1
Exhibit 2.1
EXCHANGE AGREEMENT
among
ZINDART LIMITED,
XXX XXXX HOLDINGS CO. LIMITED,
XXX XXXX PRINTING HOLDINGS CO. LIMITED,
THE SHAREHOLDERS OF XXX XXXX HOLDINGS CO. LIMITED,
THE PRINCIPAL SHAREHOLDERS OF HYP HOLDINGS LIMITED
and
CHINAVEST MANAGEMENT LIMITED
_______________________________
Dated as of February 10, 1998
_______________________________
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2
TABLE OF CONTENTS
PAGE
Section 1. THE EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Exchange Price . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Restrictions On Transfer . . . . . . . . . . . . . . . . . . . 4
1.5 Conversion of Purchaser Stock . . . . . . . . . . . . . . . . 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SUBSIDIARY, PARENT, THE
SELLING SHAREHOLDERS AND THE PRINCIPAL HYP SHAREHOLDERS . . . 5
2.1 Due Organization; No Subsidiaries; Etc. . . . . . . . . . . . 6
2.2 Articles of Association, Memorandum of Association and
Joint Venture Agreements; Records . . . . . . . . . . . . . . 6
2.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . 8
2.5 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . 10
2.8 Receivables; Major Customers . . . . . . . . . . . . . . . . . 10
2.9 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10 Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . 11
2.11 Real Property . . . . . . . . . . . . . . . . . . . . . . . . 11
2.12 Proprietary Assets . . . . . . . . . . . . . . . . . . . . . . 11
2.13 Subsidiary Contracts . . . . . . . . . . . . . . . . . . . . . 12
2.14 Liabilities; Major Suppliers . . . . . . . . . . . . . . . . . 13
2.15 Compliance With Legal Requirements . . . . . . . . . . . . . . 13
2.16 Governmental Authorizations . . . . . . . . . . . . . . . . . 14
2.17 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.18 Employee and Labor Matters . . . . . . . . . . . . . . . . . . 15
2.19 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 16
2.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . 18
2.21 Sale of Products; Performance of Services . . . . . . . . . . 18
2.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.23 Related Party Transactions . . . . . . . . . . . . . . . . . . 20
2.24 Certain Payments, Etc. . . . . . . . . . . . . . . . . . . . . 20
2.25 Proceedings; Orders . . . . . . . . . . . . . . . . . . . . . 20
2.26 Authority; Binding Nature of Agreements . . . . . . . . . . . 21
2.27 Non-Contravention; Consents . . . . . . . . . . . . . . . . . 22
2.28 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.29 Selling Shareholders and Principal HYP Shareholders . . . . . 23
2.30 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . 23
2.31 Chan Holdings and Chan Only Representations . . . . . . . . . 23
2.32 HYP and Principal HYP Shareholder Only Representations . . . . 24
i.
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . 24
3.1 Valid Issuance of Purchaser Stock . . . . . . . . . . . . . . 24
3.2 SEC Filings. . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.3 Acquisition of Shares. . . . . . . . . . . . . . . . . . . . . 25
3.4 Authority; Binding Nature of Agreement. . . . . . . . . . . . 25
3.5 Securities Act. . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4. PRE-CLOSING COVENANTS OF PARENT, SUBSIDIARY, THE SELLING
SHAREHOLDERS AND THE PRINCIPAL HYP SHAREHOLDERS . . . . . . . 25
4.1 Access and Investigation. . . . . . . . . . . . . . . . . . . 25
4.2 Operation of Business. . . . . . . . . . . . . . . . . . . . . 25
4.3 Filings and Consents. . . . . . . . . . . . . . . . . . . . . 27
4.4 Notification; Updates to Disclosure Schedule. . . . . . . . . 28
4.5 Payment of Indebtedness by Related Parties. . . . . . . . . . 28
4.6 No Negotiation. . . . . . . . . . . . . . . . . . . . . . . . 28
4.7 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . 28
4.8 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5. PRE-CLOSING COVENANTS OF PURCHASER . . . . . . . . . . . . . . 29
