Exhibit 2.1
Business Transfer Agreement
This Business Transfer Agreement (hereinafter the "Agreement") is made and
entered into on the 31 May, 2006 by and among
Kadant Light Machinery (Jining) Co, Ltd., a wholly foreign owned enterprise
established and existing under PRC laws and regulations with its registered
address at No. 99 Jidian Road 1, High and New Technologies Industry Development
Zone, Jining, Shandong 272023, People's Republic of China ("China")
("Kadant WFOE")
and
Jining Huayi Light Industry Machinery Company, a Chinese limited liability
company with its legal address at No. 99 Jidian Road 1, High and New
Technologies Industry Development Zone, Jining, Shandong 272023, China.
("Huayi")
Huayi and Kadant WFOE may be referred to as "Parties" or individually as
"Party".
The Parties agree as follows:
Preamble
Whereas, Huayi and Kadant WFOE entered into an Assets Purchase Agreement on 21st
day of January, 2006 ("APA");
Whereas, Huayi and Kadant WFOE wish to finalize the transaction outlined in the
APA as set out in this Agreement. The APA shall continue to be in force except
to the extent that this Agreement expressly amends the APA. If an item
(including but not limited to definitions) is covered in this Agreement it shall
prevail over the APA. If an item (including but not limited to definitions) is
not covered by this Agreement then the terms of the APA shall apply. In
particular Article 13.2 (m) and 13.2 (o) of the APA shall be replaced by the
procedures set forth in this Agreement.
Article 1
Step 1 - Kadant WFOE acquires Initial Assets
The Parties agree that in order to enable Huayi to cancel the mortgage over the
Facilities the Kadant WFOE agrees to buy the Fixed Assets except for the
Facilities ("Fixed Assets").
The Fixed Assets Price shall be paid by Kadant WFOE to Huayi after the following
have been completed ("Fixed Assets Pre-conditions"):
- The Parties have conducted a physical examination on all Fixed Assets
(except Facilities) and related takeover protocol signed by the
Parties;
- The Parties confirm no material adverse change in the business,
prospects or financial condition of Huayi up to date of payment of
Fixed Assets Price;
- Land-use Rights and Building Transfer Agreements signed by Huayi and
Kadant WFOE for Jining Facility and by Huayi for the Yanzhou Facility -
the Yanzhou WFOE will sign upon its establishment.
- Huayi has provided Kadant WFOE with copy of signed Agreement on
Cancellation of Mortgage between Huayi and ICBC (attached as Annex 1).
This Agreement shall replace Annex 2 to the APA. Huayi shall try its
best effort to negotiate with the bank in order to avoid or minimize
the liquidated damage due to early termination of the loan agreement.
Both Parties shall share 50% interest penalty if incurs.
- The 75% Shareholders as listed in Schedule 7 of the APA shall sign the
non-compete agreements submit to Kadant WFOE on May 29, 2006.
The Fixed Assets Price is RMB 28,366,000 subject to 20% being withheld as
retention money. Accordingly upon completion of the Fixed Assets Purchase
Preconditions Kadant WFOE shall pay Huayi RMB 22,692,800. The Parties agree that
the Fixed Assets Price shall not include the Facilities. Huayi shall promptly
provide the official tax invoice for received payment for the Fixed Assets to
Kadant WFOE.
Article 2
Step 2 - Mortgage Cancellation
On the Fixed Assets Payment Date, Huayi shall use such amount of the Fixed
Assets Price as is required to cancel the mortgage on the Facilities located in
Jining in accordance with the agreement with the mortgage holder attached as
Annex 1, before any other payment or use of the Fixed Assets Price received
under this Agreement.
< 2
>
On the Fixed Assets Payment Date, Huayi and the mortgage holder shall sign the
mortgage cancellation documentation, provide a copy of such documentation to
Kadant WFOE, and file the same with the Jining Land and Resource Bureau and
Jining Real Estate Administration Bureau. Huayi shall diligently pursue and take
all actions necessary to complete the mortgage cancellation with ICBC in respect
of the Facilities.
Huayi shall provide the mortgage cancellation certificates issued by the Jining
Land and Resource Bureau and Jining Real Estate Administration Bureau to the
Kadant WFOE.
Article 3
Step 3 - Business Transfer
The Parties agree the business transfer date shall be the date on which all of
the conditions set forth below have been satisfied ("Business Transfer Date").
It is the intent of the Parties that the Business Transfer Date shall be no
later than 2 June 2006.
