTICLE I DEFINITIONS......................................................2
ARTICLE II SALE OF RACP SHARES.............................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................11
OF RACP AND RIMASIA.............................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF...............................15
FORMER STOCKHOLDER OF ENSHI.....................................15
ARTICLE V FURTHER REPRESENTATIONS OF RIMASIA..............................28
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BUYER ....................28
AND CBH ........................................................28
ARTICLE VII COVENANTS.......................................................30
ARTICLE VIII CONDITIONS TO CLOSING ..........................................36
ARTICLE IX INDEMNIFICATION; SURVIVAL.......................................39
ARTICLE X TERMINATION.....................................................43
ARTICLE XI MISCELLANEOUS...................................................44
EXHIBIT A: FORM OF EMPLOYMENT AGREEMENT
EXHIBIT B: FORM OF NON-COMPETITION AGREEMENT
EXHIBIT C: DISCLOSURE SCHEDULE FOR SELLER GROUP
EXHIBIT D: DISCLOSURE SCHEDULE FOR FORMER STOCKHOLDER OF ENSHI
EXHIBIT E: DISCLOSURE SCHEDULE FOR BUYER AND CBH
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CONDITIONAL STOCK PURCHASE AGREEMENT
THIS CONDITIONAL STOCK PURCHASE AGREEMENT, dated 16 May,2006 (this
"Agreement"), is entered into by and among China Biopharmaceuticals Holdings,
Inc., a Delaware corporation in the United States of America ("CBH"), China
Biopharmaceuticals Corporation, a British Virgin Islands company (the "Buyer")
which is wholly owned by CBH, RACP Pharmaceutical Holdings Ltd., a British
Virgin Islands company ("RACP"), RimAsia Capital Partners, L.P., an exempted
limited partnership registered and formed under the laws of the Cayman Islands,
acting through its general partner, RimAsia Capital Partners GP, L.P., in turn
acting through its general partner, RimAsia Capital Partners GP, Ltd. (in such
capacity, "RimAsia"), being the sole holder of all of the issued and outstanding
capital stock of RACP, and Xx. Xx Xiaobo of Enshi International (Holdings) Pte
Ltd. ("EIH"), a Singapore incorporated company, from whom RACP has entered into
an agreement to purchase all the issued and outstanding capital stock of EIH
(the "Former Stockholder of Enshi").
W I T N E S E T H:
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WHEREAS, RimAsia owns all of the issued and outstanding shares of
capital stock of RACP (the "RACP Shares");
WHEREAS, RACP owns all of the issued and outstanding share capital of
EHI, which in turn wholly owns Shenyang Enshi Pharmaceutical Co, Ltd a/k/a,
("Enshi") engaged in the production and distribution of pharmaceutical products
in Shenyang, the People's Republic of China ("China");
WHEREAS, RimAsia desires to sell the RACP Shares to the Buyer, the
Buyer desires to purchase the RACP Shares from RimAsia upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, RimAsia has set up RACP for the sole purpose to purchase all
of the ownership interest of EIH as a strategic acquisition opportunity for the
Buyer and CBH;
WHEREAS, RimAsia has agreed not to sell its ownership interest of RACP
and RACP has agreed not to sell the ownership interest in EIH to any third party
other than the Buyer unless this Agreement is earlier terminated or the Buyer
cannot acquire RACP (including EIH and its subsidiaries) under the terms of this
Agreement;
NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties herein contained, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
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ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings unless the context otherwise requires:
"Accountant" means Xxxxx Xxxxxxx Xxxxx Xxxxxx and Xxxxxx LLP.
"Act" means the United States Securities Act of 1933, as amended.
"Affiliate" of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person, including but not limited to a Subsidiary
of the first Person, a Person of which the first Person is a Subsidiary, or
another Subsidiary of a Person of which the first Person is also a Subsidiary.
"Control" (including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management policies of a Person, whether through the
ownership of voting securities, by contract or credit arrangement, as trustee or
executor, or otherwise.
"Agreement" means this Conditional Stock Purchase Agreement, including
the Exhibits and Schedules hereto.
"Ancillary Agreements" means the Non-Competition Agreements, the
Employment Agreements and the Escrow Agreement.
"Assets" is defined in Section 4.11.
"Balance Sheet" means the audited balance sheet of Enshi as of December
31, 2005, included in the Financial Statements.
"Balance Sheet Net Book Value" means the total stockholder's equity of
the Enshi Group as shown on the Balance Sheet.
"Business" means the business and operations of the Enshi Group as
previously or currently conducted or contemplated to be conducted.
"Business Day" shall mean any calendar day that is not a Saturday,
Sunday, public holiday under the laws of the State of New York, or a day on
which banks located in the City of New York are authorized or required to be
closed.
"Buyer" is defined in the first paragraph of this Agreement.
"Buyer Indemnities" is defined in Section 9.1.
"CBH" is defined in the first paragraph of this Agreement.
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"CBH Common Stock" means the authorized common stock, par value $0.01 per
share, of CBH.
"Claim Notice" is defined in Section 9.5(a).
"Closing" is defined in Section 2.1(b).
"Closing Date" is defined in Section 2.1(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange
Commission.
"Consent" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, certificate, exemption, order,
registration, declaration, filing, report or notice of, with or to any Person.
"Contract" means all loan agreements, indentures, letters of credit
(including related letter of credit applications and reimbursement obligations),
mortgages, security agreements, pledge agreements, deeds of trust, bonds, notes,
guarantees, surety obligations, warranties, licenses, franchises, permits,
powers of attorney, purchase orders, leases, and other agreements, contracts,
instruments, obligations, offers, commitments, arrangements and understandings,
written or oral, to which a party or by which it or any of its properties or
assets may be bound or affected, in each case as amended, supplemented, waived
or otherwise modified, that are of the types listed in clauses (a) through (p)
below:
(a) leases, subleases, licenses, occupancy agreements, permits,
franchises, insurance policies, agreements, Governmental Approvals and other
Contracts concerning or relating to the Real Property;
(b) employment, consulting, severance, agency, bonus, compensation, or
other trusts, funds and other Contracts relating to or for the benefit of
current, future or former employees, officers, directors, sales representatives,
distributors, dealers, agents, independent contractors or consultants (whether
or not legally binding), including sales agency or distributorship agreements or
arrangements for the sale of any of the products or services of any such party;
(c) loan agreements, indentures, letters of credit (including related
letter of credit applications and reimbursement obligations), mortgages,
security agreements, pledge agreements, deeds of trust, bonds, notes,
guarantees, instruments and other contracts relating to the borrowing of money
or obtaining of or extension of credit;
(d) licenses, licensing arrangements and other Contracts providing in
whole or in part for the use of, or limiting the use of, any Intellectual
Property;
(e) finder's Contracts;
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(f) joint venture, partnership and similar Contracts involving a
sharing of profits or expenses;
(g) stock purchase agreements, asset purchase agreements and other
acquisition or divestiture agreements, including but not limited to any
agreements relating to the acquisition, lease or disposition of any such party,
any material assets or properties (other than sales of inventory made in the
ordinary course of business), any business, or any capital stock of or other
interest in any such party, within the last ten years, or involving continuing
indemnity or other obligations;
(h) Contracts prohibiting or materially restricting the ability of any
such party, to engage in any business or operate in any geographical area or to
compete with any Person;
(i) orders and other Contracts for the purchase or sale of materials,
supplies, products or services, involving aggregate payments in excess of
$25,000 in each case or $250,000 in the aggregate;
(j) orders and other Contracts with or for the direct or indirect
benefit of any member of the Seller Group or the Former Stockholder of Enshi or
any Affiliate thereof (other than RACP) (whether or not legally binding);
(k) Contracts providing for future payments that are conditioned, in
whole or in part, on a change in control of any such party;
(l) powers of attorney, except routine powers of attorney relating to
representation before governmental agencies or given in connection with
qualification to conduct business in another jurisdiction;
(m) Contracts not entered into in the ordinary course of business;
(n) Contract or series of related Contracts with respect to which the
aggregate amount that could reasonably expected to be paid or received
thereunder in the future exceeds $25,000 per annum or an aggregate of $250,000
under the term of the Contract; and
(o) Contracts that are or will be material to the business, operations,
results of operations, condition (financial or otherwise), assets or properties
of any such party.
"Disclosure Schedule of Buyer and CBH" is attached hereto as Exhibit E.
"Disclosure Schedule of Former Stockholder of Enshi" is attached hereto
as Exhibit D.
"Disclosure Schedule of Seller Group" is attached hereto as Exhibit C.
"EIH" means Enshi International (Holdings) Pte Ltd, a Singapore
incorporated company and the sole shareholder of Enshi.
"EIH Shares" is defined in Section 4.7(b).
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"Employee Benefit Plan" is defined in Section 4.19(a).
"Employment Agreement" means the employment agreements for Xx. Xx
Xiaobo and Mr. Xxx Xxxxxx substantially in the form of Exhibit A hereto.
"Encumbrance" means any mortgage, pledge, deed of trust, hypothecation,
right of others, claim, security interest, encumbrance, burden, title defect,
title retention agreement, lease, sublease, license, occupancy agreement,
easement, covenant, condition, encroachment, voting trust agreement, interest,
option, right of first offer, negotiation or refusal, proxy, lien, charge or
other restriction or limitations of any nature whatsoever, including but not
limited to such Encumbrances as may arise under any Contract; however does not
include any such encumbrance, charge or other restriction or limitations arising
under or as contemplated by the Loan Agreement.
"Enshi" is defined in the third paragraph of this Agreement.
"Enshi Acquisition Transaction" is defined in section 7.5.
"Enshi Group" means EIH and Enshi, collectively.
"Enshi Shares" is defined in Section 4.7(b).
"Environmental Laws" means all Laws relating to the protection of the
environment, to human health and safety, or to any Environmental activity,
including, without limitation, (a) CERCLA, the Resource Conservation and
Recovery Act, and the Occupational Safety and Health Act, (b) all other
requirements pertaining to reporting, licensing, permitting, investigation or
remediation of emissions, discharges, releases or threatened releases of
Hazardous Materials into the air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use, sale, treatment,
receipt, storage, disposal, transport or handling of Hazardous Materials, and
(c) all other requirements pertaining to the protection of the health and safety
of employees or the public.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Account" means the escrow account with the Escrow Agent.
"Escrow Amount" means Xxx Xxxxxxx Xxx Xxxxxxx Xxxxxx-Xxxx Xxxxxxxx
Xxxxxx Xxxxxx Dollars (US$1,125,000) to be deposited with the Escrow Agent in
accordance with the Escrow Agreement.
"Escrow Agent" means MeesPierson Intertrust.
"Escrow Agreement" means the Escrow Agreement by and between the Former
Stockholder of Enshi, RACP, RimAsia, Buyer, CBH and MeesPierson Intertrust.
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"Exchange Act" means the United States Securities and Exchange Act of
1934, as amended.
"FCPA" mean the U.S. Foreign Corrupt Practices Act of 1977.
"Financial Statements" is defined in Section 4.6.
"Former Stockholder of Enshi" means Xx. Xx Xiaobo from whom RACP
purchased 100% of the issued and outstanding share capital of EIH and its direct
wholly owned subsidiary, Enshi.
"GAAP" is defined in Section 4.6(a).
"Government Approval" means any Consent of, with or to any Governmental
Authority.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof; any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any government
authority, agency, department, board, commission or instrumentality of the
United States, any State of the United States or any political subdivision
thereof; any court, tribunal or arbitrator; and any self-regulatory
organization.
"Hazardous Materials" means any substance that: (a) is or contains
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum or petroleum-derived substances or wastes, radon gas or related
materials (b) requires investigation, removal or remediation under any
Environmental Law, or is defined, listed or identified as a "hazardous waste" or
"hazardous substance" thereunder, or (c) is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous and is regulated by any Governmental Authority or Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"Income Tax" means any Tax computed in whole or in part based on or by
reference to net income and any alternative, minimum, accumulated earnings or
personal holding company Tax (including all interest and penalties thereon and
additions thereto).
"Income Tax Return" means any return, report, declaration, form, claim
for refund or information return or statement relating to Income Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
"Indebtedness" as applied to any Person, means, without duplication,
(a) all indebtedness for borrowed money, (b) all obligations evidenced by a
note, bond, debenture, letter of credit, draft or similar instrument, (c) that
portion of obligations with respect to capital leases that is properly
classified as a liability on a balance sheet in conformity with GAAP, (d) notes
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payable and drafts accepted representing extensions of credit, (e) any
obligation owed for all or any part of the deferred purchase price of property
or services, which purchase price is due more than six months from the date of
incurrence of the obligation in respect thereof, and (f) all indebtedness and
obligations of the types described in the foregoing clauses (a) through (e) to
the extent secured by any Encumbrance on any property or asset owned or held by
that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
"Indemnified Party" and "Indemnifying Party" are defined in Section
9.5(a).
"Intellectual Property" means the United States and foreign trademarks,
service marks, trade names, trade dress, copyrights, and similar rights,
including registrations and applications to register or renew the registration
of any of the foregoing, the United States and foreign letters patent and patent
applications, and inventions, processes, designs, formulae, trade secrets,
know-how, confidential information, computer software, data and documentation,
and all similar intellectual property rights, tangible embodiments of any of the
foregoing (in any medium including electronic media), and licenses of any of the
foregoing.
"Intellectual Property Licenses" is defined in Section 4.14(a).
"IRS" means the Internal Revenue Service.
"Law" means all applicable provisions of all (a) constitutions,
treaties, statutes, laws (including the common law), codes, rules, regulations,
ordinances or orders of any Governmental Authority, (b) Governmental Approvals
and (c) orders, decisions, injunctions, judgments, awards and decrees of or
agreements with any Governmental Authority.
"Leases" means the real property leases, subleases, licenses and
occupancy agreements pursuant to which any member of the Enshi Group, is the
lessee, sublessee, licensee, user or occupant of real property used in or held
for use in connection with, necessary for the conduct of, or otherwise material
to, the Business.
"Leased Real Property" means all interests leased pursuant to the
Leases.
"Litigation" means any action, cause of action, claim, demand, suit,
proceeding, citation, summons, subpoena, inquiry or investigation of any nature,
civil, criminal, regulatory or otherwise, in law or in equity, pending or
threatened, by or before any court, tribunal, arbitrator or other Governmental
Authority.