SECTION 6. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE . . . 29
6.1 Satisfactory Completion of Pre-Acquisition Review. . . . . . . 29
6.2 Accuracy of Representations. . . . . . . . . . . . . . . . . . 29
6.3 Performance of Obligations. . . . . . . . . . . . . . . . . . 29
6.4 Approval of Purchaser's Board of Directors and
Shareholders; Consents . . . . . . . . . . . . . . . . . . . . 30
6.5 No Material Adverse Change. . . . . . . . . . . . . . . . . . 30
6.6 Additional Documents . . . . . . . . . . . . . . . . . . . . . 30
6.7 No Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 30
6.8 No Claim Regarding Stock Ownership or Sale Proceeds. . . . . . 30
6.9 No Prohibition. . . . . . . . . . . . . . . . . . . . . . . . 30
6.10 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.11 Xxxx Management Agreement. . . . . . . . . . . . . . . . . . . 31
6.12 Chan Employment Agreement. . . . . . . . . . . . . . . . . . . 31
SECTION 7. CONDITIONS PRECEDENT TO SELLING SHAREHOLDERS' OBLIGATION
TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Accuracy of Representations. . . . . . . . . . . . . . . . . . 31
7.2 Purchaser's Performance. . . . . . . . . . . . . . . . . . . . 31
7.3 No Injunction. . . . . . . . . . . . . . . . . . . . . . . . . 31
7.4 No Material Adverse Change. . . . . . . . . . . . . . . . . . 31
ii.
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 8. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1 Termination Events. . . . . . . . . . . . . . . . . . . . . . 31
8.2 Termination Procedures. . . . . . . . . . . . . . . . . . . . 32
8.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 32
SECTION 9. INDEMNIFICATION, ETC. . . . . . . . . . . . . . . . . . . . . 32
9.1 Survival of Representations and Covenants. . . . . . . . . . . 32
9.2 Indemnification by Selling Shareholders and Principal
HYP Shareholders . . . . . . . . . . . . . . . . . . . . . . . 33
9.3 Threshold. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4 Maximum Liability . . . . . . . . . . . . . . . . . . . . . . 34
9.5 Right to Require Cure of Breach. . . . . . . . . . . . . . . . 35
9.6 No Contribution. . . . . . . . . . . . . . . . . . . . . . . . 35
9.7 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.8 Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.9 Nonexclusivity of Indemnification Remedies. . . . . . . . . . 35
9.10 Defense of Third Party Claims. . . . . . . . . . . . . . . . . 35
9.11 Exercise of Remedies by Indemnitees Other Than Purchaser. . . 36
SECTION 10. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . 36
10.1 Demand Registration . . . . . . . . . . . . . . . . . . . . . 36
10.2 Piggyback Registrations . . . . . . . . . . . . . . . . . . . 38
10.3 Expenses Of Registration . . . . . . . . . . . . . . . . . . . 39
10.4 Obligations Of Purchaser . . . . . . . . . . . . . . . . . . . 39
10.5 Termination Of Registration Rights . . . . . . . . . . . . . . 40
10.6 Delay Of Registration; Furnishing Information . . . . . . . . 40
10.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 40
10.8 Assignment Of Registration Rights . . . . . . . . . . . . . . 42
10.9 Amendment Of Registration Rights . . . . . . . . . . . . . . . 42
10.10 Limitation On Subsequent Registration Rights . . . . . . . . . 42
10.11 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . 43
10.12 Rule 144 Reporting . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 11. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . 43
11.1 Noncompetition; Confidentiality . . . . . . . . . . . . . . . 43
11.2 Joint and Several Liability. . . . . . . . . . . . . . . . . . 45
11.3 Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4 Further Assurances. . . . . . . . . . . . . . . . . . . . . . 46
11.5 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . 46
11.6 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . 47
11.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.8 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
iii.