Upon Business Transfer Date the following shall occur:
1. Conditions Precedent to Business Transfer Date - the conditions should have
been completed one day before Business Transfer Date:
- Huayi has provided the official tax invoice for received payment for
the Fixed Assets to Kadant WFOE.;
- The Parties have jointly conducted a physical check of the Business
Records and signed a taking over protocol;
- The Parties have signed Intellectual Property Assignment Agreements;
- A physical count of the Inventory has been conducted by the Parties and
a joint take-over protocol has been issued and the value has been
agreed in writing by the Parties (the "Agreed Inventory Price");
2. Agreed Inventory Price
The Parties shall agree the Inventory Price in accordance with Schedule 8 of the
APA. On the Business Transfer Date Kadant WFOE shall pay Huayi the Agreed
Inventory Price minus 20% as retention money. Huayi shall promptly provide
Kadant WFOE with the official tax invoice for the received payment of the
Inventory.
The price for finished products shall vary from Schedule 8 in that the price
shall be 7.87% higher.
The Parties agree that the production by Huayi after 26 April 2006 shall be
calculated as follows:
3
>
Finished goods and WIP = cost + 18% margin.
20% retention money from the Inventory Price shall be withheld.
3. Miscellaneous Assets and Liabilities
Huayi agrees that all Huayi assets other than:
- Facilities (x.x.xxxx and buildings)
- Cash and cash equivalents (excluding customer deposits) and
- Accounts receivable outstanding on Business Transfer Date.
shall be transferred to Kadant WFOE on Business Transfer Date.
The Parties agree that all liabilities of Huayi existing prior to the Business
Transfer Date (pound) - except for the Assigned Contracts - shall be
retained by Huayi as provided in Article 1.2 of the APA.
4. Employees
Kadant WFOE shall abide by the terms of the APA in respect of employees.
On the Business Transfer Date Huayi shall terminate the employment with its
employees. Kadant WFOE shall issue an announcement declaring that it will sign
new employment contract with the employees according to the Asset Purchase
Agreement before June 20, 2006. The new employment contract commences upon the
Business Transfer Date. Upon the business transfer date Kadant WFOE shall be
responsible for the salary and social contribution of the employees.
On the Business Transfer Date, Kadant WFOE shall pay Huayi RMB 380,000 for the
employees' salary compensation. This payment will not be included into the total
Asset Purchase Price.
5. Raw Material and Auxiliary Equipment after April 26, 2006
Raw materials purchased by Huayi after April 26, 2006 not being used in
production and auxiliary equipment not being used in production = 100% cost.
This price will not be included into the total Asset Purchase Price. The VAT
incurred by this shall be borne by Kadant WFOE. Kadant WFOE will make such
payments upon the receipt of official VAT invoice on the Business Transfer Date.
6.1 Down Payment to Supplier
Before the Business Transfer Date, Huayi shall submit the certificate of its
payment to the suppliers which shall be verified and confirmed by Kadant WFOE.
Kadant WFOE shall
4
>
pay Huayi the down payments which have been confirmed upon the Business Transfer
Date. Huayi shall promptly provide Kadant WFOE with the formal receipt or
invoice for such payment.
6.2 Payment Received by Assigned Contract
Huayi shall commence the transfer of Assigned Contracts upon the Business
Transfer Date.
On the Business Transfer Date an amount equal to the total payments received
from customers in connection with Assigned Contracts shall be paid to Kadant
WFOE.
For those Assigned Contracts which have partial shipped supply scopes(s)
portion, the Hold Back Term specified in the Assigned Contracts shall be applied
to the as shipped scope(s), and this amount shall be paid to Kadant WFOE, in
addition to the total payments amount received for the unshipped scope(s) from
customers in connection with Assigned Contracts.
7. Transfer of Operation
On Business Transfer Date, Kadant WFOE shall be responsible for the operation of
the business. Huayi shall not be responsible other than as outlined in the APA.
Kadant WFOE shall be entitled to use the Facilities until Closing.
Kadant WFOE shall be responsible for security of the assets and employees until
Kadant WFOE and Yanzhou WFOE become the legal owners of the Facilities.
8. Overall Co-operation
The Parties agree:
Kadant WFOE shall provide assistance to Huayi in relation to the cancellation of
the mortgages over the facilities and Huayi shall provide assistance to Kadant
WFOE in relation to subsequent registration of the facilities in Kadant WFOE's
name.
Huayi shall provide all assistance to Kadant WFOE in relation to the smooth
operation of the business after the Business Transfer Date.