"Loan Agreement" means the Facility Agreement to be entered into by
RACP as borrower and RimAsia acting as agent.
"Losses" is defined in Section 9.1.
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"Material Adverse Effect" means any (a) event, occurrence, fact,
condition, change, development or effect that is or may be materially adverse to
the business, operations, results of operations, condition (financial or
otherwise), properties (including intangible properties), assets (including
intangible assets) or liabilities of RACP or (b) material impairment of the
ability of any member of the Seller Group to perform its respective obligations
hereunder or under the Ancillary Agreements.
"Non-Competition Agreement" means the Non-Competition Agreements
substantially in the form of Exhibit B hereto.
"Notice Period" is defined in Section 9.5(a).
"Original Purchase Agreement" is defined in Section 2.2(a).
"Organizational Documents" means, as to any Person, its certificate or
articles of incorporation, by-laws and other organizational documents.
"Original Closing Date" means the closing date when the Former
Stockholder of Enshi have sold to RACP and RACP has purchased from the Former
Stockholder of Enshi 100% of the issued and outstanding shares of EIH.
"Original Purchase Price" means the purchase price paid by RimAsia to
the Former Stockholder of Enshi for the 100% interest in the Enshi Group.
"Original Purchase Agreement" is defined in Section 2.2(a).
"Owned Intellectual Property" is defined in Section 4.14(a).
"Owned Real Property" means the real property owned by any member of
the Enshi Group, together with all structures, facilities, improvements,
fixtures, systems, equipment and items of property presently or hereafter
located thereon or attached or appurtenant thereto or owned by any member of the
Enshi Group and located on Leased Real Property, and all easements, licenses,
rights and appurtenances relating to the foregoing.
"Person" shall mean any individual, corporation, partnership, joint
venture, trust, business association, organization, Governmental Authority or
other entity.
"Permitted Encumbrance" means (a) Encumbrances reserved against in the
Balance Sheet, to the extent so reserved, (b) Encumbrances for Taxes not yet due
and payable or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on books of
any member of the Enshi Group in accordance with GAAP, or (c) those Encumbrances
that (i) are set forth in Schedule 4.11(b) and (ii) individually and in the
aggregate with all other Permitted Encumbrances, do not and will not materially
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detract from the value of any of the property or assets of any member of the
Enshi Group, or materially interfere with the use thereof as currently used or
contemplated to be used, or otherwise have or result in a Material Adverse
Effect.
"Purchase Price" is defined in Section 2.1(a).
"RACP" is defined in the first paragraph of this Agreement.
"RACP Acquisition Transaction" is defined in Section 7.5.
"RACP Shares" is defined in the first recital to this Agreement.
"RACP Warrants" is defined in Section 2.1(a).
"Real Property" means the Owned Real Property and the Leased Real
Property.
"Release" means any releasing, disposing, discharging, injecting,
spilling, leaking, leaching, pumping, dumping, emitting, escaping, emptying,
seeing, dispersal, leeching, migration, transporting, placing and the like,
including without limitation, the moving of any materials through, into or upon,
any land, soil, surface water, ground water or air, or otherwise entering into
the environment.
"Representatives" means, as to any Person, its accountants, counsel,
consultants, officers, directors, employees, agents and other advisers and
representatives.
"Return" means any return, report, declaration, form, claim for refund
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"RimAsia" is defined in the first paragraph of this Agreement.
"Seller Group" is defined in Article III.
"Subsidiary" means each corporation or other Person in which a Person
owns or controls, directly or indirectly, capital stock or other equity
interests representing more than 50% of the outstanding voting stock or other
equity interests.
"Tax" means any federal, state, local or foreign income, alternative,
minimum, accumulated earnings, personal holding company, franchise, capital
stock, profits, windfall profits, gross receipts, sales, use, value added,
transfer, registration, stamp, premium, excise, customs duties, severance,
environmental, real property, personal property, ad valorem, occupancy, license,
occupation, employment, payroll, social security, disability, unemployment,
workers' compensation, withholding, estimated or other similar tax, duty, fee,
assessment or other governmental charge or deficiencies thereof (including all
interest and penalties thereon and additions thereto).
"$" or "US$" means United States dollars.
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ARTICLE II
SALE OF RACP SHARES
Section 2.1 Purchase and Sale of RACP Shares
(a) Subject to the terms and conditions of this Agreement, RimAsia will
sell all of the RACP Shares to the Buyer and the Buyer will purchase all of the
RACP Shares from RimAsia for an aggregate purchase price of $12,050,000 (the
"Purchase Price"), consisting of (x) $11,500,000 in assumed liabilities of RACP,
(y) $550,000 cash payment (the "Cash Purchase Price") and (z) the assumption of
RACP's existing obligation to issue 12,000,000 warrant shares (the "RACP
Warrants") which will upon assumption result in an obligation of CBH to issue
12,000,000 common shares of CBH to the holders of the RACP Warrants upon the
future exercise of the RACP Warrants.
(b) Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
10.1 hereof and subject to the satisfaction or waiver of the conditions set
forth in Article 8, the closing of the transactions contemplated hereby (the
"Closing") will take place at the offices of Xxxxx & XxXxxxxx, 1114 Avenue of
the Americas, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m. on or before the first
Business Day after the 60th calendar day from the date of the Original Closing,
unless the parties otherwise agree in writing (the "Closing Date"). At the
Closing:
(i) RimAsia shall deliver to the Buyer certificates
representing all of the RACP Shares, free and clear of any Encumbrances other
than those created by RimAsia or RACP;
(ii) RimAsia shall deliver to the Buyer Non-Competition
Agreements and Employment Agreements previously executed by each of Xx. Xx
Xiaobo and Mr. Xxx Xxxxxx, respectively;
(iii) The Buyer shall pay to RimAsia the Cash Purchase Price,
by certified check or wire transfer of immediately available funds to the
account of RimAsia designated at least two Business Days prior to the Closing
Date;
(iv) CBH shall deliver to the holders of the RACP Warrants an
acknowledgement of assumption of the RACP Warrants.
Section 2.2 Purchase Price Adjustment
(a) Any funds paid to RACP from the Escrow Account as a result of any
adjustment in the Original Purchase Price made in accordance with the stock
purchase agreement between RACP and the Former Stockholder of Enshi dated 16 May
2006 (the "Original Purchase Agreement") shall be held by RACP as cash through
the Closing Date and delivered to the Buyer on the Closing Date.
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(b) In the event that the Former Stockholder of Enshi has breached any
provision in Article IV, the Escrow Amount shall be returned to the Buyer in
full. Any funds paid to RACP from the Escrow Account as a result of any breach
of any provision in Article IV by the Former Stockholder of Enshi shall be held
by RACP as cash through the Closing Date.
(c) A party's rights to indemnification pursuant to Section 9 (and any
limitations on such rights) shall not be deemed to limit, supersede or otherwise
affect such party's rights to a full purchase price adjustment pursuant to this
Section 2.2.
Section 2.3 Accounts Receivable. The Buyer and RACP shall have the
right to transfer to the Former Stockholder of Enshi (without recourse to the
Buyer or RACP) any accounts receivable of any member of Enshi Group which have
not been collected in full by such member within 120 days of the applicable due
date, in which case the Former Stockholder of Enshi shall promptly pay to the
Buyer or RACP from the Escrow Account in accordance with the Escrow Agreement an
amount equal to the uncollected portion of such accounts receivable. In the
event the Escrow Account does not contain sufficient funds to make any payment
required to be made to the Buyer or RACP with respect to such uncollected
accounts receivable, the Former Stockholder of Enshi shall be liable for such
additional amount.
Section 2.4 Contracts. If, at any time during the period commencing
immediately following the Original Closing Date and ending on the first
anniversary thereof, any Contract is terminated for any reason other than any
material breach by the Buyer or RACP, the Buyer or RACP shall have the right to
claim any expectation damages suffered by it as a result of such termination
from the Former Stockholder of Enshi (without recourse to the Buyer or RACP).
Upon submission of any such claim, the Former Stockholder of Enshi shall
promptly pay to the Buyer or RACP from the Escrow Account in accordance with the
terms of the Escrow Agreement an amount equal to such expectation damages
claimed. In the event the Escrow Account does not contain sufficient funds to
make any payment required to be made to the Buyer or RACP with respect to such
claimed expectation damages, the Former Stockholder of Enshi shall be liable for
such additional amount.
Section 2.5 Additional Payment. At the end of twelve (12) months of the
Original Closing Date, the Former Stockholder of Enshi shall receive from the
Buyer, to the extent not previously paid by RACP pursuant to the terms of the
Original Purchase Agreement, the amount of unrestricted cash or cash equivalents
shown on the Balance Sheet, provided that, the Former Stockholder of Enshi has
not distributed or withdrawn any amounts from Enshi's working capital or
otherwise outside the ordinary course of business on and after the date hereof
until the end of the Original Closing Date without the express written consent
of RACP.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF RACP AND RIMASIA
RACP and RimAsia (collectively referred to herein as the "Seller
Group"), jointly and severally, hereby represent and warrant to the Buyer as
follows:
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Section 3.1 Corporate Status.
(a) RACP is a corporation duly organized, validly existing and in good
standing under the laws of the British Virgin Islands, and has full corporate
power and authority to conduct its business and to own or lease and to operate
its properties as and in the places where such business is conducted and such
properties are owned, leased or operated.
(b) RACP has delivered to the Buyer complete and correct copies of the
Organizational Documents of RACP, as amended, and in effect on the date hereof.
Section 3.2 Authorization. RACP has full corporate power and authority
to execute and deliver this Agreement and the Ancillary Agreements to which it
shall be a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Ancillary Agreements to which RACP shall be a
party, the performance of RACP's obligations hereunder and thereunder, and the
consummation by RACP of the transactions contemplated hereby and thereby, have
been duly authorized by all requisite corporate action on the part of RACP. RACP
has duly executed this Agreement and on the Closing Date will have duly executed
and delivered the Ancillary Agreements to which it shall be a party. This
Agreement constitutes, and each such Ancillary Agreement or other instrument
when so executed and delivered will constitute the legal, valid and binding
obligation of RACP, enforceable against RACP in accordance with its respective
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally, subject to the limitations imposed by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding at law or in equity).
Section 3.3 Consents. (a) Except as disclosed on Schedule 3.3(a), no
Government Approval or other Consent is required to be obtained or made by any
member of the Seller Group in connection with the execution and delivery of this
Agreement and the Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby, except for Consents the failure of which to be
made or obtained individually and in the aggregate, could not have or result in
a Material Adverse Effect, or materially impair the ability of any member of the
Seller Group to perform its respective obligations hereunder and under the
Ancillary Agreements or the ability of the Buyer, following the Closing, to
continue to conduct the Business.
(b) Each member of the Seller Group is in compliance with all
Governmental Approvals and other Consents held by any member thereof, except for
such failures so to comply that, individually and in the aggregate, could not
have or result in a Material Adverse Effect, or materially impair the ability of
any member of the Seller Group to perform its respective obligations hereunder
and under the Ancillary Agreements. There is no Litigation pending or, to the
knowledge of any member of the Seller Group, threatened, that would result in
the revocation, cancellation, suspension or modification or nonrenewal of any
such Governmental Approval or Consent; no member of the Seller Group has been
notified that any such Governmental Approval or Consent will be modified,
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suspended, canceled or cannot be renewed in the ordinary course of business; and
there is no reasonable basis for any such revocation, cancellation, suspension,
modification or nonrenewal. The execution, delivery and performance of this
Agreement and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby do not and will not violate any such
Governmental Approval or Consent, or result in any revocation, cancellation,
suspension, modification or nonrenewal thereof.
(c) Governmental Filings. Each registration, report, statement, notice
or other filing required to be filed by RACP with any Governmental Authority
under any applicable Law has been timely filed, and when filed complied and
continues to comply with applicable Law, except for any such failure to file
that, individually or in the aggregate, could not have a Material Adverse
Effect. As of their respective dates, none of such registrations, reports,
statements, notices or other filings contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Section 3.4 Noncontravention. The execution, delivery and performance
of this Agreement and, as applicable, the Ancillary Agreements by each member of
the Seller Group, and the consummation of the transactions contemplated hereby
and thereby, do not and will not conflict with, contravene, result in a
violation or breach of or default under (with or without the giving of notice or
the lapse of time or both), create in any other Person a right of claim of
termination, amendment, or require modification, acceleration or cancellation
of, or result in the creation of any Encumbrance (or any obligation to create
any Encumbrance) upon any of the properties or assets of any member of the
Seller Group under, (a) any Law applicable to any member of the Seller Group or
any of their respective properties or assets, (b) any provision of any of the
Organizational Documents of any member of the Seller Group or (c) any Contract,
or any other agreement or instrument to which any member of the Seller Group is
a party or by which any of their respective properties or assets may be bound,
except, in the case of this clause (c), for violations and defaults that,
individually and in the aggregate, could not have or result in a Material
Adverse Effect, or materially impair the ability of any member of the Seller
Group to perform its respective obligations hereunder and under the Ancillary
Agreements.
Section 3.5 Capitalization of RACP. The authorized capital stock of
RACP consists of 50,000 shares of common stock, par value $1.00 per share, of
which only the RACP Shares are issued and outstanding. The RACP Shares have been
duly authorized and validly issued and are fully paid and nonassessable. All the
RACP Shares are owned, beneficially and of record, by RimAsia, free and clear of
any Encumbrances, and such shares are subject to no restrictions with respect to
transferability to the Buyer in accordance with the terms of this Agreement.
Upon the delivery of and payment for 100% of the RACP Shares owned by RimAsia at
the Closing as provided in this Agreement, the Buyer will acquire good and valid
title to such shares, free and clear of any Encumbrance other than any
Encumbrance created by the Buyer, RACP or RimAsia. Except as disclosed on
Schedule 3.5: (i) there are no preemptive of similar rights on the part of any
holders of any class of securities of RACP; (ii) except for this Agreement and
the RACP Warrants, no subscriptions, options, warrants, conversion or other
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rights, agreements, commitments, arrangements or understandings of any kind
obligating any member of the Seller Group or any other Person to issue or sell,
or cause to be issued or sold, any shares of capital stock of any class of
securities of RACP, or any securities convertible into or exchangeable for any
such shares, are outstanding, and no authorization therefore has been given; and
(iii) except for the RACP Warrants, there are no outstanding contractual or
other rights or obligations to or of any member of the Seller Group or any other
Person to repurchase, redeem or otherwise acquire any outstanding shares or
other equity interests of RACP.
