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EXHIBIT 2.1
Dated August 22, 1998
UNIVERSAL APPLIANCES LIMITED
XXXXXXX HOLDINGS LIMITED
- and -
THE DII GROUP, INC.
A G R E E M E N T
relating to
the sale and purchase of the share in
XXXXXXX HOLDINGS LIMITED
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THIS AGREEMENT is made on August 22,1998
BETWEEN:-
(1) UNIVERSAL APPLIANCES LIMITED a company incorporated under the
laws of Hong Kong whose registered office is at 2608 Miramar
Tower, 0 Xxxxxxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxx, Xxxx Xxxx (the
"Vendor");
(2) XXXXXXX HOLDINGS LIMITED a company incorporated in the British
Virgin Islands whose registered office is at International
Trust Building, Xxxxxxx Xxx, Road Town, Tortola, British Virgin
Islands (the "Company"); and
(3) THE DII GROUP, INC. a company incorporated under the laws of
Delaware whose principal office is at 0000 Xxxxxxx Xxxx Xxxxx,
Xxxxx 000, Xxxxx, XX 00000 (the "Purchaser").
WHEREAS
(A) The Company is a company incorporated under the laws of the
British Virgin Islands with an issued share capital of US$1.00.
(B) The Vendor has agreed to sell and transfer the Share,
representing the entire issued share capital of the Company,
and to assign the Shareholder Loan to the Purchaser on the
terms and subject to the conditions contained in this
Agreement.
IT IS AGREED as follows:-
1 INTERPRETATION
In this Agreement, including its Schedules, the headings shall not
affect its interpretation and, unless the context otherwise
requires:-
1.1 DEFINITIONS
"Accounts Date" means 30 June 1998;
"agreed terms" or "agreed form" means in relation to any document
such document in the terms agreed between the parties and for the
purposes of identification signed by the Purchaser's Solicitors and
the Vendor's Solicitors or with amendments thereto as may from time
to time be agreed (a list of the documents in the agreed terms is
set out in Schedule 7);
"Business" means the PCB Business and the SMT Business;
"Company" means Xxxxxxx Holdings Limited, details of which are set
out in Part 1 of Schedule 1;
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"Completion" means the completion of the sale and purchase of the
Share pursuant to Clause 8;
"Completion Accounts" has the meaning set out in Clause 10;
"Completion Date" means the date when Completion occurs;
"Contingent Payment Period" means, as the context requires, the
First Contingent Payment Period, the Second Contingent Payment
Period or the Third Contingent Payment Period;
"Deed of Indemnity" means a deed of indemnity in the terms set out
in Schedule 4;
"Deferred Consideration" means that part of the consideration for
the purchase of the Share as is to be calculated and satisfied in
accordance with Clause 4;
"Disclosure Letter" means the letter of even date with this
Agreement from the Vendor to the Purchaser disclosing:-
(i) information constituting exceptions to the Warranties; and
(ii) details of other matters referred to in this Agreement;
"Dormitory" means the land and buildings particulars of which are
set out as item IVB of Schedule 3;
"ENCUMBRANCE" means any claim, charge, mortgage, security, lien,
option, equity, power of sale or hypothecation;
"Escrow Consideration" means the amount of US$44,485,875 of the
Initial Consideration;
"ESCROW ACCOUNT" means the escrow account to be opened in the joint
names of the Purchaser's Solicitors and the Vendor's Solicitors and
designated as the "Waterfall Escrow Account" and which is to be
operated in the manner set out in Schedule 5;
"Escrow Agents" means the Vendor's Solicitors and the Purchaser's
Solicitors;
"Exchange Rate" means the exchange rate of HK$7.75 to US$1.00;
"Greatsino (PRC)" means Greatsino (Doumeng) Electronic Technology
Ltd, a wholly foreign owned enterprise incorporated in the PRC;
"Group" means the Company and the Subsidiaries and "Group Company"
means any one of them;
"HK$" means Hong Kong Dollars;
"Initial Consideration" means the sum of: (a) US$44,485,875 (being
the US$ equivalent of HK$344,765,531, calculated at the Exchange
Rate) referred to in Clause 3; and (b) the Property Consideration
referred to in Clause 6 (but only if the same is paid);
"Letter of Directions" means the letter of even date herewith from
the Vendor and the Purchaser to the Escrow Agents substantially in
the form as set out in Schedule 6;
"PCB Business" means the business of the production and sale of
printed circuit boards operated by the Company (or any Group
Company) in Zhuhai, the PRC;
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"PRC" means the People's Republic of China;
"Properties" means the properties referred to in Schedule 3 and
"Property" means any one of them;
"Purchaser's Accountants" means Deloitte Touche Tohmatsu;
"Purchaser's Solicitors" means Linklaters & Paines, 00xx Xxxxx,
Xxxxxxxxx Tower, 00 Xxxxx'x Xxxx Xxxxxxx, Xxxx Xxxx;
"Relevant Accounts" means the management accounts in the agreed form
comprising the proforma consolidated balance sheet of the Group as
at 30 June 1998 and the proforma consolidated profit and loss
account of the Group for the 6 months ended 30 June 1998;
"Reporting Accountants" means a firm of Chartered Accountants
independent of the Vendor and of the Purchaser to be agreed by the
Vendor and the Purchaser within 7 days of a notice by one to the
other requiring such agreement or failing such agreement to be
nominated on the application of either of them by or on behalf of
the President for the time being of the Hong Kong Society of
Accountants;
"Share" means the one ordinary share of US$1.00 in the issued share
capital of the Company, representing the entire issued share capital
of the Company, to be sold to the Purchaser pursuant to this
Agreement;
"Shareholder Loan" means all net shareholder loans and/or advances
owing by any Group Company to the Vendor or to any of its
subsidiaries at the Completion Date;
"SMT Business" means the business of the processing and sale of
printed circuit boards which have undergone the surface mount
technology, assembly and insertion processing, operated by the
Company (or any Group Company) in Zhuhai, PRC;
"Stock Exchange" means The Stock Exchange of Hong Kong Limited;
"Subsidiaries" means the subsidiaries of the Company, particulars of
which are set out in Part 2 of Schedule 1;
"Taxation" bears the meaning ascribed to it in the Deed of
Indemnity;
"Third Factory" means the land and buildings particulars of which
are set out as item IIB2 of Schedule 3;
"Total Consideration" means the Initial Consideration and the
Deferred Consideration;
"US$" and "US dollars" means United States Dollars;
"Vendor's Solicitors" means Xxxxx & XxXxxxxx, 00xx Xxxxx, Xxxxxxxxx
Xxxxx, 00 Xxxxxxxx Xxxx, Xxxx Xxxx; and
"Warranties" means the warranties, representations and undertakings
set out in Clause 9 and Schedule 2.
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1.2 SUBORDINATE LEGISLATION
Any reference to a statutory provision shall include any subordinate
legislation made from time to time under that provision.
1.3 MODIFICATION ETC. OF LEGISLATION
Any reference to a statutory provision shall include that provision
as from time to time modified or re-enacted whether before or after
the date of this Agreement so far as such modification or
re-enactment applies or is capable of applying to any transactions
entered into prior to Completion and (so far as liability thereunder
may exist or can arise) shall include also any past statutory
provision (as from time to time modified or re-enacted) which such
provision has directly or indirectly replaced.
1.4 COMPANIES ORDINANCE
The words "company", "subsidiary" and "holding company" shall have
the same meanings in this Agreement as their respective definitions
in the Companies Ordinance (Chapter 32 Laws of Hong Kong).
1.5 INTERPRETATION AND GENERAL CLAUSES ORDINANCE
The Interpretation and General Clauses Ordinance shall apply to this
Agreement in the same way as it applies to an enactment.
2 AGREEMENT TO SELL THE SHARE AND TO ASSIGN THE SHAREHOLDER LOAN
2.1 SALE OF THE SHARE AND THE SHAREHOLDER LOAN
The Vendor shall sell and transfer as beneficial owner the Share and
shall assign or procure that there is assigned absolutely to the
Purchaser the Shareholder Loan and the Purchaser, relying on (inter
alia) the several representations, warranties and undertakings
contained in this Agreement, shall purchase the Share and the
Shareholder Loan free from all claims, charges, liens, equities and
encumbrances and together with all rights and advantages now and
hereafter attaching thereto.