The non-competition obligations of the Shareholders and Huayi set forth in
Article 5.1 of the APA shall commence as of the Business Transfer Date. Promptly
after the Business Transfer Date and before the Closing Date, Huayi shall revise
its business license and its amended articles of association in full compliance
with Article 5.1 of the APA, as provided in Article 13.2 (e)(aa) and 13.2
(e)(bb) of the APA,
< 5
>
9. Termination of Lease
On Business Transfer Date Huayi shall make sure that all the leases (except for
canteen as dealt with in Article 11.5 of the APA) with the tenants have been
terminated. In case the tenants make claims or take legal actions against Kadant
WFOE, Huiyi shall take all the responsibilities and indemnify Kadant WFOE no
harm.
Article 4
Step 4 - Facilities Registration
1. Transfer of Facilities located in Jining ("Jining Facilities")
Upon receipt of the mortgage cancellation certificate, the Parties shall make an
application for the transfer of the Land Use Rights and Building Transfer
relating to the Jining Facilities.
The Parties shall prepare, sign and deliver the documents required for transfer
and registration of the Jining Facilities, as set forth in Annex 2 to this
Agreement, and such other documents as may be requested by the applicable
bureau. The Parties shall obtain the confirmation of the applicable bureau that
the registration will be accepted and registered upon submission of these
documents.
Following confirmation from the applicable bureau regarding the acceptability of
the registration documents, Kadant WFOE will pay subject to the provisions of
the APA, an amount equal to the transfer price set forth in the Land Use Rights
and Building Transfer Agreement relating to the Jining Facilities and attached
as Annex 1 to the APA, minus retention equal to 20% of such transfer price.
Huayi shall promptly provide Kadant WFOE the official tax invoice for the
received payment for Jining Facilities.
Immediately upon payment for the Jining Facilities, Huayi and Kadant WFOE submit
the documents for registration of the change in ownership of the Jining
Facilities with the Jining Land and Resource Bureau and Jining Real Estate
Administration Bureau.
2. Transfer of Facilities located in Yanzhou ("Yanzhou Facilities")
Upon receipt of the business license for the Yanzhou WFOE, Yanzhou WFOE shall
sign the Land Use Rights and Building Transfer Agreement relating to the Yanzhou
Facilities and attached as Annex 1 to the APA.
The Parties shall prepare, sign and deliver the documents required for transfer
and registration of the Yanzhou Facilities, as set forth in Annex 2 to this
Agreement, and such other documents as may be requested by the applicable
bureau. The Parties shall obtain
< 6
>
the confirmation of the applicable bureau that the registration will be accepted
and registered upon submission of these documents.
Following confirmation from the applicable bureau regarding the acceptability of
the registration documents, Yanzhou WFOE will pay subject to the provisions of
the APA, an amount equal to the transfer price set forth in the Land Use Rights
and Building Transfer Agreement relating to the Yanzhou Facilities and attached
as Annex 1 to the APA, minus retention equal to 20% of such transfer price.
Huayi shall promptly provide Yanzhou WFOE the official tax invoice for the
received payment for the Yanzhou Facilities.
Immediately upon payment for the Yanzhou Facilities, Huayi and Yanzhou WFOE
submit the documents for registration of the change in ownership of the Yanzhou
Facilities with the Yanzhou Land and Resource Bureau and Jining Real Estate
Administration Bureau.
Article 5
Step 5 - Closings
Jining Closing
The Parties agree the Jining Closing date shall be the date on which all of the
conditions set forth below have been satisfied ("Jining Closing Date").
The Parties shall confirm the final total Asset Purchase Price (including the
asset price, facility purchase price, inventory and business premium) according
to the Asset Purchase Agreement by June 1, 2006. Upon the Jining Closing Date
the payment of 80% of total Asset Purchase Price minus Yanzhou Facility price
and Yanzhou Business Premium to Huayi shall be completed. Upon Jining Closing
Date Huayi shall provide Kadant WFOE the official tax invoice for 100% transfer
price of Fixed Asset, Inventory, Jining Facility and part of Huayi Jining
Premium (The total invoice amount shall be equal to above payment made by Kadant
WFOE).
The Parties agree that the Jining Closing Date is intended to occur within 10
working days of the Business Transfer Date. If the Closing does not occur within
such 10 working days then the Party cause the delay shall pay damages to the
other Party. The damages shall be RMB 6,000 per day.