Section 3.6 Subsidiaries. Except for EIH and Enshi, RACP has no
subsidiaries or equity interest in any company, partnership or other Person.
RACP does not own, hold or have any properties or assets (whether tangible or
intangible) or any liabilities or obligations of any nature whatsoever, other
than (i) the capital stock of EIH and (ii) liabilities associated with the
formation of RACP or continuation of its corporate existence (other than
liabilities relating to Tax).
Section 3.7 Litigation. Except as disclosed on Schedule 3.7, there is
no Litigation pending or, to the knowledge of any member of the Seller Group,
threatened by, against or affecting any member of the Seller Group or any of its
properties or assets that, individually or in the aggregate, could materially
impair the ability of any member of the Seller Group to perform its respective
obligations hereunder or under any Ancillary Agreement, or have or result in a
Material Adverse Effect. There are no outstanding judgments, decrees, orders or
injunctions issued by any Governmental Authority against RACP that could have or
result in a Material Adverse Effect.
Section 3.8 Compliance with Applicable Laws. (a) Except as disclosed on
Schedule 3.8, (a) each member of the Seller Group is not in conflict with or in
violation or breach of or default under (and there exists no event that, with
notice or passage of time or both, would constitute a conflict, violation,
breach or default with, of or under) (i) any Law applicable to it or any of its
properties, assets, operations or business, (ii) any provision of its
Organizational Documents, or (iii) any Contract, or any other agreement or
instrument to which it is party or by which it or any of its properties or
assets is bound of affected, except in the case of the foregoing clauses (i) and
(iii) for any such conflicts, breaches, violations and defaults that,
individually or in the aggregate, could not have or result in a Material Adverse
Effect, or materially impair the ability of any member of the Seller Group to
perform its respective obligations hereunder and under the Ancillary Agreements,
and (b) no member of the Seller Group has received any notice or has knowledge
of any claim alleging any such conflict, violation, breach or default.
Section 3.9 Brokers and Intermediaries. RACP has not employed any
broker, finder or intermediary in connection with the transactions contemplated
by this Agreement which would be entitled to a broker's, finder's or similar fee
or commission in connection therewith or upon the consummation thereof.
Section 3.10 Disclosure. This Agreement and each Ancillary Agreement,
and each certificate or other instrument or document to which any member of the
Seller Group is a party and which has furnished by or on behalf of any member of
- 14 -
the Seller Group to the Buyer or any agent or representative of the Buyer
pursuant hereto, taken as a whole, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated herein or
therein or necessary to make the statements contained herein or therein in light
of the circumstances under which they were made, not misleading.
Section 3.11 Due Diligence. As at the Closing Date and subject to the
Former Stockholder of Enshi's delivery of a completed Disclosure Schedule and
all corresponding exhibits as attached to the Original Purchase Agreement and
approval of the same to the satisfaction of the Seller Group, the due diligence
performed by the Seller Group has been and is reasonably satisfactory to the
Seller Group.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
FORMER STOCKHOLDER OF ENSHI
The Former Stockholder of Enshi hereby represents and warrants to the
Buyer and CBH as follows. It is accepted by each party of this Agreement that
the Former Stockholder of Enshi shall not make any representations and
warranties that would conflict with or exceed the terms of the Original Purchase
Agreement.
Section 4.1 Corporate Status. (a) Each of EIH and Enshi is a
corporation duly organized, validly existing and in good standing under the laws
of its respective state of incorporation, and has full corporate power and
authority to conduct its business and to own or lease and to operate its
properties as and in the places where such business is conducted and such
properties are owned, leased or operated.
(b) Each of EIH and Enshi is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the conduct or nature of
its business or the properties owned or leased by it makes such qualification or
licensing necessary.
(c) The copies of the Organizational Documents of each of EIH and
Enshi, which have been delivered to the Buyer, are complete and correct copies
thereof and in effect on the date hereof.
Section 4.2 Authorization. The execution, delivery and performance by
such Former Stockholder of Enshi, as the case may be, of this Agreement and the
Non-Competition Agreement to which it is a party, and the consummation by such
Former Stockholder of Enshi of the transactions contemplated hereby and thereby
are within the powers of such Former Stockholder of Enshi and have been duly
authorized by all necessary action on the part of such Former Stockholder of
Enshi. Such Former Stockholder of Enshi has duly executed this Agreement and on
the Closing Date will have duly executed and delivered the Non-Competition
Agreement to which it shall be a party. This Agreement constitutes, and each
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such Non-Competition Agreement or other instrument when so executed and
delivered will constitute the legal, valid and binding obligation of such Former
Stockholder of Enshi, enforceable against such Former Stockholder of Enshi in
accordance with its respective terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally,
subject to the limitations imposed by general equitable principles (regardless
of whether such enforceability is considered in a proceeding at law or in
equity).
Section 4.3 Consents. (a) Except as disclosed on Schedule 4.3(a), as of
the Original Closing Date, no Government Approval or other Consent is required
to be obtained or made by such Former Stockholder of Enshi in connection with
the execution and delivery of this Agreement and the Non-Competition Agreement
or the consummation of the transactions contemplated hereby or thereby, except
for Consents the failure of which to be made or obtained individually and in the
aggregate, could not have or result in a Material Adverse Effect, or materially
impair the ability of such Former Stockholder of Enshi to perform its respective
obligations hereunder and under the Non-Competition Agreement or the ability of
the Buyer, following the Closing, to continue to conduct the Business.
(b) Schedule 4.3(b) contains a complete and correct list of all
Governmental Approvals and other Consents necessary for, or otherwise material
to, the conduct of the Business as of the Original Closing Date. Except as
disclosed on Schedule 4.3(b), all such Governmental Approvals and other Consents
have been duly obtained and are held by the Enshi Group, and have been in full
force and effect as of the Original Closing Date. Such Former Stockholder of
Enshi has been in compliance with all Governmental Approvals and other Consents
held by any member thereof, except for such failures so to comply that,
individually and in the aggregate, could not have or result in a Material
Adverse Effect, or materially impair the ability of such Former Stockholder of
Enshi to perform its respective obligations hereunder and under the
Non-Competition Agreement. There is no Litigation pending or, to the knowledge
of such Former Stockholder of Enshi, threatened, that would result in the
revocation, cancellation, suspension or modification or nonrenewal of any such
Governmental Approval or Consent; such Former Stockholder of Enshi has not been
notified that any such Governmental Approval or Consent will be modified,
suspended, canceled or cannot be renewed in the ordinary course of business; and
there is no reasonable basis for any such revocation, cancellation, suspension,
modification or nonrenewal. The execution, delivery and performance of this
Agreement and the Non-Competition Agreement and the consummation of the
transactions contemplated hereby and thereby do not and will not violate any
such Governmental Approval or Consent, or result in any revocation,
cancellation, suspension, modification or nonrenewal thereof.
(c) Governmental Filings. Until the Original Closing Date, each
registration, report, statement, notice or other filing requested or required to
be filed by any of EIH and Enshi with the Commission or any other Governmental
Authority under the Act, the Exchange Act or any other applicable Law has been
timely filed, and when filed complied and continues to comply with applicable
- 16 -
Law in all material respects. As of their respective dates, none of such
registrations, reports, statements, notices or other filings contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 4.4 Noncontravention. The execution, delivery and performance
of this Agreement and, as applicable, the Non-Competition Agreement by such
Former Stockholder of Enshi, and the consummation of the transactions
contemplated hereby and thereby, do not and will not conflict with, contravene,
result in a violation or breach of or default under (with or without the giving
of notice or the lapse of time or both), create in any other Person a right of
claim of termination, amendment, or require modification, acceleration or
cancellation of, or result in the creation of any Encumbrance (or any obligation
to create any Encumbrance) upon any of the properties or assets of the Enshi
Group under, (a) any Law applicable to the Enshi Group or any of their
respective properties or assets, (b) any provision of any of the Organizational
Documents of any member of the Enshi Group or (c) any Contract, or any other
agreement or instrument to which any member of the Enshi Group is a party or by
which any of their respective properties or assets may be bound, except, in the
case of this clause (c), for violations and defaults that, individually and in
the aggregate, could not have or result in a Material Adverse Effect, or
materially impair the ability of such Former Stockholder of Enshi to perform its
respective obligations hereunder and under the Non-Competition Agreement.
Section 4.5 Subsidiaries.
(a) None of the outstanding capital stock of each of EIH and Enshi has
been issued in violation of, or is not subject to any purchase option, call,
right of first refusal, preemptive, subscription or similar rights under any
provision of applicable Law, the Organizational Documents of EIH or Enshi, any
Contract or other agreement or instrument to which EIH or Enshi is subject,
bound or a party or otherwise. As of the Original Closing Date, there were no
outstanding warrants, options, rights, "phantom" stock rights, agreements,
convertible or exchangeable securities or other commitments (i) pursuant to
which EIH or Enshi is or may become obligated to issue, sell, purchase, return
or redeem any shares of capital stock or other securities of EIH or Enshi or
(ii) that give any Person the right to receive any benefits or rights similar to
any rights enjoyed by or accruing to the holders of shares of capital stock of
EIH or Enshi.
b) As of the Original Closing Date, except for Enshi, EIH has no
subsidiaries or equity interest in any company, partnership or other Person.
Section 4.6 Financial Statements; Absence of Undisclosed Liabilities.
(a) Schedule 4.6 attached hereto contains the following financial statements
(collectively, the "Financial Statements"): (i) the audited financial statements
of Enshi as at and for the years ended December 31, 2004 and December 31, 2005,
as prepared by the Accountant and (ii) the unaudited financial statements of
Enshi as at and for the 3-month period ended March 31, 2006, including in each
case a balance sheet, a statement of income, a statement of stockholders' equity
- 17 -
and a statement of cash flows, and accompanying notes. The Financial Statements
are complete and correct in all respects, have been derived from the accounting
books and records of Enshi, and have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods presented in the Financial Statements subject, in
the case of interim unaudited Financial Statements, only to normal recurring
year-end adjustments. The balance sheets included in the Financial Statements
present fairly the financial position of Enshi as at the respective dates
thereof, and the statements of income, statements of stockholder's equity and
statements of cash flows included in such Financial Statements present fairly
the results of operations and cash flows of Enshi for the respective periods
indicated.
(b) No member of Enshi Group has any liabilities or obligations of any
nature (including any off balance sheet items, contingent liabilities or similar
arrangements), whether known, unknown, absolute, accrued, contingent or
otherwise and whether due or to become due, except (i) as disclosed on Schedule
4.6, (ii) as and to the extent disclosed or reserved against in the Balance
Sheet or specifically disclosed in the notes thereto and (iii) for liabilities
and obligations that (x) are incurred after the date of the Balance Sheet in the
ordinary course of business consistent with prior practice and are not
prohibited by this Agreement and (y) could not be material to any member of the
Enshi Group or have or result in a Material Adverse Effect. Since the date of
the Balance Sheet, there has not occurred or come to exist any Material Adverse
Effect or any event, occurrence, fact, condition, change, development or effect
that, individually or in the aggregate, could become or result in a Material
Adverse Effect.
(c) The audited net income (as calculated in accordance with GAAP) for
the year ended December 31, 2005 of Enshi is no less than US$5,000,000. The
audited net assets of Enshi (as calculated in accordance with GAAP) as of the
year ended December 31, 2005 shall be no less than Renminbi 82,000,000.
Section 4.7 Stock Ownership. (a) All of the outstanding capital stock
of EIH ("EIH Shares") have been duly authorized and validly issued and are fully
paid and nonassessable. Until the delivery of and payment for the EIH Shares at
the Original Closing Date, all of EIH Shares were owned, beneficially and of
record, by the Former Stockholder of Enshi free and clear of any Encumbrances or
any other Claims. Upon the delivery of and payment for the EIH Shares at the
Original Closing Date, RACP have acquired good and valid title to all the EIH
Shares, free and clear of any Encumbrance other than any Encumbrance created by
RACP or RimAsia.
(b) All of the registered capital of Enshi ("Enshi Shares") has been
duly authorized and validly issued and have been contributed in full. All of
Enshi Shares are owned, beneficially and of record, by EIH free and clear of any
Encumbrances or any other Claims other than any Encumbrance created by RACP or
RimAsia.
Section 4.8 Absence of Certain Changes. Since the date of the Balance
Sheet and until the Original Closing Date, except as set forth in Schedule 4.8
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or as specifically permitted after the date hereof pursuant to Section 7.1, the
members of the Enshi Group have conducted their businesses only in the ordinary
course consistent with prior practice and there has not been any:
(a) change in the authorized or issued capital stock of any member of
the Enshi Group; grant of any stock option or right to purchase shares of
capital stock of any member of the Enshi Group; issuance of any security
convertible into such capital stock; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by any member of the Enshi Group of
any shares of any such capital stock; or declaration or payment of any dividend
or other distribution or payment in respect of shares of such capital stock;
(b) amendment to the Organizational Documents of any member of the
Enshi Group;
(c) payment or increase by any member of the Enshi Group of any
bonuses, salaries, or other compensation to any stockholder, director, officer,
or (except in the ordinary course of business consistent with prior practice)
employee or entry into any employment, severance, or similar Contract with any
director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
member of the Enshi Group;
(e) damage to or destruction or loss of any asset or property of any
member of the Enshi Group, whether or not covered by insurance, that
individually or in the aggregate could become or result in a Material Adverse
Effect;
(f) entry into, termination of, or receipt of notice of termination of
any Contract or transaction involving a total remaining commitment by or to any
member of the Enshi Group of at least $10,000;
(g) sale (other than sales of inventory in the ordinary course of
business consistent with prior practice), lease, or other disposition of any
asset or property or mortgage, pledge, or imposition of any Encumbrance on any
asset or property with a value to any member of the Enshi Group in excess of
$10,000;
(h) cancellation or waiver of any claims or rights with a value to any
member of the Enshi Group in excess of $10,000;
(i) change in the accounting methods used by any member of the Enshi
Group; or
(j) agreement, whether oral or written, by any member of the Enshi
Group to do any of the foregoing.