3 INITIAL CONSIDERATION
3.1 The Escrow Consideration shall be paid by the Purchaser in US
dollars forthwith upon signing of this Agreement and shall be held
in accordance with this Clause and the Letter of Directions. For the
avoidance of doubt, the parties agree the amount of the Escrow
Consideration shall be fixed at US$44,485,875, which amount shall
not be affected by any fluctuations of the HK$:US$ exchange rate.
3.2 At or before the signing of this Agreement, the Purchaser shall
deposit the Escrow Consideration in an account in the name of the
Purchaser's Solicitors and forthwith upon signing this Agreement the
Purchaser shall procure the Purchaser's Solicitors to cause the same
to be transferred into the Escrow Account. The Vendor and the
Purchaser agree to instruct the Escrow Agents to hold and apply the
Escrow Consideration together with all interest accrued thereon on
the terms of this Agreement, including Schedules 5 and 6.
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3.3 If Completion takes place in the manner set out in Clause 8:-
(a) the Escrow Consideration shall be paid to the Vendor
in accordance with the terms of the Letter of
Directions; and
(b) all interest accrued on the Escrow Consideration shall be
retained by the Purchaser and paid in accordance with the
terms of the Letter of Directions.
3.4 If Completion does not take place pursuant to Clause 8 (and the
provisions of Clause 9.4 do not apply), the Escrow Consideration and
the interest accrued thereon shall be returned to the Purchaser in
accordance with the terms of the Letter of Directions.
4 DEFERRED CONSIDERATION
4.1 As further consideration for the purchase of the Share and the
Shareholder Loan, the Vendor shall be entitled, subject to the terms
of this Agreement, to a Deferred Consideration equal to the
aggregate of the amounts calculated in accordance with Clause 4.2
below, but so that the Deferred Consideration shall not in any event
exceed HK$345,234,469.
4.2 Subject as provided in Clauses 4.8 and 4.9 the Deferred
Consideration shall be payable by the Purchaser to the Vendor in
Hong Kong Dollars and shall be calculated in accordance with the
following:-
I1 = (A x 6 - HK$100 million) x 70%
12 = (B x 6 - HK$200 million) x 70% - (Deductions x 1) - UR - I1
I3 = (C x 6) - HK$300 million - (Deductions) - I1 - I2 - UR - PA - OS + R + CR
ISMT = D x 6 - HK$44 million
where the Deferred Consideration shall be equal to the sum of I1,
I2, I3 and ISMT. For the avoidance of doubt, if the amount of any of
I1, I2, I3 or ISMT shall be negative if they are calculated on the
basis of the above formulae, then such amount shall be deemed to be
zero.
For the purpose of this Clause 4.2:
"I1" means the first instalment payment of the Deferred
Consideration in respect of the PCB Business which shall be payable
on the date set out in Clause 4.3;
"I2" means the second instalment payment of the Deferred
Consideration in respect of the PCB Business which shall be payable
on the date set out in Clause 4.3;
"I3" means the third instalment payment of the Deferred
Consideration in respect of the PCB Business which shall be payable
on the date set out in Clause 4.3;
"ISMT" means the Deferred Consideration in respect of the SMT
Business, which shall be payable together with I3 on the date set
out in Clause 4.3;
"A" means the lesser of HK$334 million and the PCB Business Profit
after Tax for the four calendar months ending 31 December 1998 (the
"First Contingent Payment Period");
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"B" means the lesser of HK$662/3 million and the PCB Business Profit
after Tax for the eight calendar months ending 30 April 1999 (the
"Second Contingent Payment Period");
"C" means the lesser of HK$100 million and the PCB Business Profit
after Tax for the 12 calendar months ending 31 August 1999 (the
"Third Contingent Payment Period");
"D" means the lesser of HK$15 million and the SMT Business Profit
after Tax for the Third Contingent Payment Period;
"Deductions" means the total amount of the deductions calculated by
reference to Clause 10.3;
"PA" means any expenses excluded in the calculation of PCB Business
Profit after Tax and SMT Business Profit after Tax by means of
paragraph (i) of the definitions thereof;
"PCB Business Profit after Tax" for each of the Contingent Payment
Periods means the net profit or loss on a fully consolidated basis
for the Group (adjusted to include the results of any other
companies insofar as fair and reasonable to take account of their
involvement in the PCB Business) calculated on the basis set out in
Clause 4.4 and otherwise in accordance with the accounting
principles used for the preparation of the Relevant Accounts (so far
as such principles comply with accounting principles generally
accepted in Hong Kong) but:-
(a) excluding profits or losses from the sale of any Group
Company or by any Group Company of any assets not actively
employed in the Business, or land and buildings;
(b) excluding goodwill charges and other purchase accounting
amortisation expenses associated with the purchase of the
Company (but including all goodwill charges as shown in
the Completion Accounts);
(c) excluding profits or losses attributable to the SMT
Business;
(d) excluding all income, expenses, depreciation and
amortisation charges relating to the Third Factory and the
Dormitory;
(e) excluding all income and expenses relating to any business
not carried on by the Group as at the date hereof;
(f) excluding any expenses for management services provided by
the Purchaser or any of its affiliates, expenses for
marketing and sales commissions ("Management and
Marketing") (other than as referred to in Clause 4.4
below);
(g) excluding all losses on revaluation of assets (but without
prejudice to Clause 4.4 below); and
(h) excluding all losses incurred on the purchase of any
company or assets;
(i) excluding all expenses in respect of the PCB Business in
respect of goods or services received prior to the
commencement of the Contingent Payment Period and which
were not accounted for in the August 31 Accounts or any
earlier accounts (as defined in Clause 10.4);
(j) excluding any provision for excess and obsolete stock,
work in progress and doubtful accounts ("EOSDA") (other
than as referred to in Clause 4.4 below);
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(k) excluding all expenses incurred by the Group in order to
comply with environmental law and regulations (not being
environmental law or regulation applicable in the PRC);
and
(l) excluding any expenses relating to Research and
Development.
"SMT Business Profit after Tax" for each of the Contingent Payment
Periods means the net profit or loss on a fully consolidated basis
for the Group (adjusted to take account of the results of any other
companies insofar as fair and reasonable to take account of their
involvement in the SMT Business) calculated on the basis set out in
Clause 4.4 and otherwise in accordance with the accounting
principles used for the preparation of the Relevant Accounts (so far
as such principles comply with accounting principles generally
accepted in Hong Kong but:-
(a) excluding profits or losses from the sale of any Group
Company or by any Group Company of any assets not actively
employed in the Business, or land and buildings;
(b) excluding goodwill charges and other purchase accounting
amortisation expenses associated with the purchase of the
Company (but including all goodwill charges as shown in
the Completion Accounts);
(c) excluding profits or losses attributable to the PCB
Business;
(d) excluding all income, expenses, depreciation and
amortisation charges relating to the Third Factory and the
Dormitory;
(e) excluding all income and expenses relating to any business
not carried on by the Group as at the date hereof;
(f) excluding any expenses for Management and Marketing;
(g) excluding all losses on revaluation of assets (but without
prejudice to Clause 4.4 below); and
(h) excluding all losses incurred on the purchase of any
company or assets;
(i) excluding all expenses in respect of the SMT Business in
respect of goods or services received prior to the
commencement of the Contingent Payment Period and which
were not accounted for in the August 31 Accounts;
(j) excluding any provision for EOSDA (other than as referred
to in Clause 4.4 below);
(k) excluding all expenses incurred by the Group in order to
comply with environmental law and regulations (not being
environmental law or regulation applicable in the PRC);
and
(l) excluding any expenses relating to Research and
Development.
"UR" means such amount of the Receivables (as defined in Clause
10.1) as have not been collected by the expiry of the Second
Contingent Payment Period;
"OS" means such amount of the Stock (as defined in Clause 10.1) as
remains at the expiry of the Third Contingent Payment Period;
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"R" means the lesser of (i) the Deductions and (ii) the amount, if
any, by which the PCB Profit after Tax for the Contingent Payment
Period exceeds HK$100 million; and
"CR" means such amount (if any) of UR as are collected by the expiry
of the Third Contingent Payment Period.