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TABLE OF CONTENTS
(CONTINUED)
PAGE
11.9 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 48
11.11 Governing Law; Venue. . . . . . . . . . . . . . . . . . . . . 48
11.12 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 49
11.13 Remedies Cumulative; Specific Performance. . . . . . . . . . . 49
11.14 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.15 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.16 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 50
11.17 Parties in Interest. . . . . . . . . . . . . . . . . . . . . . 50
11.18 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 50
11.19 Dollars. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.20 Post-Closing Covenant. . . . . . . . . . . . . . . . . . . . . 50
11.21 Representations. . . . . . . . . . . . . . . . . . . . . . . . 50
11.22 Construction. . . . . . . . . . . . . . . . . . . . . . . . . 50
EXHIBITS
EXHIBIT A Definitions
EXHIBIT B Escrow Agreement
EXHIBIT C Form of General Release
iv.
6
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "AGREEMENT") is entered into as of
February 10, 1998 by and among ZINDART LIMITED, a Hong Kong corporation
("PURCHASER"), XXX XXXX HOLDINGS CO. LIMITED, a Cayman Islands corporation
("PARENT"), XXX XXXX PRINTING HOLDINGS CO. LIMITED, a Hong Kong corporation
("SUBSIDIARY"), HYP HOLDINGS LIMITED, a Cayman Islands corporation ("HYP"),
XXXX XXXX (BVI) HOLDINGS LIMITED, a British Virgin Islands corporation ("CHAN
HOLDINGS"), XXXX XXXX, an individual ("CHAN") (HYP, Chan Holdings and Chan are
sometimes hereinafter collectively referred to as the "SELLING SHAREHOLDERS"),
and CHINAVEST IV, L.P., a Delaware limited partnership, CHINAVEST IV-A, L.P., a
Delaware limited partnership, CHINAVEST IV-B, L.P., a Bermuda limited
partnership, ADVENT GLOBAL GECC LIMITED PARTNERSHIP, a Delaware limited
partnership, ADVENT INTERNATIONAL INVESTORS II LIMITED PARTNERSHIP, a Delaware
limited partnership, GLOBAL PRIVATE EQUITY II - LIMITED PARTNERSHIP, a Delaware
limited partnership, GLOBAL PRIVATE EQUITY II - PGGM LIMITED PARTNERSHIP, a
Delaware limited partnership, ASIA/PACIFIC SPECIAL SITUATIONS FUND LIMITED
PARTNERSHIP, a Delaware limited partnership, and ADVENT ASIA/PACIFIC FUND
LIMITED PARTNERSHIP, a Bermuda limited partnership (the ChinaVest and Advent
entities are sometimes hereinafter collectively referred to as the "PRINCIPAL
HYP SHAREHOLDERS"), and CHINAVEST MANAGEMENT LIMITED, a Bermuda corporation
(including its successors, the "AGENT"). Certain capitalized terms used in
this Agreement are defined in EXHIBIT A attached hereto.
RECITALS
A. Parent and one additional shareholder hold all of Subsidiary's
issued and outstanding ordinary shares, with a par value of HK$1.00 per share
(the "SUBSIDIARY ORDINARY SHARES").
B. HYP owns beneficially and of record 15,000,000 of Parent's
ordinary shares, with a par value of HK$0.10 per share (the "PARENT ORDINARY
SHARES"), and 181,012,500 of Parent's preferred shares, with a par value of
HK$0.01 per share (the "PARENT PREFERRED SHARES"); Chan Holdings owns
beneficially and of record 5,000,000 Parent Ordinary Shares and 60,337,500
Parent Preferred Shares; and Chan owns beneficially and of record 176,471
Parent Ordinary Shares and no Parent Preferred Shares (the Parent Ordinary
Shares and the Parent Preferred Shares being collectively referred to as the
"PARENT SHARES"), which constitute all of the outstanding shares of capital
stock of Parent.
C. Prior to the Closing (as defined below), Parent will redeem
all or a portion of the Parent Preferred Shares from its shareholders holding
Parent Preferred Shares on a pro rata basis for an aggregate of $5,000,000.
D. The Principal HYP Shareholders together own 96.5% of the
outstanding shares of capital stock of HYP.
E. The Selling Shareholders desire to effect an exchange of all
the Parent Shares for the consideration, and on the terms and subject to the
conditions, set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, hereby agree as follows:
SECTION 1. THE EXCHANGE.
1.