Section 4.9 Litigation. Except as disclosed on Schedule 4.9, there is
no Litigation pending or, to the knowledge of such Former Stockholder of Enshi,
threatened by, against or affecting such Former Stockholder of Enshi or any of
- 19 -
its properties or assets or any member of the Enshi Group that, individually or
in the aggregate, could materially impair the ability of such Former Stockholder
of Enshi to perform its respective obligations hereunder or under the
Non-Competition Agreement, or have or result in a Material Adverse Effect on the
Business. As of the Original Closing Date, there were no outstanding judgments,
decrees, orders or injunctions issued by any Governmental Authority against any
member of the Enshi Group, or that in any way affect the Business and could have
or result in a Material Adverse Effect.
Section 4.10 Compliance with Applicable Laws. (a) Except as disclosed
on Schedule 4.10(a), (i) such Former Stockholder of Enshi is not in conflict
with or in violation or breach of or default under (and there exists no event
that, with notice or passage of time or both, would constitute a conflict,
violation, breach or default with, of or under) (x) any Law applicable to it or
any of its properties, assets, operations or business, (y) any Contract, or any
other agreement or instrument to which it is party or by which it or any of its
properties or assets is bound of affected, except in the case of the foregoing
clauses (x) and (y) for any such conflicts, breaches, violations and defaults
that, individually or in the aggregate, could not have or result in a Material
Adverse Effect, or materially impair the ability of such Former Stockholder of
Enshi to perform its respective obligations hereunder and under the
Non-Competition Agreement, and (ii) such Former Stockholder of Enshi has not
received any notice or has knowledge of any claim alleging any such conflict,
violation, breach or default.
(b) Except as disclosed on Schedule 4.10(b), (i) each member of the
Enshi Group is not in conflict with or in violation or breach of or default
under (and there exists no event that, with notice or passage of time or both,
would constitute a conflict, violation, breach or default with, of or under) (x)
any Law applicable to it or any of its properties, assets, operations or
business, (y) any Contract, or any other agreement or instrument to which it is
party or by which it or any of its properties or assets is bound of affected,
except in the case of the foregoing clauses (x) and (y) for any such conflicts,
breaches, violations and defaults that, individually or in the aggregate, could
not have or result in a Material Adverse Effect, or materially impair the
ability of such member of the Enshi Group to perform its respective obligations
hereunder, and (ii) any member of the Enshi Group has not received any notice or
has knowledge of any claim alleging any such conflict, violation, breach or
default.
Section 4.11 Assets. As of the Original Closing Date, each member of
the Enshi Group owns, or otherwise has full, exclusive, sufficient and legally
enforceable rights to use, all of the properties and assets (real, personal or
mixed, tangible or intangible), used or held for use in connection with,
necessary for the conduct of, or otherwise material to, the Business (the
"Assets"). Each member of the Enshi Group has good, valid and marketable title
to, or in the case of leased property has good and valid leasehold interests in,
each of its Assets, including but not limited to all such Assets reflected in
the Balance Sheet or acquired since the date thereof (except as may be disposed
of in the ordinary course of business after the date hereof and in accordance
with this Agreement), in each case free and clear of any Encumbrance, except
Permitted Encumbrances. Each member of the Enshi Group has maintained all
tangible Assets in good repair, working order and operating condition subject
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only to ordinary wear and tear, and all such tangible Assets are fully adequate
and suitable for the purposes for which they are presently being used. Schedule
4.11(a) sets forth a list of all tangible Assets, including but not limited to
buildings, machinery, equipment and motor vehicles with a net book value of at
least Renminbi One Million as of year ended December 31, 2005, and identifies
the location of such Assets and Schedule 4.11(b) set forth a list of
Encumbrances permitted on the Assets.
Section 4.12 Real Property (a) Owned Real Property. Schedule 4.12 (a)
contains a complete and correct list of, as of the Original Closing Date, all
Owned Real Property setting forth the address and owner of each parcel of Owned
Real Property and describing all improvements thereon. Each member of Enshi
Group has good, valid and marketable title to its respective, Owned Real
Property, free and clear of any Encumbrances other than Permitted Encumbrances.
(b) Leases. Schedule 4.12(b) contains a complete and correct list of
all Leases setting forth the address, landlord and tenant for each Lease as of
the Original Closing Date. Each Lease is legal, valid, binding, in full force
and effect and enforceable against each party thereto, except to the extent that
any failure to be so enforceable, individually and in the aggregate, could not
have or result in a Material Adverse Effect, or materially impair the ability of
such Former Stockholder of Enshi to perform its respective obligations hereunder
and under the Non-Competition Agreement. As of the Original Closing Date, no
member of the Enshi Group was, and no other party was, in default, violation or
breach in any respect under any Lease, and no event has occurred and has been
continuing that constitutes or, with notice or the passage of time or both,
would constitute a default, violation or breach in any respect under any Lease.
Each Lease has granted the tenant under the Lease the exclusive right to use and
occupy the premises and rights demised and intended to be demised thereunder. As
of the Original Closing Date, each member of the Enshi Group had good and valid
title to the leasehold estate under its respective Leases free and clear of any
Encumbrances other than Permitted Encumbrances, and each member of the Enshi
Group enjoyed peaceful and undisturbed possession under its respective Leases
for the Leased Real Property.
(c) Fee and Leasehold Interests, etc. As of the Original Closing Date,
the Real Property constituted all the fee and leasehold interests in real
property held by the Enshi Group, and constituted all of the fee and leasehold
interests in real property used or held for use in connection with, necessary
for the conduct of, or otherwise material to, the Business.
(d) No Proceedings. As of the Original Closing Date, there were no
proceedings in eminent domain or other similar proceedings pending or, to the
knowledge of such Former Stockholder of Enshi, threatened affecting any portion
of the Real Property. There exist no writ, injunction, decree, order or judgment
outstanding, nor any Litigation, pending or threatened, relating to the
ownership, lease, use, occupancy or operation by any Person of any Real
Property.
(e) Current Use. As of the Original Closing Date, the use and operation
of the Real Property in the conduct of the Business did not violate in any
material respect any instrument of record or agreement affecting the Real
Property. There was no violation of any covenant, condition, restriction,
- 21 -
easement or agreement or order of any Governmental Authority that affects the
Real Property or the ownership, operation, use or occupancy thereof. No damage
or destruction has occurred with respect to any of the Real Property that,
individually or in the aggregate, could reasonably be expected to have or result
in a Material Adverse Effect.
(f) Real Property Taxes. As of the Original Closing Date, each parcel
included in the Real Property was assessed for real estate tax purposes as a
wholly independent tax lot, separate from any adjoining land or improvements not
constituting a part of that parcel.
Section 4.13 Contracts (a) Disclosure. Schedule 4.13(a) contains a
complete and correct list of all Contracts of each member of the Enshi Group
that (i) are material to the conduct and operations of its business and
properties, (ii) involve any of the officers, consultants, directors, employees
or shareholders of the Enshi Group; or (iii) obligate any member of the Enshi
Group to share, license or develop any product or technology (except licenses
granted in the ordinary course of business). For the purposes of this Section
4.13, "material" shall mean (i) reasonably likely to result in consideration to
any member of the Enshi Group, or imposing liability or contingent liability on
any member of the Enshi Group, in excess of US$25,000 in each case or US$250,000
in the aggregate in the current fiscal year, (ii) containing exclusivity,
non-competition, or similar clauses that impair, restrict or impose conditions
on any member of the Enshi Group's right to offer or sell products or services,
(iii) not in the ordinary course of business or (iv) an agreement the
termination of which would be reasonably likely to have a Material Adverse
Effect.
(b) Enforceability. As of the Original Closing Date, all Contracts were
legal, valid, binding, in full force and effect and enforceable against each
party thereto, except to the extent that any failure to be enforceable,
individually and in the aggregate, could not have or result in a Material
Adverse Effect, or materially impair the ability of such Former Stockholder of
Enshi to perform its respective obligations hereunder and under the
Non-Competition Agreement. Except as set forth in Schedule 4.13(a), there did
not exist under any Contract any violation, breach or event of default, or event
or condition that, after notice or lapse of time or both, would constitute a
violation, breach or event of default thereunder, on the part of any member of
the Enshi Group or any other Person. Except as set forth in Schedule 4.13(b),
the enforceability of all Contracts will not be affected in any manner by the
execution, delivery or performance of this Agreement, and no Contract contains
any change in control or other terms or conditions that will become applicable
or inapplicable as a result of the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreements.
Section 4.14 Intellectual Property. (a) Schedule 4.14(i) sets forth a
complete and correct list of all Intellectual Property that is owned by each
member of the Enshi Group, which is material to the Business (the "Owned
Intellectual Property"). The Owned Intellectual Property constitutes all
Intellectual Property used or held for use in connection with, necessary for the
conduct of, or otherwise material to the Business, except for the Intellectual
Property described on Schedule 4.14(ii). Immediately after the Original Closing
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Date, such member of the Enshi Group will have the right to use all Intellectual
Property described on Schedule 4.14(ii) and will own all Owned Intellectual
Property, free from any Encumbrances. Schedule 4.14(iii) sets forth a complete
and correct list of all written or oral licenses and arrangements material to
the Business, (i) pursuant to which the use by any Person of Intellectual
Property is permitted by each member of the Enshi Group and (ii) pursuant to
which the use by each member of the Enshi Group of Intellectual Property is
permitted by any Person (collectively, the "Intellectual Property Licenses").
All Intellectual Property Licenses are in full force and effect in accordance
with their terms, and are free and clear of any Encumbrances. Neither any member
of the Enshi Group nor, to the knowledge of such Former Stockholder of Enshi,
any other party is in default under any Intellectual Property License, and no
such default is currently threatened. The conduct of the Business does not
infringe the rights of any third party in respect of any Intellectual Property,
except as set forth on Schedule 4.14(iv). To the knowledge of such Former
Stockholder of Enshi, none of the Owned Intellectual Property or the
Intellectual Property Licenses is being infringed by third parties. Except as
set forth on Schedule 4.14(v), there is no claim or demand of any Person
pertaining to, or any proceeding which is pending or, to the knowledge of such
Former Stockholder of Enshi, threatened, that challenges the rights of any
member of the Enshi Group in respect of any Owned Intellectual Property or
Intellectual Property License, or that claims that any default exists under any
Intellectual Property License, which, individually or in the aggregate, could
have or result in a Material Adverse Effect. None of the Owned Intellectual
Property or the Intellectual Property Licenses is subject to any outstanding
order, ruling, decree, judgment or stipulation by or with any court, tribunal,
arbitrator, or other Governmental Authority. The Owned Intellectual Property has
been duly registered with, filed in or issued by, as the case may be, the United
States Patent and Trademark Office and United States Copyright Office or other
filing offices, domestic or foreign, to the extent necessary or desirable to
ensure full protection under any applicable Law, and the same remain in full
force and effect.
Section 4.15 Insurance. Schedule 4.15 contains a complete and correct
list and summary description of all insurance policies maintained (at present or
at any time since January 1, 2004) by or on behalf of each member of the Enshi
Group. A complete and correct copy of all such policies together with all riders
and amendments thereto has been delivered to the Buyer. Such policies are in
full force and effect, and all premiums due thereon have been paid. Each member
of the Enshi Group has complied in all material respects with the terms and
provisions of such policies. The insurance coverage provided by such policies is
adequate and suitable for the Business, and is on such terms (including without
limitation as to deductibles and self-insured retentions), covers such risks,
contains such deductibles and retentions, and is in such amounts, as the
insurance customarily carried by comparable companies of established reputation
similarly situated and carrying on the same or similar business.
Section 4.16 Environmental Matters. (a) Compliance with Environmental
Law. The Enshi Group has complied and is in compliance in all material respects
with all applicable Environmental Laws pertaining to any of the properties and
assets of any member of the Enshi Group (including the Real Property) and the
use and ownership thereof, and to the operation of the Business. No material
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violation by any member of the Enshi Group is being alleged of any applicable
Environmental Law relating to any of the properties and assets of the Enshi
Group including (the Real Property) or the use or ownership thereof, or to the
operation of the Business.
(b) Other Environmental Matters. (i) Neither the Enshi Group or any
other Person (including any tenant or subtenant) has caused or taken any action
that will result in, nor is any member of the Enshi Group subject to, any
material liability or obligation on the part of any member of the Enshi Group,
or the Buyer or any of its Affiliates, relating to (x) the environmental
conditions on, under, or about the Real Property or other properties or assets
owned, leased, operated or used by any member of the Enshi Group or any
predecessor thereto at the present time or in the past, including without
limitation, the air, soil and groundwater conditions at such properties or (y)
the past or present use, management, handling, transport, treatment, generation,
storage, disposal or Release of any Hazardous Materials.
(ii) Such Former Stockholder of Enshi has disclosed and made
available to the Buyer all information, including, without limitation, all
studies, analyses and test results, in the possession, custody or control of or
otherwise known to such Former Stockholder of Enshi relating to (x) the
environmental conditions on, under or about the Real Property or other
properties or assets owned, leased, operated or used by any member of the Enshi
Group or any predecessor in interest thereto at the present time or in the past,
and (y) any Hazardous Materials used, managed, handled, transported, treated,
generated, stored or Released by any member of the Enshi Group or any other
Person on, under, about or from any of the Real Property, or otherwise in
connection with the use or operation of any of the properties and assets of any
member of the Enshi Group, or the Business.
Section 4.17 Affiliate Transactions (a) Schedule 4.17(a) contains a
complete and correct list of all agreements, contracts, arrangements,
understandings, transfers of assets or liabilities or other commitments or
transactions, whether or not entered into in the ordinary course of business, to
or by which any member of the Enshi Group, on the one hand, and any of the
Former Stockholder of Enshi or any of their respective Affiliates (other than
any member of the Enshi Group), on the other hand, are or have been a party or
otherwise bound or affected, and that (i) are material and currently pending or
in effect or (ii) involve continuing liabilities and obligations that,
individually or in the aggregate, have been, are or will be material to any
member of the Enshi Group. Except as disclosed in Schedule 4.17(a), each
agreement, contract, arrangement, understanding, transfer of assets or
liabilities or other commitment or transaction set forth or required to be set
forth in Schedule 4.17(a) was on terms and conditions as favorable to the
relevant member of the Enshi Group as would have been obtainable by it at the
time in a comparable arm's-length transaction with a Person other than any
Former Stockholder of Enshi or any of their respective Affiliates. For the
purposes of this Section 4.17(a), "material" shall mean reasonably likely to
result in consideration to any member of the Enshi Group, or imposing liability
or contingent liability on any member of the Enshi Group, in excess of five
percent (5%) of net sales of Enshi Group for the fiscal year ended December 31,
2005 or (ii) containing exclusivity, non-competition, or similar clauses that
impair, restrict or impose conditions on any member of the Enshi Group's right
to offer or sell products or services.