4.3 The Deferred Consideration shall be paid in three instalments as
follows:
4.3.1 I1 shall be paid on or before 15 February 1999;
4.3.2 I2 shall be paid on or before 15 June 1999; and
4.3.3 I3 and ISMT shall be paid on or before 15 October 1999.
4.4 The amounts referred to in Clause 4.2 above shall be derived from
the unaudited consolidated profit and loss account of the Group for
the relevant Contingent Payment Period. For the purpose of
determining the Deferred Consideration the following bases of
accounting shall be adopted:-
(a) all plant and machinery relating to the Business shall be
depreciated on a straight line basis over a period of 10
years and all other assets shall be depreciated on the
same basis as in the Relevant Accounts;
(b) in lieu of any other expenses in respect of Management and
Marketing and any provisions for EOSDA, there shall be
included in the calculation of PCB Profit after Tax a
monthly provision of 4% of each month's turnover;
(c) in lieu of any other provision for EOSDA there shall be
included in the calculation of SMT Profit after Tax a
monthly provision of 1.5% of each month's turnover; and
(d) in determining any amount of OS a policy of FIFO will be
adopted.
4.5 The amount of the PCB Profit after Tax and the SMT Profit after Tax
and the amount of the relevant instalment of the Deferred
Consideration payable for each Contingent Payment Period shall be
subject to agreement in writing between the Vendor and the Purchaser
within 45 days after the end of the relevant Contingent Payment
Period Provided That the Purchaser shall procure that, commencing
the end of the relevant Contingent Payment Period, the Vendor's
accountants shall be given such access to the relevant personnel,
books and records of the Group Companies and of the supporting
documentation and such assistance as is reasonable for the Vendor's
accountants to determine the amount of the PCB Profit after Tax and
the SMT Profit after Tax and the basis of preparation of the
unaudited consolidated profit and loss account referred to in Clause
4.4.
4.6 If the amount of the relevant instalment of the Deferred
Consideration payable for the relevant Contingent Payment Period is
not agreed in writing between the Vendor and the Purchaser in
accordance with Clause 4.5 the item or items in dispute shall be
determined by the Reporting Accountants but if by the payment date
referred to in Clause 4.3 to the extent that the Vendor and the
Purchaser have agreed on an amount (but not what the Vendor claims
to be the whole amount) payable in respect of the relevant
Contingent Payment Period the amount so agreed shall be paid on such
date and any additional amount (or amount directed to be repaid)
shall be paid (or repaid) within 7 days after it has been determined
by the Reporting Accountants pursuant to Clause 4.7.
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4.7 The Reporting Accountants shall act on the following basis:
(a) the Reporting Accountants will act as experts and not as
arbitrators;
(b) their terms of reference shall be to resolve within 45
days of their appointment the item or items in dispute, as
notified to them in writing by the Vendor and the
Purchaser;
(c) the determination of the Reporting Accountants shall (in
the absence of manifest error) be conclusive and binding
on the parties hereto;
(d) they shall, if they consider fit, direct that any part of
any agreed amount referred to in Clause 4.6, be repaid or
direct that an additional amount (as referred to in Clause
4.6) be payable;
(e) their costs shall be borne by the Purchaser if they direct
an additional amount to be payable and by the Vendor in
all other cases.
4.8 If any amount by way of compensation or indemnity shall be agreed to
be payable by the Vendor to the Purchaser for breach of any of the
Warranties or in respect of any matters contained in the Deed of
Indemnity and the amount so agreed is not paid by the Vendor within
30 days of being agreed, the Purchaser shall be entitled to deduct
the agreed amount payable from the next instalment or, if the next
instalment is insufficient, the next instalments of the Deferred
Consideration and deduction of the relevant amount shall discharge
the Vendor's liability in respect of such amount and the Purchaser's
obligation to pay the Deferred Consideration shall be reduced
accordingly.
4.9 If on the date of payment of I3 and ISMT in accordance with Clause
4.3, the Purchaser is claiming that any amount by way of
compensation or indemnity has become payable (and remains unpaid) to
the Purchaser for breach of any of the Warranties by the Vendor or
in respect of any matters contained in the Deed of Indemnity, and
the Purchaser and the Vendor have not agreed the amount payable (or
whether any amount is payable) to the Purchaser as a result thereof,
the Purchaser shall be entitled to withhold from the final
instalment of the Deferred Consideration an amount equal to its
reasonable estimate of the amount due from the Purchaser ("Retained
Amount"). The Retained Amount shall be paid into the Escrow Account
and shall be retained in such account pending agreement between the
Vendor and the Purchaser in respect of the amount of the liability
(if any) of the Vendor in respect of the alleged breach or claim
under the Deed of Indemnity. If no agreement is reached, the
Retained Amount shall be retained pending the decision of a court of
competent jurisdiction regarding the alleged breach or claim. The
Vendor and the Purchaser agree that interest accrued on any of the
Retained Amount which is ultimately paid to the Vendor shall be for
the benefit of the Vendor and interest on any amount of the Retained
Amount which is ultimately repaid to the Purchaser shall be for the
benefit of the Purchaser.
5 ACTION PENDING COMPLETION
5.1 GENERAL OBLIGATIONS OF THE VENDOR The Vendor agrees that, pending
Completion:
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5.1.1 each Group Company will carry on business only in the
ordinary course, save in so far as agreed in writing by
the Purchaser;
5.1.2 the Purchaser and its agents will, upon reasonable notice,
be allowed reasonable access to, and to take copies of,
the books and records of each Group Company including,
without limitation, the statutory books, minute books,
leases, licences, contracts, details of receivables,
intellectual property, supplier lists and customer lists
in the possession or control of any Group Company provided
that the Purchaser and its agents will be subject to
similar confidentiality obligations in relation to such
information to those set out in the letter dated 5 August
1998 between the Vendor and the Purchaser;
5.1.3 such representatives and advisers as the Purchaser
requests may be designated to consult with the Vendor with
regard to the management and operations of the Group
Companies. The Vendor will consult with such
representatives and advisers with respect to any action
which may materially affect the business of the Group
taken as a whole. The Vendor will provide to such
representatives and advisers such information as they may
reasonably request for this purpose; and
5.1.4 each Group Company will maintain in force all insurance
policies and all other such insurances normally kept in
force by them.
5.2 RESTRICTIONS ON THE VENDOR
Without prejudice to the generality of Clause 5.1, the Vendor shall
collaborate fully with the Purchaser in relation to all material
matters concerning the running of the Group between the date of this
Agreement and Completion and during that period the Vendor shall
procure that each Group Company shall not, without the prior written
consent of the Purchaser (which consent shall not be unreasonably
withheld or delayed):-
5.2.1 incur or enter into any agreement or commitment involving
any capital expenditure in excess of HK$2 million per item
and HK$10 million in aggregate save and except for the
expenditure set out in the document in the agreed terms in
respect of the Third Factory and the Dormitory;
5.2.2 enter into or amend any contract or commitment which is
not capable of being terminated without compensation at
any time with three months notice or less other than the
contracts listed in the document in the agreed terms in
respect of the Third Factory and the Dormitory;
5.2.3 enter into or amend any Encumbrance, contract or
commitment relating to any of the Properties or their
management or the rents payable therefor other than
contracts or commitments which would not have a material
adverse effect on the value of the Group or the value of
the Properties other than the contracts listed in the
document in the agreed terms in respect of the Third
Factory and the Dormitory;
5.2.4 incur any additional borrowings or incur any other
indebtedness otherwise than in the ordinary course of
business;
5.2.5 make any amendment to the terms and conditions of
employment (including, without limitation, remuneration,
pension entitlements and other benefits) of any employee
(other than minor increases awarded on a selective basis
in the ordinary course of business, which the Vendor shall
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notify to the Purchaser as soon as reasonably possible),
provide or agree to provide any gratuitous payment or
benefit to any such person or any of their dependants, or
dismiss any employee (other than for cause, but provided
that none of the employees named in the list in the agreed
terms shall be dismissed by the Vendor or any Group
Company before Completion) or engage or appoint any
additional employee except for employees with annual
remuneration of less than HK$50,000;
5.2.6 except in the ordinary course of business acquire or agree
to acquire or dispose of or agree to dispose of any
material asset or material stocks or enter into or amend
any material contract or arrangement, in each case,
involving consideration, expenditure or liabilities in
excess of HK$100,000;
5.2.7 amend any insurance contract, fail to notify any insurance
claim in accordance with the provisions of the relevant
policy or settle any such claim below the amount claimed;
5.2.8 create, allot or issue any share or loan capital of any
Group Company;
5.2.9 acquire or agree to acquire any share, shares or other
interest in any company, partnership or other venture;
5.2.10 declare, make or pay any dividend or other distribution to
shareholders.