7
1.1 GENERAL. At the Closing, on the terms and subject to the
conditions of this Agreement, (a) the Selling Shareholders shall sell, assign,
transfer and deliver the Parent Shares to Purchaser in exchange for the
consideration set forth in Section 1.2, and (b) Purchaser shall deliver the
consideration described in Section 1.2 to the Selling Shareholders in exchange
for the Parent Shares and the performance of the other conditions described
herein.
1.2 EXCHANGE PRICE. As consideration for the Parent Shares and
the execution and delivery of the documents described in Section 1.3, Purchaser
shall pay to the Selling Shareholders the following (collectively, the
"CONSIDERATION"): (i) $35,000,000 in cash; and (ii) up to One Million
(1,000,000) of the ordinary shares of Purchaser (the "PURCHASER STOCK"). The
Consideration shall be paid to the Selling Shareholders as follows:
(a) At the Closing, Purchaser shall pay to the Agent (as
defined in Section 11.3 hereof) $35,000,000 in cash for distribution, after
payment of certain expenses and items agreed to among the Selling Shareholders,
to the Selling Shareholders in the amount of each Selling Shareholder's Pro
Rata Share.
(b) At the Closing, pursuant to the terms of the Escrow
Agreement in the form of EXHIBIT B attached hereto (the "ESCROW AGREEMENT"),
Purchaser shall reserve for the ultimate benefit of the Selling Shareholders a
total of Six Hundred Sixty-Six Thousand Six Hundred Sixty-Seven (666,667)
shares of Purchaser Stock (the "ESCROW SHARES") by depositing with the Escrow
Agent (as defined therein) completed but unexecuted share certificates in the
name of The Bank of New York (as depositary) to hold the same for each Selling
Shareholder in the amounts designated in writing by the Selling Shareholders.
As provided in the Escrow Agreement, the Escrow Shares (subject to adjustment
in the event of any stock split, subdivision or recapitalization of the
Purchaser Stock) shall be held by the Escrow Agent for one hundred eighty (180)
days following the Closing Date as security for the indemnification provisions
of Section 9 hereof.
(c) Up to a total of Three Hundred Thirty-Three Thousand
Three Hundred Thirty-Three (333,333) shares of Purchaser Stock (subject to
adjustment in the event of any stock split, subdivision or recapitalization of
the Purchaser Stock), in an amount for each Selling Shareholder of such Selling
Shareholder's Pro Rata Share (the "EARN-OUT SHARES"), shall be issued by
Purchaser and delivered to the Selling Shareholders only in the event that the
Subsidiary EBITDA during the Earn-Out Period equals or exceeds the benchmarks
indicated below:
SUBSIDIARY EBITDA PERCENTAGE OF EARN-
DURING EARN-OUT PERIOD OUT SHARES TO BE ISSUED
---------------------- -----------------------
Equal to $12,480,000 0%
Greater than $12,480,000 (100% x (Subsidiary EBITDA - $12,480,000))
but less than $15,600,000 / $3,120,000, rounded to the nearest
whole percentage number
Equal to or greater than
$15,600,000 100%
The Subsidiary EBITDA shall be determined by an audit (the "AUDIT") acceptable
to Purchaser of the Earn-Out Period conducted by Xxxxxx Xxxxxxxx & Co., at
Purchaser's expense, within ninety (90) days after the end of the earn-Out
Period. In the event Subsidiary effects a fundamental change in its business
following the Closing, the Subsidiary EBITDA benchmarks set forth above shall
be subject to adjustment pursuant to mechanisms to be mutually agreed upon by
Purchaser and the Agent or some other designated representative
2.
8
of the Selling Shareholders. A fundamental change would include, but not be
limited to, the relocation of Subsidiary's manufacturing facilities or the
construction of new manufacturing facilities. In the event that the Subsidiary
EBITDA as determined by the Audit meets the threshold amounts shown above, all
or a portion of the Earn-Out Shares shall be delivered to the Selling
Shareholders as soon as practicable, but in no event later than forty-five (45)
days, after the completion of the Audit.
(d) Except as provided in Section 10.3 hereof, any taxes
applicable to, imposed upon or arising out of the exchange of the Parent Shares
to Purchaser and the other transactions contemplated by this Agreement,
including but not limited to any income, transfer, sales, use, gross receipts
or documentary stamp taxes, shall be split evenly by the Selling Shareholders,
on the one hand, and Purchaser, on the other hand.