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(b) Except as set forth in Schedule 4.17(b), no stockholder, officer,
director or employee of any member of the Enshi Group, or any family member,
relative or Affiliate of any such stockholder, officer, director or employee,
(i) owns, directly or indirectly, and whether on an individual, joint or other
basis, more than five percent (5%) interest in (x) any property or asset, real
or personal, tangible or intangible, used in or held for use in connection with
or pertaining to the Business, or (y) any Person, that is a supplier, customer
or competitor of any member of the Enshi Group, (ii) serves as an officer,
director or employee of any Person that is a supplier, customer or competitor of
any member of the Enshi Group or (iii) has received any loans from or is
otherwise a debtor of, or made any loans to or is otherwise a creditor of, any
member of the Enshi Group in an amount in excess of five percent (5%) of net
sales of the Enshi Group for the fiscal year ended December 31, 2005.
Section 4.18 Employees, Labor Matters, etc. Except as set forth on
Schedule 4.18, no member of the Enshi Group is a party to or bound by any
collective bargaining agreement, and there are no labor unions or other
organizations representing, purporting to represent or attempting to represent
any employees employed by any member of the Enshi Group. Since January 1, 2002,
there has not occurred or been threatened any material strike, slowdown,
picketing, work stoppage, concerted refusal to work overtime or other similar
labor activity with respect to any employees of any member of the Enshi Group.
Except as set forth on Schedule 4.18, there are no labor disputes currently
subject to any grievance procedure, arbitration or litigation and there is no
representation petition pending or threatened with respect to any employee of
any member of the Enshi Group. Each member of the Enshi Group has complied with
all applicable Laws pertaining to the employment or termination of employment of
their respective employees, including, without limitation, all such Laws
relating to labor relations, equal employment opportunities, fair employment
practices, prohibited discrimination or distinction and other similar employment
activities, except for any failure so to comply that, individually and in the
aggregate, could not result in any material liability or obligation on the part
of any member of the Enshi Group or the Buyer or any of its Affiliates, or have
or result in a Material Adverse Effect.
Section 4.19 Benefit Plans and Related Matters. (a) Except as set forth
on Schedule 4.19(a), with respect to any employee or former employee of any
member of the Enshi Group, no member of the Enshi Group, or any affiliated
company presently maintains, contributes to or has any liability under: (i) any
bonus, incentive compensation, profit sharing, retirement, pension, group
insurance, death benefit, cafeteria, medical expense reimbursement, dependent
care, stock option, stock purchase, stock appreciation rights, deferred
compensation, consulting, severance pay or termination pay, vacation pay,
welfare or other employee benefit or fringe benefit plan, program or
arrangement; or (ii) any plan, program or arrangement which is an employee
pension benefit plan, or an "employee welfare benefit plan" as defined under
relevant laws, including laws of the People's Republic of China applicable to
any member of the Enshi Group. Each plan, program and arrangement set forth on
Schedule 4.19(a) is herein referred to as an "Employee Benefit Plan". The term
"affiliated company" means any organization that would be aggregated with the
any member of the Enshi Group under Section 414(b), (c), (m) or (o) of the Code.
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(b) There is no pending or threatened legal action, claim, proceeding
or investigation against or involving any Employee Benefit Plan (other than
routine claims for benefits) an there is no basis for any facts which could give
rise to any such condition, legal action, claim, proceeding or investigation.
(c) None of the members of the Enshi Group nor any of its Affiliates is
a party to any employment agreement, whether written or oral, or agreement with
change in control or similar provisions, or a collective bargaining agreement or
contract with any labor union relating to any employees or former employees of
such member of the Enshi Group.
Section 4.20 Taxes. (a) Except as set forth on Schedule 4.20(a), (i)
all Returns required to be filed by, or with respect to any activities or assets
of, each member of the Enshi Group on or before the Original Closing Date have
been duly and timely filed and are correct and complete in all material
respects, (ii) all Taxes shown as owing on such Returns have been paid and (iii)
no member of the Enshi Group is currently the beneficiary of any extension of
time within which to file any Return.
(b) Except as set forth on Schedule 4.20(b), (i) all Taxes that are or
may become payable by any member of the Enshi Group or chargeable as an
Encumbrance upon its assets as of the Original Closing Date for which the filing
of a Return is not required have been duly and timely paid and (ii) each member
of the Enshi Group has duly and timely withheld all Taxes required to be
withheld in connection with the business or assets of such member, and such
withheld Taxes have been either duly and timely paid to the proper governmental
authorities or properly set aside in accounts for such purpose.
(c) Except as set forth on Schedule 4.20(c), there has been no claim or
issue (other than a claim or issue that has been finally settled) concerning any
liability for Taxes of any member of the Enshi Group asserted, raised or
threatened by any taxing authority and, to the knowledge of each of the Former
Stockholder of Enshi, no circumstances exist to form the basis for such a claim
or issue.
(d) Schedule 4.20(d) lists all Income Tax Returns that have been filed
with respect to any member of the Enshi Group for taxable periods ended on or
after January 1, 2000 and that have not yet been audited or are currently the
subject of audit.
(e) Except as set forth on Schedule 4.20(e), no member of the Enshi
Group has (i) waived any statute of limitations, (ii) agreed to any extension of
the period for assessment or collection or (iii) executed or filed any power of
attorney with respect to Taxes, which waiver, agreement or power of attorney is
currently in force.
(f) Except as set forth on Schedule 4.20(f), (i) there are no
outstanding adjustments for Income Tax purposes applicable to any member of the
Enshi Group required as a result of changes in methods of accounting effected on
or before the Original Closing Date and (ii) no material elections for Income
Tax purposes have been made by any member of the Enshi Group that are currently
in force or by which any member of the Enshi Group is bound.
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(g) Except as set forth in Schedule 4.20(g), no member of the Enshi
Group (i) is a party to or bound by or has any obligation under any Tax
allocation, sharing, indemnity or similar agreement or arrangement or (ii) is or
has been a member of any group of companies filing a consolidated, combined or
unitary Income Tax Return.
Section 4.21 Accounts Receivable. Each member of the Enshi Group has
delivered or caused to be delivered to the Buyer and RACP a complete and
accurate aging of all accounts receivable of such member of the Enshi Group as
of the end of each monthly period since January 1, 2004. Except as set forth in
Schedule 4.21, no account receivable any member of the Enshi Group reflected on
the Balance Sheet and no account receivable arising after the date of the
Balance Sheet and reflected on the books of the Enshi Group is uncollectible or
subject to counterclaim or offset, except to the extent reserved against
thereon. All accounts receivable reflected on the Balance Sheet or on such books
have been generated in the ordinary course of business and reflect a bona fide
obligation for the payment of goods or services provided by any member of the
Enshi Group. Except as set forth in Schedule 4.21, all discounts to customers of
each member of the Enshi Group are as shown on its books and records and in no
event exceed one percent of receivables to which they relate.
Section 4.22 Customers. Schedule 4.22 sets forth for each of the years
ended from December 31, 2003 to December 31, 2005 and for the four-month period
ended April 30, 2006 (a) the names and addresses of the ten (10) largest
customers of Enshi based on the aggregate value of services ordered from the
Enshi by such customers during each such period and (b) the amount for which
each such customer was invoiced during each such period. No member of the Enshi
Group has received any notice or has any reason to believe that any material
customer of Enshi (i) has ceased, or will cease, to use the services of Enshi,
(ii) has materially reduced or will materially reduce, the use of services of
Enshi or (iii) has sought, or is seeking, to materially reduce the price it will
pay for services of Enshi, which cessations and reductions, either individually
or in the aggregate, could have or result in a Material Adverse Effect.
Section 4.23 Bank Accounts. Schedule 4.23 sets forth a complete and
correct list containing the names set forth of each bank in which any member of
the Enshi Group has an account or safe deposit or lock box, the account or box
number, as the case may be, and the name of every person authorized to draw
thereon or having access thereto.
Section 4.24 Disclosure. This Agreement and the Non-Competition
Agreement, and each certificate or other instrument or document furnished by or
on behalf of such Former Stockholder of Enshi to the Buyer or any agent or
representative of the Buyer pursuant hereto, taken as a whole, do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated herein or therein or necessary to make the statements
contained herein or therein in light of the circumstances under which they were
made, not misleading.
Section 4.25 Income Tax. The Former Stockholder of Enshi shall be
personally responsible if Enshi Group owe any tax to the Government incurred
prior to the Original Closing Date.
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Section 4.26 FCPA. The Former Stockholder of Enshi has not conducted or
authorized any of the employees, officers, agents, directors, affiliates, or
representatives of any member of the Enshi Group to conduct any activities that
may violate any provisions of the FCPA.
Section 4.27 Renewal of Bank Loan. Enshi's currently outstanding bank
loans in the amount of Renminbi 10,000,000 with Agricultural Bank of China
Shenyang Branch Zhongshan Sub-branch and Renminbi 10,000,000 with Citic Bank,
Shenyang Branch, as lenders, have been or are being extended, renewed or
refinanced with third parties for a term of at least one (1) year from the date
of such extension, renewal or refinance on terms that are no less favorable to
any member of the Enshi Group than were in effect during the initial term of
such loan.
ARTICLE V
FURTHER REPRESENTATIONS OF RIMASIA
In addition to the representations and warranties set forth in Article
III, RimAsia hereby represents and warrants to the Buyer as follows:
Section 5.1 Authorization. The execution, delivery and performance by
RimAsia, as the case may be, of this Agreement and the Ancillary Agreements to
which it is a party, and the consummation by RimAsia of the transactions
contemplated hereby and thereby are within RimAsia's powers and have been duly
authorized by all necessary action on the part of such Person. RimAsia has duly
executed this Agreement and on the Closing Date will have duly executed and
delivered the Ancillary Agreements to which it shall be a party. The execution
and delivery of this Agreement and the Ancillary Agreements, the performance of
RimAsia's obligations hereunder and thereunder, and the consummation by RimAsia
of the transactions contemplated hereby and thereby, have been duly authorized
by all requisite action on the part of RimAsia. This Agreement constitutes, and
each such Ancillary Agreement or other instrument when so executed and delivered
will constitute the legal, valid and binding obligation of RimAsia, enforceable
against RimAsia in accordance with its respective terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally, subject to the limitations imposed by general equitable principles
(regardless of whether such enforceability is considered in a proceeding at law
or in equity).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND CBH
The Buyer and CBH, jointly and severally, hereby represent and warrant
to RimAsia as follows:
Section 6.1 Corporate Status. Each of the Buyer and CBH is a
corporation duly incorporated, validly existing and in good standing under the
laws of its respective state of incorporation. CBH has full corporate power and
authority to conduct its business and to own or lease and to operate its
properties as and in the places where such business is conducted and such
properties are owned, leased or operated.
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Section 6.2 Authorization. Each of the Buyer and CBH has full corporate
power and authority to execute and deliver this Agreement and the Ancillary
Agreements to which it shall be a party, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Ancillary
Agreements to which the Buyer or CBH shall be a party, the performance of its
respective obligations hereunder and thereunder, and the consummation by the
Buyer and CBH of the transactions contemplated hereby and thereby, have been
duly authorized by all requisite corporate action on the part of the Buyer and
CBH. Each of the Buyer and CBH has duly executed this Agreement and on the
Closing Date will have duly executed and delivered the Ancillary Agreements to
which it shall be a party. This Agreement constitutes, and each such Ancillary
Agreement or other instrument when so executed and delivered will constitute the
legal, valid and binding obligation of the Buyer or CBH, as the case may be,
enforceable against such Person in accordance with its respective terms, except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, subject to the limitations imposed by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding at law or in equity).
Section 6.3 Consents. Except as disclosed on Schedule 6.3, no
Government Approval or other Consent is required to be obtained or made by the
Buyer or CBH in connection with the execution and delivery of this Agreement and
the Ancillary Agreements to which it shall be a party or the consummation of the
transactions contemplated hereby or thereby, except for Consents the failure of
which to be made or obtained individually and in the aggregate, could not have
or result in a Material Adverse Effect, or materially impair the ability of the
Buyer or CBH to perform its respective obligations hereunder and under such
Ancillary Agreements.
Section 6.4 Noncontravention. The execution, delivery and performance
by the Buyer or CBH, as the case may be, of this Agreement and the Ancillary
Agreements to which the it shall be a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not conflict with,
contravene, result in a violation or breach of or default under (with or without
the giving of notice or the lapse of time, or both), create in any other Person
a right or claim of termination, amendment, modification, acceleration or
cancellation of, or result in or require the creation of any Encumbrance (or any
obligation to create any Encumbrance) on any of the properties or assets of the
Buyer or CBH under (a) any Law applicable to the Buyer or CBH or any of its
respective properties or assets, (b) any provision of any of the Organizational
Documents of the Buyer or CBH, or (c) any contract, agreement or other
instrument to which the Buyer or CBH is a party or by which its properties or
assets may be bound, except, in the case of clause (c), for violations and
defaults that, individually and in the aggregate, would not materially impair
the ability of the Buyer or CBH to perform its obligations hereunder and under
the Ancillary Agreements.
Section 6.5 Brokers and Intermediaries. Neither the Buyer nor CBH has
employed any broker, finder, advisor or intermediary in connection with the
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transactions contemplated by this Agreement which would be entitled to a
broker's, finder's or similar fee or commission in connection therewith or upon
the consummation thereof.
Section 6.6 Due Diligence. The due diligence performed by the Buyer and
CBH has been and is reasonably satisfactory to the Buyer and CBH.
ARTICLE VII
COVENANTS
Section 7.1 Conduct of Business. On and after the Original Closing Date
to the Closing Date, (i) RimAsia shall monitor all cash disbursements by any
member of the Enshi Group and RimAsia's approval and authorization shall be
required for any such individual cash disbursement by any member of the Enshi
Group in excess of $75,000 and (ii) neither RACP nor RimAsia will take any
action which would have a Material Adverse Effect on the Business or the
transactions contemplated by this Agreement, except as expressly consented to by
the Buyer and CBH in writing.