6 PROPERTY MATTERS
6.1 At the date of this Agreement the Purchaser is conducting due
diligence investigations in respect of certain matters regarding the
land and buildings on Site B and Site D (referred to in Part II and
Part IV of Schedule 3) (which, excluding the SMT Factory referred to
in paragraph B1 of Part II of Schedule 3, and the land on which such
factory is located, are collectively herein referred to as the
"Relevant Properties"), including the nature of the Group Companies'
interests in the Relevant Properties, the amount of expenditure
incurred in relation to the Relevant Properties and the level of
commitments assumed and proposed to be assumed in relation thereto.
The Purchaser confirms that it is its wish and intention to acquire
(as part of the assets of the Group Companies) the Relevant
Properties and that it will continue to diligently progress its due
diligence investigations.
6.2 The Vendor and the Purchaser have agreed that additional
consideration will be payable subject to and in accordance with this
Clause in respect of the Relevant Properties and that the amount of
such consideration (the "Property Consideration") shall be payable
in HK$ and shall be determined by reference to the expenditure
incurred by the Vendor or the Group Companies in respect of the
Relevant Properties, plus interest on such sums in respect of the
period from the date of the expenditure was incurred up to the
Property Payment Date at an agreed rate of 8% per annum. Within 14
days of the date hereof the Vendor shall produce to the Purchaser
such information as the Purchaser may reasonably require to enable
it to determine the appropriate amount of the Property Consideration
and the Vendor and the Purchaser shall use all reasonable endeavours
to agree the Property Consideration.
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6.3 The Vendor and the Purchaser have further agreed that as part of the
intended arrangements in respect of the Relevant Properties it is
expected that the relevant Group Company will enter into a lease at
the Property Payment Date (as defined in Clause 6.4) pursuant to
which a lease would be granted to the Vendor or one of its
subsidiaries over 2 floors of the Third Factory and two Dormitory
blocks for a period of three years (subject to a one year extension
at the option of the tenant) at a commercial rent to be agreed.
6.4 On or before 11 September 1998 the Purchaser will notify the Vendor
of whether, as a result of its due diligence and further discussions
as contemplated by Clauses 6.1 to 6.3, it elects for the Relevant
Properties to be retained as part of the assets of the Group
Companies after Completion and if such is to be the case it shall
serve a Property Payment Notice on the Vendor which shall state a
date (the "Property Payment Date") upon which payment of the
Property Consideration shall become payable. The Property Payment
Date shall be the Completion Date if such date has not already
passed at the time of service of the Property Payment Notice and
otherwise shall be no more than 7 days following service of the
Property Payment Notice. On the Property Payment Date the Purchaser
shall pay the agreed amount of the Property Consideration and the
Vendor shall deliver to the Purchaser such documents, deeds and
certificates relating to the Relevant Properties as the Purchaser
reasonably requires.
6.5 If the Purchaser does not serve a Property Payment Notice by 11
September 1998 (whether because it is not satisfied with the result
of its due diligence, is unable to agree the Property Consideration
or otherwise) it shall, following Completion, take all such steps as
the Vendor may reasonably require to cause the relevant Group
Companies to transfer to the Vendor for nil consideration all their
right title and interest in the Relevant Properties as soon as
practicable and pending such transfer the Purchaser shall hold the
Relevant Properties on trust for the Vendor. For the avoidance of
doubt, it is agreed that the Purchaser shall upon Completion be
entitled to all the Properties set out in Schedule 3 other than the
Relevant Properties for no additional consideration, whether or not
it elects to retain the Relevant Properties.
7 CONDUCT OF THE BUSINESS OF THE GROUP DURING THE CONTINGENT PAYMENT
PERIOD
7.1 Clauses 7.1 to 7.4 below shall apply during the Contingent Payment
Period.
7.2 The Purchaser covenants that, so far as it is able, save with the
consent of the Vendor (which consent shall not be unreasonably
withheld or delayed), it will not knowingly take any positive action
or knowingly refrain from taking any action which results in any of
the following circumstances arising:
(a) any Group Company entering into any arrangement (whether
by a single transaction or a number of related or
unrelated transactions and whether at one time or over a
period of time) except in the ordinary course of business
of the Group to sell, transfer, lease out, lend,
distribute or otherwise dispose of (whether outright, by a
sale-and-repurchase or sale-and-leaseback arrangement, or
otherwise) all or a material part of its operating assets;
or
(b) there occurring any material change in the nature of the
Business or operations of any Group Company or the Group
Companies as a whole (whether by a single transaction or a
number of related or unrelated transactions, whether at
one time or over a period of time and whether by disposal,
acquisition or otherwise).
14
7.3 The Purchaser covenants and undertakes to the Vendor that it will
not take any action which is intended to reduce the amount of
Deferred Consideration which may become due to the Vendor and which
is inconsistent with the undertaking in paragraph (d) below and
that, save with the prior written consent of the Vendor (which
consent shall not be unreasonably withheld or delayed):-
(a) it will maintain and provide funding to the Group to
ensure that the Group has sufficient working capital to
carry on the Business;
(b) subject to the agreement of the relevant customers, it
will procure that the Group will continue its dealings
with such customers on terms which are similar to those
which apply at the date hereof including, without
limitation, credit terms and other material terms of
business;
(c) it will procure that the number of employees of the Group
will be maintained at a level which is similar to that at
the date hereof and that such employees are managed in a
way which is similar to the practice of the Group at the
date hereof;
(d) it will use its best endeavours to maximise the profits of
the Group in the Contingent Payment Period in accordance
with good business practices;
(e) it will procure that each Group Company shall not:-
(i) enter into or amend any contract or commitment which
is not in the ordinary course of business;
(ii) incur any additional borrowings or incur any other
indebtedness otherwise than in the ordinary course
of business;
(iii) acquire or agree to acquire any share, shares or
other interest in any company, partnership or other
venture (it being agreed that it is the Purchaser's
intention to establish one or more trading
companies).
Provided that nothing in this Clause 7 shall in any way restrict the
Purchaser or the Group Companies from taking steps or implementing
business practices which are necessary to ensure compliance with
applicable law and regulations.
7.4 The Purchaser shall procure that during the Contingent Payment
Period and the three months thereafter, such two persons as the
Vendor may nominate from time to time will be appointed as and
permitted to serve as a director of each of the Group Companies (and
any trading company to be established by the Purchaser in connection
with the Business). Such directors shall be allowed full access to,
and to take copies of, the books and records of each such company
including, without limitation, the statutory books, minute books,
leases, licences, contracts, details of receivables, intellectual
property, supplier lists and customer lists in the possession or
control of any such company.
7.5 The Purchaser shall arrange interest free funding of up to HK$50
million for the Group for the purpose of financing additional plant
and machinery expansion for the PCB Business.
7.6 In the event of any breach or alleged breach by the Purchaser of its
undertakings under Clauses 7.2 to 7.5 ("Relevant Undertakings"), the
Vendor and its representatives shall be given such access to the
relevant personnel, books, records and premises of the Group
Companies and assistance as is reasonable for the Vendor to
determine if the Relevant Undertakings have been complied with.
15
As soon as practicable after the Vendor has determined that there
has been a breach of the Relevant Undertakings and in any event no
later than 40 days following the end of the relevant Contingent
Payment Period) the Vendor shall give notice (the "Notice") to the
Purchaser of the basis for and facts surrounding the alleged breach.
The Vendor and the Purchaser shall use all reasonable endeavours to
reach agreement on the matters the subject of the alleged breach on
the common understanding that in the event of any actual breach by
the Purchaser of the Relevant Undertakings the Vendor shall be
entitled to receive by way of additional consideration such
additional amount as it would have been entitled to receive pursuant
to Clause 4 had the relevant breach not occurred and had the results
of the Group in respect of the relevant Contingent Payment Period
not been affected by the breach (if they were in fact so affected).
If the Vendor and the Purchaser are unable to reach agreement on the
matters the subject of the alleged breach and any appropriate
payment by way of additional consideration in respect thereof within
30 days after receipt by the Purchaser of the Notice, the matter
shall be referred to arbitration. Such arbitration shall be
conducted in accordance with the UNCITRAL Arbitration Rules as at
present in force and as may be amended by the rest of this Clause.