1. Conditions Precedent to Jining Closing Date - - the conditions should
have been completed one day before Jining Closing Date:
- Kadant WFOE has received signed copies of the mortgage cancellation
certificate by Jining Land and Resource Bureau for all Facilities;
7
>
- Jining Land and Resource Bureau and Jining Real Estate Administration
has issued land use rights certificates and building title certificates
in the name of the Kadant WFOE. Details of such certificates are in
accordance with the signed contracts;
- Kadant WFOE has received evidence from Huayi that the termination of
the Employee's employment with Huayi has been recorded with the
competent authorities;
- Kadant WFOE has received evidence from Huayi that the "Assigned
Contracts" have been transferred in accordance with APA requirements;
- Huayi has provided Kadant WFOE the original intellectual property
certificates including patents and trademarks;
- All Schedules and Annexes referred to in APA have been completed and
submitted to Kadant WFOE;
- Huayi's obligation to deliver the revised business license and its
amended articles of association in full compliance with Article 5.1 of
the APA, as provided in Article 13.2 (e)(aa) and 13.2 (e)(bb) of the
APA has been completed;
- The Parties shall confirm all items listed in Article 13.2 of the APA
are completed;
- All steps in Annex 4 hereto have been completed;
- All the payments which shall have been made before the Closing Date
according to this Agreement have been completed.
2. Payment Upon Jining Closing:
Kadant WFOE shall pay to Huayi the portion of the Purchased Assets Price
representing the Huayi Business relating to Jining RMB 33,600,000 ("Huayi Jining
Business Premium") subject to the following adjustments:
(a) 20% of the Final Purchase Price minus Huayi Yanzhou Business
Premium shall be deducted as retention money;
(b) As set forth in Article 7.1 of the APA, all taxes and fees arising
from the transfer of the Huayi Assets shall be borne by the Parties in
accordance with PRC law. However, Kadant shall be responsible for VAT
arising out of purchasing the Inventory.
Yanzhou Closing
The Parties agree the Yanzhou Closing date shall be the date on which the
conditions set forth below have been satisfied ("Yanzhou Closing Date").
< 8
>
Upon the Yanzhou Closing Date the payment to Huayi for Yanzhou Facility Price
and Huayi Yanzhou Business Premium shall be completed. Upon Yanzhou Closing Date
Huayi shall provide Yanzhou WFOE the official tax invoice for 100% transfer
price of Yanzhou Facility transfer price and Huayi Yanzhou Premium.
The Parties agree that the Yanzhou Closing Date is intended to occur within 20
working days of the Business Transfer Date. If the Closing does not occur within
such 20 working days then the Party cause the delay shall pay damages to the
other Party. The damages shall be RMB 6,000 per day.
1. Conditions Precedent to Yanzhou Closing Date - the conditions should have
been completed one day before Yanzhou Closing Date:
- The official tax invoice for the sale of the Yanzhou Facilities has
been given to the Yanzhou WFOE;
- Yanzhou Land and Resource Bureau and Jining Real Estate Administration
has issued land use rights certificates and building title certificates
in the name of the Yanzhou WFOE. Details of such certificates are in
accordance with the signed contracts;
- Jining Closing has been completed.
2. Payment Upon Yanzhou Closing:
Kadant WFOE shall pay to Huayi the portion of the Purchased Assets Price
representing the Huayi Business relating to Yanzhou RMB 8,400,000 ("Huayi
Yanzhou Business Premium") subject to the following adjustments:
(a) 20% of Final Purchase Price minus the Huayi Jining Business
Premium shall be deducted as retention money;
(b) As set forth in Article 7.1 of the APA, all taxes and fees arising
from the transfer of the Huayi Assets shall be borne by the Parties in
accordance with PRC law. However, Kadant shall be responsible for VAT
arising out of purchasing the Inventory.
Retention Money - Bank Payment Guarantees
Kadant WFOE shall provide Huayi with bank payment guarantees which shall be
equal to 20% of the Final Purchase Price in the form of Annex 3 hereto and in
lieu of the standby letter of credit attached as Annex 4 of the APA. The
procedures for claims under the bank payment guarantees shall be as outlined in
Article 7.2 of the APA and Annex 3 hereto. Upon any payment to Huayi under the
payment guarantee, Huayi shall provide to Kadant WFOE the official tax invoice
for 100% of the amount paid.
< 9
>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
on its behalf by a duly authorized officer in 4 originals in English and Chinese
as of the date first written above. The English copy and Chinese copy have shall
be equally valid.
Jining Huayi Light Industry Machinery Co., Ltd (official seal)
Place:/Date: Jining 31 May 2006
/s/ Liu Zhaofu
--------------
Liu Zhaofu
Chairman of the Board
Kadant Light Machinery (Jining) Co., Ltd (official seal)
Place:/Date: Jining 31 May 2006
By: /s/ Xxxxx X. Xxxxx
------------------
Xxxxx X. Xxxxx
Vice President
< 10
>
List of Annexes
Annex 1 Mortgage Cancellation Agreement
Annex 2 Land Registration Protocol
Annex 3 Bank Payment Guarantee
Annex 4 Protocol
11