(a) Except as expressly consented to by the Buyer and CBH in writing,
from the Original Closing Date to the Closing Date, RimAsia and RACP shall:
(1) not cause or permit any amendment, supplement, waiver or
modification to or of any of Organizational Documents of RACP or any
member of the Enshi Group;
(2) not declare dividends on, or redeem or repurchase any
shares of, any class of capital stock or issue any capital stock of
RACP or any member of the Enshi Group.
(3) not increase any obligations of RACP or any member of the
Enshi Group with respect to Indebtedness, repay any loans or other
amounts outstanding to RimAsia or any of its respective Affiliates,
make capital expenditures in excess of $50,000 in any case or $250,000
in the aggregate, pay any bonuses or advances against salaries except
as set forth on Schedule 7.1, prepay any accounts payable, delay
payment of any trade payables other than in the ordinary course of
business, or make any other cash payments other than in the ordinary
course of business;
(4) not sell, transfer, assign, lease, license, mortgage,
pledge, hypothecate, grant any security interest in, or otherwise
subject to any other Encumbrance, any of the Assets (including, without
limitation, all of its Intellectual Property), except for sales in the
ordinary course of business;
(5) not enter into or assume any Contract, or enter into or
permit any amendment, supplement, waiver or other modification in
respect thereof, except for such Contracts and amendments, supplements,
waivers and modifications thereof that, individually and in the
aggregate, are not material to any member of the Enshi Group and that
are entered into, assumed or permitted in the ordinary course of
business and following prior notice to and consultation with the Buyer;
- 30 -
(6) not compromise, settle, grant any waiver or release
relating to or otherwise adjust any Litigation, except in the ordinary
course of business of the Enshi Group, and following prior notice to
and consultation with the Buyer;
(7) not merge or consolidate with, or agree to merge or
consolidate with, or purchase substantially all of the assets of, or
otherwise acquire, any business, business organization or division
thereof, or any other Person, except in the ordinary course of business
of the Enshi Group and following prior notice to and consultation with
the Buyer;
(8) not organize any new subsidiary or acquire any capital
stock of any Person or any equity or ownership interest in any
business, except in the ordinary course of business of the Enshi Group
and following prior notice to and consultation with the Buyer;
(9) not take any action or omit to take any action, which
action or omission would result in a breach of any of the
representations and warranties set forth in Articles III and IV;
(b) Furthermore, except as expressly consented to by the Buyer and CBH
in writing, from the Original Closing Date to the Closing Date, RimAsia and RACP
agree not to take any action that would prevent any member of the Enshi Group
to:
(1) operate the business of each member of the Enshi Group in,
and only in, the ordinary course of business, in substantially the same
manner as heretofore conducted, and to preserve intact the present
business organization of each member of the Enshi Group, keep available
the services of its present officers and significant employees, and
preserve its relationships with customers, suppliers and others having
business dealings with it, to the end that its goodwill and going
business shall be in all material respects unimpaired following the
Original Closing Date;
(2) maintain all of the tangible Assets in good repair,
working order and operating condition subject only to ordinary wear and
tear;
(3) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it;
(4) pay accounts payable and other obligations, when they
become due and payable, in the ordinary course of business;
(5) perform in all material respects all of its obligations
under any Contracts, agreements or other instruments relating to or
affecting any of the properties and assets of any member of the Enshi
Group (including the Assets) or the Business;
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(6) maintain its books of account and records in the usual,
regular and ordinary manner consistent with past policies and practice;
(7) comply in all material respects with all Laws applicable
to it or any of its properties, assets or business;
(8) maintain each member of the Enshi Group's good standing in
its jurisdiction of incorporation and in the jurisdictions in which it
is qualified to do business as a foreign corporation and to maintain
all Governmental Approvals and other Consents necessary for, or
otherwise material to, the Business;
(9) promptly advise the Buyer in writing of any event,
occurrence, fact, condition, change, development or effect that,
individually or in the aggregate, could have or result in a Material
Adverse Effect or a breach of this Section 7.1; and
(10) conduct all Tax affairs relating to each member of the
Enshi Group only in the ordinary course of business, in substantially
the same manner as heretofore conducted.
Section 7.2 Access and Information. So long as this Agreement remains
in effect, RACP will allow the Buyer and its Representatives, full access during
reasonable business hours to all of RACP's and each member of the Enshi Group's
respective properties, assets, books, contracts, commitments, reports and
records, and allow them access to all such documents, records and information
with respect to the properties, assets and business of RACP and each member of
the Enshi Group and copies of any work papers relating thereto as the Buyer
shall from time to time reasonably request. In addition, RACP will permit the
Buyer and its Representatives, reasonable access during reasonable business
hours to RACP's and each member of the Enshi Group's lenders, customers and
suppliers, other Persons with whom any member of the Enshi Group does or has
done business, and other Representatives or other personnel of RACP or any
member of the Enshi Group, as may be necessary or useful to the Buyer in its
judgment in connection with its review of the properties, assets and business of
RACP and each member of the Enshi Group and the above-mentioned documents,
records and information and so that the Buyer may keep itself generally informed
as to the affairs of the Business.
Section 7.3 Confidentiality. The parties hereto hereby agree to treat
all of the information required to be disclosed or exchanged in connection with
this Agreement and any other confidential information a party hereto receives
from another party hereto as confidential, to not use any of such information
except in connection with this Agreement, and, if this Agreement is terminated
for any reason whatsoever, to return to such other party all tangible
embodiments (and all copies) of such information which are in its possession.
Other than required under the relevant disclosure rules of under the securities
laws of the United States, the parties hereto may disclose on a confidential
basis the transactions contemplated hereby and any information which such party
may obtain from another party hereto to their respective Representatives to the
extent necessary to obtain their services in connection with the transactions
- 32 -
contemplated hereby. The obligation to maintain the confidentiality of
information shall not apply to any information disclosed or disclosures made in
response to a valid subpoena or similar process or to an order of a court of
competent jurisdiction, provided that the disclosing party shall have used its
best efforts to notify the other party hereto to whom the confidential
information belongs in time to afford such party an opportunity to contest such
process or order.
Section 7.4 Expenses. Whether or not the Closing or the closing of the
transactions contemplated under the Original Purchase Agreement ("Original
Closing") takes place, all costs and expenses incurred by the Buyer in
connection with this Agreement, the Ancillary Agreements, the Original Purchase
Agreement and the transactions contemplated hereby and thereby ("Transactions")
shall be paid by the Buyer. Whether or not the Closing or the Original Closing
takes place, all costs and expenses subject to a maximum of $300,000 incurred by
RimAsia and RACP in connection with the Transactions including but not limited
to the costs of legal counsels (Paul, Hastings, Xxxxxxxx & Xxxxxx, Xxxxxx &
Xxxxxx, and Rajah & Xxxx), commercial and industry due diligence (Bluepeak
Group), escrow agent (MeesPierson Intertrust), investigative agency (IonAsia),
and out-of-pocket travel and accommodation expenses shall be paid by CBH,
provided that if the Original Closing takes place, all such expenses subject to
a maximum of $300,000 will be paid by RACP from its cash reserves at the
Original Closing, and provided further that for the avoidance of doubt it is
hereby agreed that any stamp duties payable pursuant to the transactions
contemplated under this Agreement, the costs of legal due diligence (Beijing
Kang Da), audit and financial due diligence (Xxxxx Xxxxxxxx) and such other
additional costs of service providers as may have been retained will not be
payable by RimAsia or RACP.
Section 7.5 No Solicitation and No Competition. (a) During the term of
this Agreement, (i) RACP and RimAsia shall not, and shall cause each other
member of the Seller Group and each Representative of any member of the Seller
Group not to, (a) directly or indirectly solicit or encourage any inquiries or
proposals for, or enter into or continue any discussions with respect to, the
acquisition by any Person of any of the RACP Shares, any other shares of capital
stock or other securities of RACP, or all or substantially all of the Business
or of the assets of RACP (an "RACP Acquisition Transaction"), or (b) furnish or
permit to be furnished any non-public information concerning RACP or its
business and operations to any Person (other than to the Buyer, Representatives
of the Buyer, Representatives of the Seller Group and to sources of potential
financing), other than information furnished in the ordinary course of business
after prior written notice to and consultation with the Buyer. RACP and RimAsia
shall promptly notify the Buyer of any inquiry or proposal received by it or by
any Representative thereof with respect to any such RACP Acquisition
Transaction. RACP and RimAsia shall immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any Person other than
the Buyer in respect of any RACP Acquisition Transaction; and (ii) each of the
Former Stockholder of Enshi shall not, and shall cause each other member of the
Enshi Group and each Representative of any member of the Enshi Group not to, (a)
directly or indirectly solicit or encourage any inquiries or proposals for, or
enter into or continue any discussions with respect to, the acquisition by any
Person (other than RACP or the Buyer) of any shares of capital stock or other
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securities of any member of Enshi Group, or all or substantially all of the
Business or of the assets of any member of Enshi Group (an "Enshi Acquisition
Transaction"), or (b) furnish or permit to be furnished any non-public
information concerning any member of Enshi Group or its business and operations
to any Person (other than the Buyer and its Representatives), other than
information furnished in the ordinary course of business after prior written
notice to and consultation with the Buyer. The Former Stockholder of Enshi shall
promptly notify the Buyer of any inquiry or proposal received by it or by any
Representative thereof with respect to any such Enshi Acquisition Transaction.
The Former Stockholder of Enshi shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any Person
other than RACP and the Buyer in respect of any Enshi Acquisition Transaction.
Section 7.6 Further Actions. (a) Each party hereto shall use best
efforts to take or cause to be taken all actions, and to do or cause to be done
all other things, necessary, proper or advisable in order for such party to
fulfill all closing conditions hereunder and perform its obligations in respect
of this Agreement and the Ancillary Agreements to which it is a party, or
otherwise to consummate and make effective the transactions contemplated hereby
and thereby.
(b) Each party hereto shall, as promptly as practicable, (i) make, or
cause to be made, all filings and submissions (including but not limited to
under the HSR Act) required under any Law applicable to such party, and give
such reasonable undertakings as may be required in connection therewith, and
(ii) use best efforts to obtain or make, or cause to be obtained or made, all
Governmental Approvals and Consents necessary to be obtained or made by such
party, in each case in connection with this Agreement or the Ancillary
Agreements, the sale and transfer of the RACP Shares pursuant hereto, or the
consummation of the other transactions contemplated hereby or thereby. Such
party shall coordinate and cooperate with all other parties hereto in exchanging
such information and supplying such reasonable assistance as may be reasonably
requested by such other parties in connection with the filings and other actions
contemplated by this Section 7.6.
(c) At all times prior to the Closing Date, RimAsia and RACP shall
promptly notify the Buyer in writing of any fact, condition, event or occurrence
that could reasonably be expected to result in the failure of any of the
conditions contained in Sections 8.1 and 8.2 to be satisfied, promptly upon
becoming aware of the same, and the Buyer shall promptly notify RACP and RimAsia
in writing of any fact, condition, event or occurrence that could reasonably be
expected to result in the failure of any of the conditions contained in Sections
8.1 and 8.3 to be satisfied, promptly upon becoming aware of the same.
(d) If any third party whose Consent is required to transfer the
benefit of any Contract or Governmental Approval to Buyer (the "Rights") does
not consent to such transfer, the Former Stockholder of Enshi shall, at the
request of the Buyer and to the extent permitted by Law, enforce, use, carry out
and comply with such Right against such Person as agent of the Buyer, at the
Buyer's cost and expense and for the Buyer's exclusive benefit.
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Section 7.7 Continued Service. Xx. Xx Xiaobo shall serve as a
consultant of Enshi, for a period of 12 months from the Original Closing Date.
In such capacity, Xx. Xx shall make himself available at least six (6) hours per
working day, through phone or by personal presence, for consultation with or by,
the Buyer and RACP. By such continued service, Xx. Xx shall assist Enshi to
achieve its business objectives in order to achieve its financial performance
goals for 2006. Such financial performance goals of Enshi for 2006 shall be set
at an audited net income after tax of Renminbi 48,000,0000 determined under
GAAP.
Section 7.8 Further Assurances. Following the Closing Date, RimAsia,
RACP and the Former Stockholder of Enshi shall, and shall cause each other
member of the Seller Group to, from time to time, execute and deliver such
additional instruments, documents, conveyances or assurances and take such other
actions as shall be necessary, or otherwise reasonably be requested by the
Buyer, to confirm and assure the rights and obligations provided for in this
Agreement and the Ancillary Agreements and render effective the consummation of
the transactions contemplated hereby and thereby, or otherwise to carry out the
intent and purposes of this Agreement (which include the transfer to the Buyer
of the ownership and intended related benefits of the business of RACP).
Section 7.9 Tax Matters. (a) RimAsia shall be responsible for, and
neither the Buyer, CBH nor RACP shall bear, any Taxes that relate to the
purchase and sale of the RACP Shares pursuant to this Agreement (including,
without limitation, any real property gains and transfer Taxes).
(b) RimAsia shall prepare and timely file, or cause to be prepared and
timely filed, with the relevant taxing authorities all Returns relating to the
business or assets of RACP that are required to be filed by Tax Law on or prior
to the Closing Date or otherwise relating to periods prior to the Closing Date.
The Buyer shall cooperate with RimAsia and their Representatives with respect to
the preparation and filing of such Returns.
Section 7.10 FCPA. RACP will not conduct or authorize any employees,
officers, agents, directors, affiliates, or representatives of RACP or any
member of the Enshi Group to conduct any activities that may violate any
provisions of the FCPA.
Section 7.11 CBH. Xx. Xxxxx Xxx Peng will remain as the Chief Executive
Officer of CBH at all times through the Closing Date and will ably carry out and
discharge his duties as Chief Executive Officer of CBH during such period,
except for any incapacitation for a period of up to thirty days after which time
he resumes such duties. In addition, Xx. Xxxxx Xxx Peng will maintain beneficial
ownership of at least 90 per cent of his current equity shareholdings in CBH as
of the date hereof.
Section 7.12 Share Charge. Within 20 days after the Closing, the Buyer
shall execute and deliver to RimAsia a share charge between RimAsia and the
Buyer in its capacity as a sole shareholder of RACP (the "Share Charge") in
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substantially the form of the RimAsia Share Charge (as defined in the Loan
Agreement), and shall procure that the particulars of the Share Charge shall be
submitted to the Registrar of Companies in the British Virgin Islands for
registration.