The arbitrator shall be appointed by agreement between the Vendor
and the Purchaser. In the absence of agreement, the appointing
authority shall be Hong Kong International Arbitration Centre. The
place of arbitration shall be in Hong Kong at Hong Kong
International Arbitration Centre (HKIAC). There shall be only one
arbitrator and such arbitrator shall have appropriate expertise. Any
such arbitration shall be administered by HKIAC in accordance with
HKIAC Procedures for Arbitration in force at the date of this
Agreement including such additions to the UNCITRAL Arbitration Rules
as are therein contained. Any amounts becoming due to the Vendor
under this Clause 7.6 shall be paid by the Purchaser within 30 days
of the amount being agreed or determined by arbitration, as the case
may be.
7.7 The Vendor undertakes that, subject as provided below, for a period
of 12 months following the expiry of the Third Contingent Payment
Period ("Supply Period") it will continue to supply orders for SMT
products to the Group Companies. The Vendor and the Purchaser (on
behalf of the Group Companies) shall agree the commercial terms for
such SMT Business on an arms length basis but shall use the internal
costings and quotations prepared by the Vendor for the purpose of
determining the sales price of the products in which the SMT
products are used as a benchmark for determining the appropriate
commercial terms for the continuing business. The Vendor undertakes
that during each quarter of the Supply Period the volume of business
made available to the Group Companies by or on behalf of the Vendor
and its subsidiaries, expressed as a percentage of the average
quarterly volume of SMT orders completed by the Group Companies for
the Third Contingent Payment Period shall be as follows:-
Percentage of average quarterly
Relevant quarter during Supply volume over Third Contingent
Period Payment Period
1st 100
2nd 75
3rd 50
4th 25
Provided that it shall be a defence of the Vendor to any claim by
the Purchaser that the Vendor has not complied with its obligation
pursuant to this Clause 7.7 to the extent that the Vendor and
members of its Group have a limited (or no) demand for SMT products.
16
If and to the extent that the Group Companies shall fail to accept
the orders from the Vendor within 14 days after the date such orders
are offered by the Vendor to the Group, the Vendor shall be entitled
to purchase the SMT products in respect of which the said orders
were not accepted by the Group as aforesaid from any third party
seller at such price and on such commercial terms as are no less
favourable to the Vendor as those offered to the Group.
7.8 The Purchaser undertakes that to the extent it is able, having
regard to the requirements of its customers, during the Contingent
Payment Period it will offer to buy products from the Group at such
price and on such commercial terms as may be consistent with the
Purchaser's and/or its customers' requirements and/or terms of
business.
8 CONDITIONS AND COMPLETION
8.1 DATE AND PLACE
Subject as hereinafter provided Completion shall take place at the
offices of the Purchaser's Solicitors, or such other offices as the
parties may agree, on the second business day after receipt by the
Purchaser of notice that the condition specified in Clause 8.2 is
satisfied or such other date as the parties may agree (but
Completion shall not take place before 26 August 1998).
8.2 CONDITIONS PRECEDENT
Completion of this Agreement is conditional upon the approval of the
terms of this Agreement by the shareholders of the Vendor in
accordance with the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited.
8.3 NON SATISFACTION
The Vendor shall promptly give notice to the Purchaser of the
satisfaction of the condition specified in Clause 8.2 and if the
condition is not satisfied on or before the date falling two months
after the date hereof, this Agreement shall lapse.
8.4 VENDOR'S OBLIGATIONS
On Completion the Vendor shall procure that there shall be delivered
to the Purchaser:-
8.4.1 a duly executed transfer of the Share in favour of the
Purchaser, or as it may direct, together with the relative
share certificate;
8.4.2 the written resignations of each of the directors and
secretaries of each Group Company from his office as a
director or secretary to take effect on the date of
Completion with acknowledgements signed by each of them in
a form satisfactory to the Purchaser to the effect that he
has no claim against any Group Company for compensation
for loss of office (whether contractual, statutory or
otherwise), redundancy or otherwise except only for any
accrued remuneration and reimbursable business expenses
incurred down to the date of Completion;
8.4.3 the written resignations of the auditors of each Group
Company to take effect on or before the date of
Completion, with acknowledgements signed by each of them
in a form satisfactory to the Purchaser to the effect that
they have no claim against any Group Company and
17
containing the statement referred to in Section 140A
Companies Ordinance to the effect that there are no
circumstances connected with their resignation which they
consider should be brought to the notice of the members or
creditors of any Group Company;
8.4.4 the certificates of incorporation, corporate seals (if
any), cheque books and statutory books of each Group
Company (duly written up-to-date), the share certificates
in respect of each of the Subsidiaries and transfers of
all shares in the Subsidiaries held by nominees in favour
of the Purchaser or as it may direct;
8.4.5 all the financial and accounting books and records of each
Group Company and all documents of title relating to the
Properties (provided that this requirement may be
satisfied by making all such books, records and documents
available at the offices of the Group Companies);
8.4.6 the Deed of Indemnity duly executed by the Vendor;
8.4.7 a copy of the resolutions of the board of the directors
of the Vendor approving the sale of the Share pursuant to
this Agreement;
8.4.8 either a copy of the confirmation from the Stock Exchange
permitting the Vendor to obtain approval of the
shareholders of the Vendor of the terms of this Agreement
by way of a written certificate of approval by Xxxx Xxxx
Holdings Limited, Techral Holdings Limited and Fairfax
Overseas Limited (or if such written confirmation is not
available, a copy of the published announcement containing
a statement to such effect) together with a copy of such
certificate or a copy of the resolution of the
shareholders of the Vendor approving the terms of this
Agreement;
8.4.9 a copy of an agreement between Greatsino Electronic
Limited and Xx Xxx terminating the service contract of Xx
Xxx with Greatsino Electronic Limited without any
liability to any member of the Group; and
8.4.10 copies of the documents entered into in connection with
the transfer by the Company of its interests in Greatsino
Limited, Greatsino Far East Limited and Portland Pacific
Limited which documents shall accord with the principles
set out in the document in the agreed terms.
8.5 BOARD RESOLUTIONS OF THE GROUP COMPANIES
On Completion the Vendor shall procure the passing of Board
Resolutions of each Group Company inter alia:-
8.5.1 revoking all existing authorities to bankers in respect of
the operation of its bank accounts and giving authority in
favour of such persons as the Purchaser may nominate to
operate such accounts;
8.5.2 accepting the resignations referred to in Clause 8.4.2 and
appointing such persons as the Purchaser may nominate as
directors and secretary;
8.5.3 approving the registration of the share transfer referred
to in Clause 8.4.1;
8.5.4 accepting the resignations referred to in Clause 8.4.3 and
appointing the Purchaser's Accountants as auditors of each
Group Company;
18
8.5.5 changing its registered office in accordance with
instructions given by the Purchaser;
and shall hand to the Purchaser duly certified copies of such
Resolutions.
8.6 PAYMENT OF PRICE/RIGHT TO TERMINATE
Against compliance with the foregoing provisions the Purchaser shall
pay to the Vendor the Initial Consideration in accordance with
Clause 3. If the foregoing provisions of this Clause are not fully
complied with by the Vendor, the Purchaser shall be entitled (in
addition to and without prejudice to all other rights or remedies
available to it including the right to claim damages) to elect to
terminate this Agreement or to effect Completion so far as
practicable having regard to the defaults which have occurred or to
fix a new date for Completion (not being more than 28 days after the
agreed date for Completion).
9 WARRANTIES
9.1 INCORPORATION OF SCHEDULE 2
9.1.1 The Vendor hereby warrants and represents to and
undertakes with the Purchaser in the terms set out in
Schedule 2 subject only to:
(i) any matter which is disclosed in the Disclosure
Letter and any matter expressly provided for under
the terms of this Agreement; and
(ii) any matter or thing hereafter done or omitted to be
done pursuant to this Agreement or otherwise at the
request in writing or with the approval in writing of
the Purchaser.
The Vendor shall have no liability in respect of any claim
under the Warranties to the extent that such claim arises
from any matter or thing referred to in this Clause
9.1.1(i) and (ii).
9.1.2 The Vendor acknowledges that the Purchaser has entered
into this Agreement in reliance upon the Warranties. Save
as expressly otherwise provided, the Warranties shall be
separate and independent and shall not be limited by
reference to any other paragraph of Schedule 2 or by
anything in this Agreement or the Deed of Indemnity.
9.2 UPDATING TO COMPLETION
The Vendor further warrants and undertakes to and with the Purchaser
that:-
(i) the Warranties will be fulfilled down to and will be true
in all material respects at Completion as if they had been
entered into afresh at Completion; and
(ii) if after the signing of this Agreement and before
Completion, any material event shall occur or matter arise
which results or may result in any of the Warranties being
unfulfilled, untrue or incorrect at Completion in any
material respect the Vendor shall immediately notify the
Purchaser in writing fully thereof prior to Completion and
the Vendor shall make any investigation concerning the
event or matter which the Purchaser may require.
19
9.3 EFFECT OF COMPLETION
The Warranties and all other provisions of this Agreement in so far
as the same shall not have been performed at Completion shall not be
extinguished or affected by Completion, or by any other event or
matter whatsoever, except by a specific and duly authorised written
waiver or release by the Purchaser.
9.4 RIGHT OF TERMINATION
If prior to Completion:-
9.4.1 it shall be found that any of the Warranties have not been
carried out or complied with or are otherwise untrue in
any material respect where the breach is of a fundamental
nature the Purchaser shall be entitled (in addition to and
without prejudice to all other rights or remedies
available to it and its successors in title including the
right to claim damages) by notice in writing to the Vendor
to terminate this Agreement (but failure to exercise this
right shall not constitute a waiver of any other right of
the Purchaser or its successors in title arising out of
any breach of Warranty) whereupon the Vendor shall be
entitled within 48 hours of receipt of the Purchaser's
notice to serve notice objecting to such termination.
Unless the Vendor's notice of objection is served within
such period this Agreement shall terminate as set out in
this Clause. In the event of the Vendor duly serving a
notice of objection the Escrow Consideration shall remain
deposited in the Escrow Account and the provisions of
Clause 7.6 (including the arbitration provisions thereof)
shall apply mutatis mutandis for the purpose of
determining the right (or otherwise) of the Purchaser to
terminate this Agreement. The Vendor and the Purchaser
agree that if it is determined that the Purchaser was not
entitled to terminate this Agreement Completion shall
occur within 3 days after such determination in accordance
with Clause 8 and that interest accrued on the Initial
Consideration in respect of the period from the original
Completion Date (as notified pursuant to Clause 8.1) and
the date of actual Completion shall be for the benefit of
the Vendor; or
9.4.2 there shall occur anything which makes the transaction
contemplated hereby illegal or any act of God, war, riot,
civil commotion, fire, flood, explosion or terrorism which
affects or is likely to affect adversely to a material
degree the financial position or business prospects of the
Group Companies as a whole or any of the Group Companies,
the Purchaser shall be entitled by notice in writing to
the Vendor to terminate this Agreement; but the occurrence
of such event shall not give rise to any right to damages
or compensation.
9.5 LIMITATION OF LIABILITY
The liability of the Vendor in respect of any breach of the
Warranties and to indemnify the Purchaser and/or the Group Companies
in respect of the matters contained in the Deed of Indemnity shall
be further limited as follows.
20
The Vendor shall have no liability:-
(a) MINIMUM CLAIMS
In respect of any claim arising from any single
circumstance if the amount of the claim does not exceed
US$50,000 (save that claims relating to a series of
connected matters shall be aggregated for this purpose)
but the Vendor shall not be liable for a claim in excess
of that amount unless the liability determined in respect
of any such claim (excluding interest, costs and expenses)
also exceeds that amount.
(b) AGGREGATE MINIMUM CLAIMS
In respect of any claim unless the aggregate amount of all
claims for which the Vendor would otherwise be liable
under this Agreement and the Deed of Indemnity exceeds
US$250,000, but if the aggregate liability in respect of
all such claims exceeds that figure then subject as
provided elsewhere in this Clause 9 all claims, including
claims previously notified, shall accrue against and be
recoverable from the Vendor.
(c) MAXIMUM CLAIMS
In respect of any claim to the extent that the aggregate
amount of the liability of the Vendor for all claims made
under this Agreement and the Deed of Indemnity would
exceed 100 per cent. of the Initial Consideration.
9.5.1 The Vendor shall be under no liability in respect of a
breach of any of the Warranties or to indemnify under the
Deed of Indemnity as aforesaid unless the Vendor shall
have received written notice from the Purchaser prior to
the date falling two months after the end of the Third
Contingent Payment Period ("14 Month Date") in respect of
the Warranties and prior to the sixth anniversary from the
date of this Agreement in respect of the Deed of
Indemnity, giving full details of the relevant claim and
any such claim shall (if not previously satisfied, settled
or withdrawn) be deemed to have been waived at the
expiration of 6 months after the 14 Month Date or the
sixth anniversary of the date of this Agreement (as the
case may be) unless proceedings in respect thereof shall
then have been commenced against the Vendor.
9.5.2 The Vendor shall be under no liability in respect of any
claim for breach of the Warranties or to indemnify under
the Deed of Indemnity as aforesaid:-
(a) if such liability would not have arisen but for
something voluntarily done or omitted to be done
(other than pursuant to a legally binding commitment
created on or before Completion) by the Purchaser or
the Company or the Subsidiaries after Completion and
otherwise than in the ordinary course of business;
(b) to the extent that a note, provision, allowance or
reserve in respect thereof was made in the Relevant
Accounts;
(c) to the extent that such claim would not have arisen
but for a change in the accounting treatment of
assets and liabilities or of the tax attributable to
timing differences (including capital allowances) in
future accounts of the Group Companies or but for any
other change in the accounting bases upon which the
Group Companies prepare their future accounts, not
being a change which is dictated by generally
accepted accounting principles or the agreed basis of
accounting referred to in Clause 4.4;
21
(d) to the extent that such claim relates to any loss for
which the Purchaser or any of the Group Companies is
actually indemnified by insurance or for which it
would have been so indemnified if at the relevant
time it had maintained insurance cover of a type
which is valid and in force in relation to any of the
Group Companies at the date of this Agreement; and
(e) if such liability would not have arisen but for a
change in any legislation made after Completion or a
change in the interpretation of the law after
Completion or if such liability would not have arisen
but for any judgment delivered after Completion.
9.5.3 The parties agree as follows (by way of covenant only and
not as a condition precedent to the Purchaser being able
to assert a claim):-
(i) The Purchaser shall procure that notice is given to
the Vendor of the relevant facts of any claim under
the Warranties or the Deed of Indemnity as soon as
reasonably practicable and in no event any later than
thirty (30) days after the Purchaser becomes aware
thereof in reasonable detail.
(ii) In the event that the Purchaser or any of the Group
Companies is entitled to recover any sum (whether by
payment, discount, credit or otherwise) from any
third party in respect of any matter or event which
gives rise to a claim against the Vendor hereunder,
the Purchaser shall use, or procure that the Group
Companies shall use, all reasonable endeavours to
recover such sum before making the claim, and any sum
recovered will reduce the amount of the claim, and,
in the event of the recovery being made after the
claim has been satisfied by the Vendor, the Purchaser
shall account to the Vendor in respect of any amount
so recovered (after deduction of all reasonable costs
and expenses of the recovery insofar as reasonably
attributable to the amount paid by the Vendor in
respect of the claim) up to the amount of the claim.
(iii) In the event that a claim against the Vendor arises
as a result of or in connection with a liability to
or a dispute with any third party, no such liability
or dispute shall be admitted, settled or discharged
without the written consent of the Vendor (which
shall not be unreasonably withheld or delayed) and
the Purchaser shall (provided that it is indemnified
to its reasonable satisfaction by the Vendor against
any costs, expenses, liabilities, penalties, and
fines which may be incurred by the Purchaser and the
Group Companies in taking such action) take and shall
procure that the Group Companies shall take such
action to avoid, dispute, resist, appeal, compromise
or contest such liability or dispute as may be
reasonably requested by the Vendor provided that
neither the Purchaser nor any Group Company shall be
required to take any steps which would require any
admission of guilt or liability relating to matters
connected with the claim in question nor, in the
event that the Purchaser objects to the taking of
such action so requested on the grounds of the merits
of the claim, shall they be required to take any such
action unless the Vendor shall have produced to them
a leading barrister's opinion that such action is
reasonable.
22
(iv) Where and to the extent that there are available to
the Group Companies any reliefs, rights of repayment
or other rights or claims of a similar nature to set
against or otherwise mitigate any liability arising
from any claim for tax and such reliefs, rights of
repayment or other rights or claims have not been
taken into account in the Relevant Accounts and arose
wholly or mainly by reason of any act, omission or
transaction of the Group Companies before the date of
Completion, credit for any such reliefs, rights of
repayment or other rights or claims shall be given to
the Vendor against any liability in respect of a
claim for tax provided that and to the extent that
such reliefs, rights of repayment or other rights or
claims of a similar nature are available to offset
the tax liability of the Group Companies after
Completion.