Section 7.13 Renewal of Loan. After the Original Closing Date, RACP
shall procure that Enshi's currently outstanding bank loans as of the date
hereof in the amounts of Renminbi 10,000,000 with Agricultural Bank of China
Shenyang Branch Zhongshan Sub-branch and Renminbi 10,000,000 with Citic Bank,
Shenyang Branch, as lenders, be secured by Enshi's Assets, provided that, (a)
the Former Stockholder of Enshi has renewed, extended or refinanced with third
parties such loans for a term of at least one (1) year from the date of such
renewal, extension or refinance on terms that are no less favorable to any
member of the Enshi Group than were in effect during the initial term of such
loans (excluding changes in bank loan rates as set forth by the People's Bank of
China) and (b) each such loan shall not be renewed, extended or refinanced for
an amount more than Renminbi 10,000,000.
Section 7.14 Financial Statements. The Former Stockholder of Enshi
shall use his best efforts to procure that Enshi shall achieve audited net
income (as calculated in accordance with GAAP) for the year ended December 31,
2006 of no less than the audited net income (as calculated in accordance with
GAAP) for the year ended December 31, 2005, and audited net assets of Enshi (as
calculated in accordance with GAAP) as of December 31, 2006 of no less than
audited net assets of Enshi (as calculated in accordance with GAAP) as of
December 31, 2005 (prior to the declaration or distribution of dividends, if
any, after the Closing Date).
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1 Conditions to Obligations of Each Party. The obligations of
each member of the Seller Group, the Buyer and CBH required to be performed by
such parties at the Closing are subject to the passage of the later of September
20, 2006 and the effectiveness of the registration statement filed by CBH on
March 24, 2006, but no later than November 20, 2006 and the satisfaction, on or
prior to the Closing Date, of the following conditions:
(a) No Injunction, etc. Consummation of the transactions contemplated
hereby or by the Ancillary Agreements shall not have been restrained, enjoined
or otherwise prohibited or made illegal by any applicable Law, including any
order, injunction, decree or judgment of any court or other Governmental
Authority; and no such Law that would have such an effect shall have been
promulgated, entered, issued or determined by any court or other Governmental
Authority to be applicable to this Agreement or the Ancillary Agreements. No
action or proceeding shall be pending or threatened by any Governmental
Authority or other Person on the Closing Date before any court or other
Governmental Authority to restrain, enjoin or otherwise prevent the consummation
of the transactions contemplated hereby or by the Ancillary Agreements, or to
recover any material damages or obtain other material relief as a result of such
transactions, or that otherwise relates to the application of any such Law.
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Section 8.2 Conditions to Obligations of the Buyer and CBH. The
obligations of the Buyer and CBH required to be performed by such parties at the
Closing are subject to the satisfaction, on or prior to the Closing Date of the
following conditions, each of which may be jointly waived in writing by the
Buyer and CBH:
(a) Representations, Performance. (i) The representations and
warranties of each member of the Seller Group and the Former Stockholder of
Enshi contained in Article III, Article IV, Article V or in any Ancillary
Agreement shall be true, complete and correct in all material respects at and as
of the Closing Date except that those representations and warranties which are
made as of a specific date shall be true, complete and correct in all material
respects only as of such date.
(ii) Each member of the Seller Group and the Former
Stockholder of Enshi shall have in all material respects duly performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by such member prior to or on the
Closing Date.
(iii) Each member of the Seller Group and the Former
Stockholder of Enshi shall have delivered to the Buyer a certificate, dated the
Closing Date and signed by the Stockholder, to the effect set forth above in
this Section 8.1(a).
(b) Delivery of the RACP Shares. At the Closing RimAsia shall have
delivered all of the certificates for the RACP Shares as provided in Section
2.1.
(c) Consents. All Governmental Approvals and Consents required to be
made or obtained by any member of the Seller Group and the Former Stockholder of
Enshi in connection with the execution and delivery of this Agreement and the
Ancillary Agreements or the consummation of the transactions contemplated hereby
or thereby shall have been made or obtained, except for Consents (other than
Governmental Approvals) the failure of which to be made or obtained,
individually and in the aggregate, could not have or result in a Material
Adverse Effect, or materially impair the ability of any member of the Seller
Group or the Former Stockholder of Enshi or the Buyer to perform its respective
obligations hereunder and under the Ancillary Agreements or the ability of the
Buyer, following the Closing, to continue to conduct the Business. Complete and
correct copies of all such Governmental Approvals and Consents shall have been
delivered to the Buyer.
(d) Resignation of Directors. (i) All directors of RACP whose
resignations shall have been requested by the Buyer not less than five days
prior to the Closing Date shall have submitted their resignations or been
removed from office effective as of the Closing Date and (ii) RimAsia has the
right to elect one (1) director to the board of each of RACP, EIH and Enshi.
(e) No Material Adverse Effect. No event, occurrence, fact, condition,
change, development or effect shall exist or have occurred or come to exist or
been threatened since the date of the Balance Sheet that, individually or in the
aggregate, has had or resulted in, or could reasonably be expected to become or
result in, a Material Adverse Effect.
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(f) Ancillary Agreements. The Ancillary Agreements shall have been
executed and delivered by each member of the Seller Group party thereto and the
Non-Competition Agreement shall have been executed and delivered by the Former
Stockholder of Enshi, and shall be satisfactory in form and substance to the
Buyer.
(g) Opinion of Counsel. (a) The Buyer shall have received opinions,
addressed to it and dated the Closing Date, from Paul, Hastings, Xxxxxxxx &
Xxxxxx and Xxxxxx & Xxxxxx, US and BVI counsels to the Seller Group,
respectively, substantially in the form agreed to by the Buyer and RimAsia (but
for the avoidance of doubt such opinion is to be limited to issues of
authorization, execution and enforceability), and from Xx. Xxx Ji (Xxxx Xxx) of
Xxxxxxxx Legal Group (Beijing), PRC counsel and Xx. XXX Xxx Xxx of Xxxxx Xx &
Partners, Singapore counsel to the Former Stockholder of Enshi, substantially in
the form agreed to by the Buyer and the Former Stockholder of Enshi.
(h) Corporate and Other Proceedings. All corporate, partnership and
other proceedings of each member of the Seller Group and the Former Stockholder
of Enshi in connection with the transactions contemplated by this Agreement and
the Ancillary Agreements, and all documents and instruments incident thereto,
shall be reasonably satisfactory in substance and form to the Buyer and its
counsel, and the Buyer and its counsel shall have received all such documents
and instruments, or copies thereof, certified if requested, as may be reasonably
requested.
(i) Due Diligence. The result of due diligence, including but not
limited to, the legal due diligence, financial due diligence and business due
diligence, shall be reasonably satisfactory to the Buyer and CBH.
Section 8.3 Conditions to Obligations of Seller Group. The obligations
of the members of the Seller Group required to be performed by such members at
the Closing are subject to the satisfaction, on or prior to the Closing Date of
the following conditions, each of which may be waived in writing by RimAsia:
(a) Representations, Performance. (i) The representations and
warranties of the Buyer and CBH contained in Article 6 or in any Ancillary
Agreement (x) shall be true, complete and correct in all material respects at
and as of the date hereof, and (y) shall be repeated and shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though made on and as of the Closing Date except that those
representations and warranties which are made as of a specific date shall be
true, complete and correct in all material respects only as of such date.
(ii) The Buyer shall have in all material respects duly
performed and complied with all agreements, covenants and conditions required by
this Agreement to be performed or complied with by the Buyer prior to or on the
Closing Date.
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(iii) Each of the Buyer and CBH shall have delivered to
RimAsia a certificate, dated the Closing Date and signed by the Buyer CBH,
respectively, to the effect set forth above in this Section 8.3(a).
(b) Assumption of RACP Warrants. At the Closing CBH shall have
delivered the letter of assumption of the RACP Warrants as provided in Section
2.1.
(c) Ancillary Agreements. The Ancillary Agreements to which Buyer shall
be a party shall have been executed and delivered by Buyer, and shall be
satisfactory in form and substance to RimAsia in its reasonable judgment.
(d) Corporate and Other Proceedings. All corporate and other
proceedings of Buyer and CBH in connection with the transactions contemplated by
this Agreement and the Ancillary Agreements, and all documents and instruments
incident thereto, shall be reasonably satisfactory in substance and form to the
Seller Group and its counsel, and the Seller Group and its counsel shall have
received all such documents and instruments, or copies thereof, certified if
requested, as may be reasonably requested.
(e) Election of Directors. At the Closing, (i) RimAsia shall be
entitled to designate one (1) additional director to the board of director of
CBH (which shall be acceptable to CBH in its discretion, not to be unreasonably
withheld), and (ii) CBH shall promptly increase the size of its board of
directors and shall cause RimAsia's designee to be so elected for a term which
shall be terminated at the latest of (i) the date of the third anniversary of
such election, (ii) the date when all the outstanding borrowings under the Loan
Agreement are paid in full, and (iii) the date when more than 50% of the RACP
Warrants or shares of CBH arising from the exercise thereof have been disposed
by RimAsia.
(f) Board Approval. A majority of the disinterested directors of CBH,
by taking all required actions, shall have approved the transaction contemplated
in this Agreement as a "strategic transaction" as provided in the definition of
"Exempt Issuance" in CBH's Securities Purchase Agreements with certain
purchasers dated February 3, 2006 and March 10, 2006.
ARTICLE IX
INDEMNIFICATION; SURVIVAL
Section 9.1 Indemnification by RimAsia. RimAsia shall indemnify each of
the Buyer and CBH and their respective officers, directors, employees, agents,
advisers and representatives (collectively, the "Buyer Indemnitees"), and shall
hold each of them harmless from and against, and pay or reimburse the Buyer
Indemnitees for, any and all claims, demands, liabilities, obligations, losses,
fines, costs, expenses, royalties, Litigation, deficiencies or damages (whether
absolute, accrued, conditional or otherwise and whether or not resulting from
third party claims), including interest and penalties with respect thereto and
out-of-pocket expenses and reasonable attorneys' and accountants' fees and
expenses incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of their respective rights hereunder or
under any Ancillary Agreement (collectively, "Losses"), resulting from or
arising out of:
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(a) any material inaccuracy of any representation or warranty when made
or deemed made by any member of the Seller Group herein or under any of the
Ancillary Agreements or in connection herewith or therewith; or
(b) any failure of any member of the Seller Group to perform any
covenant or agreement hereunder or under any of the Ancillary Agreements or
fulfill any other obligation in respect hereof or thereof.
Section 9.2 Indemnification by the Former Stockholder of Enshi. The
Former Stockholder of Enshi shall indemnify each of the Buyer Indemnitees, and
shall hold each of them harmless from and against, and pay or reimburse the
Buyer Indemnitees for, any and all Losses, resulting from or arising out of:
(a) any material inaccuracy of any representation or warranty when made
or deemed made by any member of the Former Stockholder of Enshi herein or under
the Non-Competition Agreement or in connection herewith or therewith; or
(b) any failure of any member of the Former Stockholder of Enshi to
perform any covenant or agreement hereunder or under any of the Non-Competition
Agreement or fulfill any other obligation in respect hereof or thereof.
(c) any amount of income tax incurred prior to the Original Date of
Closing and payable to any Government by any member of the Enshi Group which
have not been paid in full.
Section 9.3 Indemnification by the Buyer and CBH. (a) The Buyer and CBH
shall indemnify and hold harmless RimAsia and their respective officers,
directors, employees, agents, advisers and representatives (collectively, the
"Seller Indemnitees") from and against any and all Losses resulting from or
arising out of (i) any material inaccuracy in any representation or warranty
made by the Buyer or CBH herein or under any of the Ancillary Agreements or in
connection herewith or therewith; or (ii) any failure of the Buyer or CBH to
perform any covenant or agreement hereunder or fulfill any other obligation in
respect hereof or thereof.
Section 9.4 Payment Adjustments, etc. (a) Any indemnity payment made by
RimAsia to the Buyer Indemnitees, on the one hand, or by the Buyer to RimAsia,
on the other hand, pursuant to this Section 9 in respect of any claim (i) shall
be net of an amount equal to (x) any insurance proceeds realized by and paid to
the Indemnified Party minus (y) any related costs and expenses, including the
aggregate cost of pursuing any related insurance claims plus any correspondent
increases in insurance premiums or other chargebacks. The Indemnified Party
shall use its reasonable efforts to make insurance claims relating to any claim
for which it is seeking indemnification pursuant to Section 9; provided, that
the Indemnified Party shall not be obligated to make such an insurance claim if
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the Indemnified Party in its reasonable judgment believes that the cost of
pursuing such an insurance claim together with any correspondent increase in
insurance premiums or other chargebacks to the Indemnified Party or RACP, as the
case may be, would exceed the value of the claim for which the Indemnified Party
is seeking indemnification pursuant to this Section 9.
(b) The provisions of this Section 9 shall in no way limit, supersede
or otherwise affect the rights of any party under Section 2.2, and nothing
contained in Section 2.2 relating to an adjustment to the Purchase Price shall
limit, supersede or otherwise affect the rights of any party under this Section
9; provided, that no party shall be entitled to be compensated more than once
for the same Loss.
(c) The indemnity provided for in this Section 9 shall be the sole and
exclusive remedy of the Buyer and RimAsia, as the case may be, after the Closing
for any inaccuracy of any representation or warranty of any member of the Seller
Group, the Former Stockholder of Enshi, the Buyer or CBH, respectively;
provided, that nothing herein shall limit in any way any such party's remedies
in respect of fraud or intentional misrepresentation or omission by the other
party in connection herewith or with any Ancillary Agreement or the transactions
contemplated hereby or thereby.
Section 9.5 Indemnification Procedures. (a) All claims for
indemnification by any party (the "Indemnified Party") hereunder shall be
asserted and resolved as set forth in this Section. In the event that any
written claim or demand for which the party from whom indemnification is sought
(the "Indemnifying Party") would be liable to any Indemnified Party hereunder is
asserted against or sought to be collected from any Indemnified Party by a third
party, such Indemnified Party shall promptly, but in no event more than fifteen
(15) days after such Indemnified Party has actual knowledge of such claim or
demand, notify the Indemnifying Party of such claim or demand and the amount or
the estimated amount thereof to the extent then feasible (which estimate shall
not be conclusive of the final amount of such claim and demand) (the "Claim
Notice"); provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure (except the Indemnifying Party shall not be liable for any expenses
incurred during the period in which the Indemnified Party failed to give such
notice). The Indemnifying Party shall have fifteen (15) days from the personal
delivery or mailing of the Claim Notice (the "Notice Period") to notify the
Indemnified Party (i) whether or not the Indemnifying Party disputes the
liability of the Indemnifying Party to the Indemnified Party hereunder with
respect to such claim or demand and (ii) whether or not it desires to defend the
Indemnified Party against such claim or demand.