(v) In assessing any damages or other amounts recoverable
under this Agreement there shall be taken into
account the value of any additional benefit accruing
to the Purchaser or the Group Companies in
consequence of the matter or circumstances giving
rise to the claim pursuant to which the damages or
such other amounts arose (not being a benefit which
the Group Companies would have enjoyed had such
matter or circumstance not arisen).
(vi) In calculating the liability of the Vendor in respect
of any claim credit will be given to the Vendor to
the extent that any provision for tax proves to have
been an over provision in the Relevant Accounts.
9.5.4 If the Purchaser or the Group Companies are entitled to
make a claim both under the Warranties and under the Deed
of Indemnity, then either the Purchaser or the Group
Companies shall make the said claim either under the
Warranties or under the Deed of Indemnity, but not both,
in respect of the same liability, and the Vendor shall not
be liable for more than the full amount of such liability.
9.5.5 Notwithstanding Clause 9.5.1, the 14 Month Date shall not
apply as a time period for making claims against the
Vendor when such claim is based on any fraudulent act or
omission or fraudulent misrepresentation by the Vendor
prior to Completion, but the applicable time period shall
instead be 3 years from Completion.
9.5.6 Nothing in this Clause 9 shall limit or restrict the
Purchaser's general obligation at law to mitigate any loss
or damage which it may incur in consequence of any matter
giving rise to a potential claim under this Agreement or
the Deed of Indemnity.
9.5.7 The Purchaser acknowledges that, save for the Warranties,
it has not relied in relation to the purchase of the Share
on, or been induced to enter into this Agreement by, any
information (written or oral), statements or warranties or
representations of any description made, supplied or given
by the Vendor or the Group Companies or the officers,
agents, employees or advisers of any of them in relation
to the assets and liabilities of the Group Companies,
their value or amount, or the businesses or affairs of the
Group Companies or otherwise.
9.6 INFORMATION FROM GROUP COMPANIES
Any information supplied by or on behalf of any Group Company to the
Vendor or any of its subsidiaries or its agents or its accountants,
solicitors or other advisers prior to Completion in connection with
the Warranties or otherwise in relation to the business and affairs
23
of any Group Company shall not constitute a representation or
warranty or guarantee as to the accuracy thereof and the Vendor
hereby waives any and all claims which it might otherwise have
against any Group Company or any employees or officers of any such
company in respect thereof and undertakes not to bring any action or
proceeding in relation thereto.
10 COMPLETION ACCOUNTS AND AUGUST 31 ACCOUNTS
10.1 The Completion Accounts
The Purchaser shall procure that as soon as practicable following
Completion there shall be drawn up by the Purchaser's Accountants a
consolidated balance sheet of the Group Companies as at the
Completion Date (the "COMPLETION ACCOUNTS"). The Completion Accounts
shall be drawn up in accordance with accountancy principles
generally accepted in Hong Kong as used for the preparation of the
Relevant Accounts but shall not contain any provisions in respect of
EOSDA (as defined in Clause 4.2). The Completion Accounts shall:-
10.1.1 set out the amount of the net assets of the Group
Companies and shall identify the amount of net assets
attributable to the PCB Business and the amount of net
assets attributable to the SMT Business;
10.1.2 identify the amount of net current assets (or, as the case
may be, net current liabilities) of the Business as at the
Completion Date;
10.1.3 identify the amount of receivables ("Receivables") owing
to the Group Companies at the Completion Date and there
shall be included a list of receivables as at such date;
10.1.4 identify the amount of stock and work in progress
("Stock") of the Group Companies as at the Completion Date
and there shall be prepared a list identifying the Stock;
and
10.1.5 classify the entire liability to Trilease International
Limited as a long-term liability and adjust the current
liabilities accordingly.
10.2 Preparation
10.2.1 The Completion Accounts shall be subject to agreement in
writing between the Vendor and the Purchaser within 45
days after the Completion Date Provided That the Purchaser
shall procure that, commencing the Completion Date, the
Vendor's accountants shall be given such access to the
relevant personnel, books and records of the Group
Companies and of the supporting documentation and
assistance as is reasonable for the Vendor's accountants
to agree the Completion Accounts. Failing such agreement
between the Vendor and the Purchaser, Clauses 10.2.2 and
10.2.3 shall apply.
10.2.2 If the Completion Accounts are not agreed between the
Vendor and the Purchaser as provided in Clause 10.2.1, the
disagreement shall be referred to the Reporting
Accountants.
10.2.3 The Reporting Accountants shall act as experts and not as
arbitrators and their determination of any matter falling
within their jurisdiction shall be final and binding on
the parties save in the event of manifest error (when the
relevant part of their determination shall be void and the
matter shall be remitted to the Reporting Accountants for
correction). In particular, without limitation:
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(i) their determination shall be deemed to be
incorporated into the Completion Accounts, which
shall then be final and binding on the parties save
as aforesaid;
(ii) their determination of any fact which they have found
it necessary to determine shall be final and binding
on the parties for all purposes including any
Warranty claim or alleged or prospective Warranty
claim or any claim or alleged or prospective claim
for indemnification.
10.2.4 The expenses of the Reporting Accountants shall be borne
equally between the Purchaser and the Vendor.
10.3 ADJUSTMENT OF DEFERRED CONSIDERATION
If the net assets of the PCB Business shall be less than HK$250
million and/or the net assets of the SMT Business, according to the
Completion Accounts, shall be less than HK$44 million, the Purchaser
shall be entitled to deduct from the Deferred Consideration an
amount equal to the aggregate amount by which the net assets of the
PCB Business and/or the SMT Business are less than HK$250 million
and HK$44 million respectively on the basis set out in Clause 4. If
the Completion Accounts show that there are net current liabilities
attributable to the Business (adjusted as set out in Clause 10.1.5)
as at the Completion Date the Purchaser shall be entitled to deduct
from the Deferred Consideration the amount of such net current
liabilities on the basis set out in Clause 4. In the event the
amount of the second instalment of the Deferred Consideration is
less than the amounts permitted to be deducted by the Purchaser,
deductions shall be made from the third instalment of the Deferred
Consideration. For the avoidance of doubt the "Deductions" referred
to in the definition of "deductions" in Clause 4 shall be the
aggregate of all amounts permitted to be deducted under this Clause
10.3.
10.4 THE AUGUST 31 ACCOUNTS
As soon as practicable following Completion the Purchaser shall draw
up or shall procure that the Purchaser's Accountants draw up a
consolidated profit and loss account for the Group Companies in
respect of the two month period ending 31 August 1998 together with
a consolidated balance sheet of the Group Companies as at 31 August
1998 (the "AUGUST 31 ACCOUNTS"). The August 31 Accounts shall be
drawn up in accordance with accountancy principles generally
accepted in Hong Kong as used for the preparation of the Relevant
Accounts and shall be relied upon in the preparation of the
unaudited consolidated profit and loss accounts in respect of the
Contingent Payment Period.
The August 31 Accounts shall be subject to agreement in writing
between the Vendor and the Purchaser within 45 days after the
Completion Date Provided That the Purchaser shall procure that the
Vendor's accountants shall be given such access to the relevant
personnel, books and records of the Group Companies and of the
supporting documentation and such assistance as is reasonable for
the Vendor's accountants to agree the August 31 Accounts. Failing
such agreement between the Vendor and the Purchaser, Clauses 10.2.2
to 10.2.4 shall apply mutatis mutandis.
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11 RESTRICTIONS AND UNDERTAKINGS OF THE PURCHASER
11.1 RESTRICTIONS
The Purchaser undertakes with the Vendor and its successors in title
as trustee for itself and the subsidiaries from time to time of the
Vendor that:-
(a) the Purchaser shall procure that, as soon as practicable
after Completion, each of the names of the Subsidiaries
shall be changed such that such new name shall not include
the word or symbol "Greatsino" or " " or any word or
symbol confusingly similar thereto in such a way as to be
capable of or likely to be confused with the word or
symbol "Greatsino" or " "; and
(b) subject as provided in Clause 11.1(a), the Purchaser shall
not, and the Purchaser shall procure that its subsidiaries
from time to time shall not, at any time hereafter in
relation to any trade, business or company use a name or
trade xxxx including the word or symbol "Greatsino" or " "
or any word or symbol confusingly similar thereto in such
a way as to be capable of or likely to be confused with
the word or symbol "Greatsino" or " ".
11.2 REASONABLENESS OF RESTRICTIONS
The Purchaser agrees that it considers that the undertakings and
restrictions contained in this Clause are no greater than is
reasonable and necessary for the protection of the interest of the
Vendor but if any such undertaking or restriction shall be held to
be void but would be valid if deleted in part or reduced in
application, such undertaking or restriction shall apply with such
deletion or modification as may be necessary to make it valid and
enforceable.
12 RESTRICTIONS OF THE VENDOR
12.1 RESTRICTIONS
The Vendor undertakes with the Purchaser and its successors in title
as trustee for itself and the Group Companies that the Vendor will
not and will procure that any subsidiary will not in any Relevant
Capacity during the Restricted Period:
12.1.1 directly or indirectly carry on the business of
manufacture, production and sale of printed circuit boards
nor be concerned or interested in any such business other
than as the holder of not more than 5% of the issued
shares or debentures of any company listed on a stock
exchange;
12.1.2 in competition with the PCB Business as now carried on
canvass or solicit the custom of any person, firm or
company who has within two years prior to Completion been
a customer of any Group Company; or
12.1.3 induce or seek to induce any present employee of any Group
Company to become employed whether as employee, consultant
or otherwise by the Vendor or any subsidiary of the
Vendor.
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12.2 REASONABLENESS OF RESTRICTIONS
The Vendor agrees that it considers that the restrictions contained
in this Clause are no greater than is reasonable and necessary for
the protection of the interest of the Purchaser but if any such
restriction shall be held to be void but would be valid if deleted
in part or reduced in application, such restriction shall apply with
such deletion or modification as may be necessary to make it valid
and enforceable.
12.3 INTERPRETATION
The following terms shall have the following meanings respectively
in this Clause 12:
12.3.1 RESTRICTED PERIOD means 30 months commencing on
Completion;
12.3.2 RELEVANT CAPACITY means for its own account or for that of
any person, firm or company (other than the Purchaser and
the Group Companies) or in any other manner and whether
through the medium of any company controlled by it (for
which purpose "control" shall be construed by reference to
the Hong Kong Code on Takeovers and Mergers and there
shall be aggregated with its shareholding or ability to
exercise control the shares held or control exercised by
any person connected with the Vendor) or as principal,
partner, consultant or agent.
13 OTHER PROVISIONS
13.1 ANNOUNCEMENTS
Each of the Vendor and the Purchaser shall, insofar as it is
reasonably practicable to do so, consult the other of them as to the
terms, of the timetable for and manner of publication of, any
announcement by either of the first-mentioned party to shareholders,
employees, customers and suppliers, or to stock exchanges or
authorities or to the media or otherwise which the Vendor or the
Purchaser (as the case may be) may desire or be obliged to make
regarding this Agreement. Subject as aforesaid, none of the Vendor
or the Purchaser shall make or authorise any announcement concerning
the subject matter of this Agreement (save as required by law or by
the Stock Exchange or other stock exchange or regulatory
authorities).
13.2 SUCCESSORS AND ASSIGNS
This Agreement shall be personal to the parties to it save that (and
save as otherwise expressly provided herein) the benefit (and not
the burden) of any of its provisions may be assigned by any party to
any wholly-owned subsidiary of such party only for so long as such
subsidiary remains wholly-owned by such party and remains the
beneficial owner of such benefit so assigned.
13.3 VARIATION
No variation of this Agreement shall be effective unless in writing
and signed by or on behalf of each of the parties.
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13.4 TIME OF THE ESSENCE
Time shall be of the essence of this Agreement, both as regards the
dates and periods mentioned and as regards any dates and periods
which may be substituted for them in accordance with this Agreement
or by agreement in writing between the parties.
13.5 INFORMATION AND FURTHER ASSURANCE
At any time after the date of this Agreement each of the parties
shall use its best endeavours to do such acts and things as the
other parties may reasonably require for the purpose of giving to
the other parties the full benefit of all the provisions of this
Agreement. For the avoidance of doubt and without prejudice to the
generality of the foregoing, the Company hereby acknowledges and
agrees that it shall use its best endeavours to ensure that the
provisions of Clause 7 are complied with.
13.6 Release of Vendor Guarantees
With effect from the date of this Agreement the parties will
co-operate with a view to securing the release of the Vendor from
its guarantee in favour of Sin Hua Bank and Trilease International
Limited in respect of the Group's obligations to such company. The
Purchaser undertakes to secure such release no later than 90 days
following Completion and if, following Completion, any liability of
the Vendor shall arise in respect of such guarantee the Purchaser
shall indemnify the Vendor in respect thereof.
13.7 COSTS
The Vendor shall bear all legal, accountancy and other costs and
expenses incurred by them in connection with this Agreement, the
Deed of Indemnity and the sale of the Share. The Purchaser shall
bear all such costs and expenses incurred by it. None of the Group
Companies shall bear any of the costs incurred in connection with
the entering into of this Agreement.
13.8 NOTICES
Any notice, claim or demand requiring to be served under or in
connection with this Agreement shall be in writing and shall be
sufficiently given or served if delivered or sent:-
In the case of the Vendor to Universal Appliances Limited at:
2608 Miramar Tower
0 Xxxxxxxxx Xxxx
Xxxxxxxxxxx
Xxxxxxx
Xxxx Xxxx
Fax: 0000 0000
Attention: Xxxxxxx Ko
In the case of the Company and the Purchaser to The DII
Group, Inc. at:
0000 Xxxxxxx Xxxx Xxxxx
Xxxxx
Xxxxxxxx 00000
XXX
Fax: (000) 000 0000
Attention: Xxxx Xxxxxxx
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Any such notice shall be delivered by hand or cable, telegram, telex
or facsimile transmission or sent by pre-paid registered post and if
delivered by hand or sent by cable, telegram, telex or facsimile
shall conclusively be deemed to have been given or served at the
time of despatch, and if sent by post shall conclusively be deemed
to have been received, in the case of any notice sent domestically
48 hours from the time of posting or, in the case of any notice sent
internationally, 7 days from the date of posting.
13.9 INVALIDITY
If any term or provision in this Agreement shall be held to be
illegal or unenforceable, in whole or in part, under any enactment
or rule of law, such term or provision or part shall to that extent
be deemed not to form part of this Agreement but the enforceability
of the remainder of this Agreement shall not be affected.
13.10 COUNTERPARTS
This Agreement may be entered into in any number of counterparts and
by the parties to it on separate counterparts, each of which when so
executed and delivered shall be an original, but all the
counterparts shall together constitute one and the same instrument.
13.11 GOVERNING LAW AND SUBMISSION TO JURISDICTION
This Agreement and the documents to be entered into pursuant to it
shall be governed by and construed in accordance with the laws of
Hong Kong and all the parties irrevocably agree that the courts of
Hong Kong are to have exclusive jurisdiction to settle any disputes
which may arise out of or in connection with this Agreement and such
documents and that accordingly any suit, action or proceedings
arising out of or in connection with this Agreement and such
documents shall be brought in such courts.
13.12 APPOINTMENT OF PROCESS AGENT
The Purchaser hereby irrevocably appoints Linklaters & Paines of
00xx Xxxxx, Xxxxxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx (Attn.:
X X Xxxx) as its agent for the service of process in Hong Kong,
service upon whom shall be deemed completed whether or not forwarded
to or received by the intended recipient. If such process agent
ceases to have an address in Hong Kong, the Purchaser agrees to
appoint a new process agent and to deliver to the other parties
within 14 days a copy of a written acceptance of appointment by the
process agents. Nothing contained in this Agreement shall affect the
right to serve process in any other manner permitted by law or the
right to bring proceedings in any other jurisdiction for the
purposes of the enforcement or execution of any judgment or other
settlement in any of the courts.
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I N W I T N E S S whereof this Agreement has been duly executed.
SIGNED by )
for and on behalf of )
Universal Appliances Limited )
in the presence of:- )
SIGNED by )
for and on behalf of )
Xxxxxxx Holdings Limited )
in the presence of:- )
SIGNED by )
for and on behalf of )
The DII Group, Inc. )
in the presence of:- )