(b) All costs and expenses incurred by the Indemnifying Party in
defending such claim or demand shall be a liability of, and shall be paid by,
the Indemnifying Party. Except as hereinafter provided, in the event that the
Indemnifying Party notifies the Indemnified Party within the Notice Period that
it desires to defend the Indemnified Party against such claim or demand, the
Indemnifying Party shall have the right to assume the defense of the Indemnified
Party by appropriate proceedings; provided, that (i) counsel for the
Indemnifying Party who shall conduct such defense shall be reasonably
- 41 -
satisfactory to the Indemnified Party, and the Indemnified Party may participate
in such defense at such Indemnified Party's cost and expense and (ii) except
with the prior written consent of the Indemnified Party, no Indemnifying Party,
in the defense of any such claim or demand, shall consent to entry of any
judgment or enter into any settlement that provides for injunctive or other
nonmonetary relief affecting the Indemnified Party or that does not include as
an unconditional term thereof the giving by each claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
demand. In the event that the Indemnified Party shall in good faith determine
that the conduct of the defense of any claim subject to indemnification
hereunder or any proposed settlement of any such claim by the Indemnifying Party
might be expected to affect adversely and materially the Indemnified Party's Tax
liability or (in the case of an Indemnified Party that is a Buyer Indemnitee)
the ability of any member of the Enshi Group to conduct its business, or that
the Indemnified Party may have available to it one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the Indemnifying Party in respect of such claim or any litigation
relating thereto, the Indemnified Party shall have the right at all times to
take over and assume control over the defense, settlement, negotiations or
litigation relating to any such claim at the sole cost of the Indemnifying
Party, provided, that if the Indemnified Party does so take over and assume
control, the Indemnified Party shall not settle such claim or litigation without
the written consent of the Indemnifying Party, such consent not to be
unreasonably withheld. In the event that the Indemnifying Party does not accept
the defense of any matter as above provided, the Indemnified Party shall have
the full right to defend against any such claim or demand, and shall be entitled
to settle or agree to pay in full such claim or demand. In any event, the Seller
Group, the Buyer and CBH shall cooperate in the defense of any claim or demand
subject to this Section 9 and the records of each shall be available to the
other with respect to such defense.
Section 9.6 Survival. All claims for indemnification under clause (i)
of Section 9.1(a) or Section 9.2(a) with respect to the representations and
warranties contained herein must be asserted on or prior to the date that is 30
days after the termination of the respective survival periods set forth in this
Section 9.6. The representations and warranties contained in this Agreement
shall survive the execution and delivery of this Agreement, any examination by
or on behalf of the parties hereto and the completion of the transactions
contemplated herein, but only to the extent specified below:
(a) Except as set forth in clause (b) below, the representations and
warranties contained in Articles III, IV and V shall survive until the second
anniversary of the Original Closing Date.
(b) The representations and warranties of contained in Sections 3.1,
3.2, 4.1, 4.2, 4.16, 4.19 and 4.20 shall survive without limitation.
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ARTICLE X
TERMINATION
Section 10.1 Termination. Notwithstanding anything to the contrary in
this Agreement, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(a) by mutual written consent of the parties hereto;
(b) by the members of the Seller Group or the Buyer by written notice
to the other party after 5:00 p.m. New York time on November 20, 2006, if the
transactions contemplated hereby shall not have been consummated pursuant
hereto, unless such date is extended by the mutual written consent of the
members of the Seller Group and the Buyer; or
(c) By the members of the Seller Group by written notice to the Buyer
and CBH if:
(i) the representations and warranties of the Buyer and CBH
shall not be true and correct in all material respects at and as of the date
when made, or shall not be true and correct in all material respects as of the
Closing Date as though made on and as of such date, or
(ii) the Buyer and CBH shall (and the terminating party shall
not) have failed to perform and comply with, in all material respects, all
agreements, covenants and conditions hereby required to have been performed or
complied with by such party prior to the time of such termination, and such
failure shall not have been cured with a reasonable period of time but not less
than 10 days following notice of such failure.
(d) By the Buyer and CBH by written notice to RimAsia if:
(i) the representations and warranties of RimAsia shall not be
true and correct in all material respects at and as of the date when made, or
shall not be true and correct in all material respects as of the Closing Date as
though made on and as of such date, or
(ii) RimAsia shall (and the terminating party shall not) have
failed to perform and comply with, in all material respects, all agreements,
covenants and conditions hereby required to have been performed or complied with
by such party prior to the time of such termination, and such failure shall not
have been cured with a reasonable period of time but not less than 10 days
following notice of such failure.
Section 10.2 Effect of Termination. In the event of the termination of
this Agreement by any party hereto pursuant to Section 10.1, written notice
thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated, without further action by
any party. If the transactions contemplated by this Agreement are terminated as
provided herein, the Buyer shall promptly return to the Seller Group all
confidential documents and other material received from such the Seller Group
and its Representatives relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof. Upon termination, this
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Agreement shall become void and have no effect, without liability to any Person
in respect hereof or of the transactions contemplated hereby on the part of any
party hereto, or any of its directors, officers, Representatives, stockholders
or Affiliates, except as specified in Sections 7.3 and 7.4 and except for any
liability resulting from such party's breach of this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. All notices and other communications hereunder
shall be in writing (including wire, telefax or similar writing) and shall be
sent, delivered or mailed, addressed, or telefaxed:
if to RACP, to:
RACP Pharmaceutical Holdings Ltd
c/o RimAsia Capital Partners, L.P.
0000 Xxxx xx Xxxxxxx Tower
00 Xxxxxxxx Xxxx, Xxxxxxxxx
Xxxx Xxxx
Attention: Xxxxxx Xxx
Telecopier No.: (000) 0000 0000
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx
22/F, Bank of China Tower
0 Xxxxxx Xxxx, Xxxxxxx
Xxxx Xxxx
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopier No.: (000) 0000 0000
if to Former Stockholder of Enshi, to:
No. 33, Wu Ai Street; Shen He District Shenyang, Liaoning
People's Republic of China Attn: Li Xiaobo Telecopier No.:
(00) 000-00000000 Telephone No.: (0) 000-000-0000
Xx. 000, Xxxx X-00, Qing Nian Da Street, Shen He District
Shenyang, Liaoning
People's Republic of China
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with a copy to:
Grandall Legal Group (Beijing)
9/F, Tower E, Royal Palace,
No. 6 Gong Yuan Xi Jie, Xxxx Xxx Men Nei Ave.
Beijing
People's Republic of China
100005
Telecopier: (00 00) 0000 0000
if to the Buyer or CBH, to:
China Biopharmaceuticals Holdings, Inc.
1601, Building A, Jinshan Xxxxx
Xx. 0 Xxxxxx Xx.,
Xxxxxxx, Xxxxxx'x Xxxxxxxx of China
210009
Attention: Xxxxx Xxx
Telecopier No.: (00 00) 00000000
with a copy to:
Xxxxx & XxXxxxxx
1114 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopier No.: (000) 000-0000
if to RimAsia, to:
Rim Asia Capital Partners, L.P.
0000 Xxxx xx Xxxxxxx Tower
00 Xxxxxxxx Xxxx, Xxxxxxxxx
Xxxx Xxxx
Attention: Xxxx Xxx
Telecopier No.: (000) 0000 0000
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx
22/F, Bank of China Tower
0 Xxxxxx Xxxx, Xxxxxxx
Xxxx Xxxx
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopier No.: (000) 0000 0000
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Each such notice, request or other communication shall be given (i) by mail
(postage prepaid, registered or certified mail, return receipt requested), (ii)
by hand delivery, (iii) by nationally recognized courier service or (iv) by
telefax, receipt confirmed. Each such notice, request or communication shall be
effective (i) if mailed, five (5) days after mailing at the address specified in
this Section (or in accordance with the latest unrevoked written direction from
such party), (ii) if delivered by hand or by nationally recognized courier
service, when delivered at the address specified in this Section (or in
accordance with the latest unrevoked written direction from such party) and
(iii) if given by telefax, when such telefax is transmitted to the telefax
number specified in this Section (or in accordance with the latest unrevoked
written direction from such party), and the appropriate confirmation is
received.
Section 11.2 Interpretation and Definitions.
(a) References in this Agreement to any gender include references to
all genders, and references to the singular include references to the plural and
vice versa.
(b) The words "include", "includes" and "including" when used in this
Agreement shall be deemed to be followed by the phrase "without limitation".
(c) Unless the context otherwise requires, references in this Agreement
to Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement.
(d) Unless the context otherwise requires, the words "hereof', "hereby"
and "herein" and words of similar meaning when used in this Agreement refer to
this Agreement in its entirety and not to any particular Article, Section or
provision of this Agreement.
Section 11.3 Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or entity
or any circumstance, is found to be invalid or unenforceable in any
jurisdiction, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid or enforceable, the
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other Persons, entities or circumstances shall
not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
Section 11.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
shall, taken together, be considered one and the same agreement, it being
understood that both parties need not sign the same counterpart.
- 46 -
Section 11.5 Entire Agreement; No Third Party Beneficiaries. This
Agreement and the Ancillary Agreements (when executed and delivered), (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) except as provided in Section 9 with respect to
indemnification of Indemnified Parties hereunder, is not intended to confer upon
any Person other than the parties hereto any rights or remedies hereunder.
Section 11.6 Governing Law and Jurisdiction. This Agreement shall be
governed by and construed exclusively in accordance with the laws of Singapore
without giving effect to any choice of law rule that would cause the application
of the laws of any jurisdiction other than the laws of Singapore to the rights
and duties of the parties hereunder.
Section 11.7 Dispute Resolution. Any dispute, controversy or claim
arising out of or relating to this Agreement, or the breach, termination or
invalidity thereof, shall be settled by arbitration in accordance with the
Arbitration Rules of the Singapore International Arbitration Centre ("SAIC
Rules") as at present in force and as may be amended by the rest of this
provision and which rules are deemed to be incorporated by reference in this
section. The appointing authority shall be Singapore International Arbitration
Centre. The place of arbitration shall be in Singapore at Singapore
International Arbitration Centre. There shall be three (3) arbitrators. The
language(s) to be used in the arbitral proceedings shall be both Mandarin
Chinese and English. Any such arbitration shall be administered by SIAC in
accordance with SIAC Rules in force at the date of this Agreement. The decision
and award of the arbitrators shall be final and binding, and there shall be no
appeal. In order to preserve its rights and remedies, each party shall be
entitled to seek preliminary injunctive relief from any court of or other
temporary relief from such court or from the arbitration tribunal pending the
final decision or award of the arbitrators.
Section 11.8 Publicity. So long as this Agreement is in effect, none of
the parties hereto nor their respective affiliates shall issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without the consent of the other
parties, which consent shall not be unreasonably withheld or withdrawn, except
as may be required by law or the regulations or policies of any securities
exchange, in which case the party required to make the release or statement
shall provide prompt notice to the other parties so that they may seek an
appropriate protective order, waive compliance with the terms of this Section or
comment on such release or statement in advance of such issuance.
Section 11.9 Assignment. Neither this Agreement nor any of the rights
or obligations hereunder shall be assigned by any of the parties hereto without
the prior written consent of each of the other parties, except that any party
may assign all its rights and obligations to the assignee of all or
- 47 -
substantially all of the assets of such party provided that such party shall in
no event be released from its obligations hereunder without the prior written
consent of each other party. This Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns. Any attempted assignment in violation of the terms of this Section
shall be void and unenforceable.
Section 11.10 Amendment; Waivers, etc. No amendment, modification or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, discharge or waiver is sought. Any
such waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the party
granting such waiver in any other respect or at any other time. Neither the
waiver by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the parties, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a waiver of any
other breach or default of a similar nature, or as a waiver of any of such
provisions, rights or privileges hereunder. The rights and remedies herein
provided are cumulative and none is exclusive of any other, or of any rights or
remedies that any party may otherwise have at law or in equity. The rights and
remedies of any party based upon, arising out of or otherwise in respect of any
inaccuracy or breach of any representation, warranty, covenant or agreement or
failure to fulfill any condition shall in no way be limited by the fact that the
act, omission, occurrence or other state of facts upon which any claim of any
such inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement as to which there is no
inaccuracy or breach. The representations and warranties of the members of the
Seller Group shall not be affected or deemed waived by reason of any
investigation made by or on behalf of the Buyer (including but not limited to by
any of its Representatives) or by reason of the fact that the Buyer or any of
its Representatives knew or should have known that any such representation or
warranty is or might be inaccurate.
Section 11.11 Language. For convenience, this Agreement has been
translated into Chinese language. The English and Chinese language versions
shall have equal validity and the wording of each version shall be deemed to
carry the same meaning and legal effect. In the event of any discrepancy between
the wordings of the said two versions, such discrepancy shall be interpreted
according to the purpose of this Agreement.
[signature page to follow]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
CHINA BIOPHARMACEUTICALS CORPORATION
By: /s/ Peng Mao
---------------------------------------
Name: Peng Mao
Title: Director
CHINA BIOPHARMACEUTICALS HOLDINGS, INC.
By: /s/ Peng Mao
---------------------------------------
Name: Peng Mao
Title: Chairman and Chief Executive Officer
RACP PHARMACEUTICAL HOLDINGS LTD
By: /s/ Xxxx Xxx
---------------------------------------
Name: Xxxx Xxx
Title: Director
RIMASIA CAPITAL PARTNERS, L.P.,
acting by its sole general partner,
RIMASIA CAPITAL PARTNERS GP, L.P.,
in turn acting by its sole general partner
RIMASIA CAPITAL PARTNERS GP, LTD.
By: /s/ Xxxx Xxx
---------------------------------------
Name: Xxxx Xxx
Title: Authorised Signatory
FORMER STOCKHOLDER OF ENSHI
By: /s/ XX, Xxxxxx
---------------------------------------
Name: XX, Xxxxxx