1.3 CLOSING.
(a) The closing of the transactions contemplated hereby
(the "CLOSING") shall take place at the offices of Xxxxxx Godward LLP, Xxx
Xxxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx at 5:00 p.m. (California
time) on February 10, 1998 (or at such other place or time as Purchaser and the
Selling Shareholders may designate). For purposes of this Agreement,
"SCHEDULED CLOSING TIME" shall mean the time and date as of which the Closing
is required to take place pursuant to this Section 1.3(a) and "CLOSING DATE"
shall mean the time and date as of which the Closing actually takes place.
(b) At the Closing:
(1) each Selling Shareholder shall deliver to
Purchaser share transfer forms in respect of the Parent Shares being exchanged
by such Selling Shareholder, duly endorsed (or accompanied by duly executed
stock powers);
(2) each Selling Shareholder and Principal HYP
Shareholder shall execute and deliver to Purchaser, Subsidiary and Parent a
General Release in the form of EXHIBIT C attached hereto;
(3) each Selling Shareholder and Principal HYP
Shareholder shall execute and deliver to Purchaser, Subsidiary and Parent a
certificate (the "CLOSING CERTIFICATE") setting forth its representation and
warranty that (A) each representation and warranty made by it in this Agreement
was accurate in all respects as of the date of this Agreement, (B) except as
expressly set forth in the Closing Certificate, each representation and
warranty made by it in this Agreement is accurate in all respects as of the
Closing Date as if made on the Closing Date, (C) each covenant and obligation
that it is required to have complied with or performed pursuant to this
Agreement at or prior to the Closing has been duly complied with and performed
in all respects, and (D) except as expressly set forth in the Closing
Certificate, each condition set forth in Sections 6.4(c), 6.5, 6.7 and 6.8 has
been satisfied in all respects; and
(4) all persons designated in writing by
Purchaser prior to the Closing shall resign from their positions as directors
and officers of Subsidiary and Parent.
1.4 RESTRICTIONS ON TRANSFER.
(a) RESTRICTIONS ON HYP AND PRINCIPAL HYP SHAREHOLDERS.
(1) Each of HYP and the Principal HYP
Shareholders understands and acknowledges that the Purchaser Stock (or American
Depositary Shares) to be delivered to it has not been registered under the
Securities Act and may not be offered or sold unless such securities are
registered under the Securities Act or an exemption from the registration
requirements is available.
3.
9
(2) Each certificate representing shares of
Purchaser Stock delivered to HYP or the Principal HYP Shareholders shall
(unless otherwise permitted by the provisions of this Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in this Agreement):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE
ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED."
(3) Notwithstanding the foregoing, each of HYP
and the Principal HYP Shareholders agrees and acknowledges that any securities
held from time to time by "affiliates" (as that term is used in the Securities
Act) shall bear the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE HELD BY A
PERSON WHO MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR
PURPOSES OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED."
(4) Except as provided in Section 1.5 of the
Escrow Agreement, neither HYP nor any of the Principal HYP Shareholders shall
convey their Purchaser Stock or any interest therein until the date such
Purchaser Stock is issued and, if applicable, released from escrow.
(b) RESTRICTIONS ON CHAN HOLDINGS AND CHAN.
(1) Each of Chan Holdings and Chan understands
and acknowledges that the Purchaser Stock (or American Depositary Shares) to be
delivered to it has not been registered under the Securities Act and may not be
offered or sold in the United States or to U.S. persons or for the account or
benefit of a U.S. person unless such securities are registered under the
Securities Act, or an exemption from the registration requirements is
available.
(2) If requested by Purchaser, each certificate
representing shares of Purchaser Stock delivered to Chan Holdings or Chan shall
(unless otherwise permitted by the provisions of this Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend provided elsewhere in this Agreement) prior to release
from escrow:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS UNTIL 40 DAYS
AFTER THE DATE OF ORIGINAL ISSUANCE OF THE SECURITIES, EXCEPT
IN ACCORDANCE WITH REGULATION S PROMULGATED UNDER THE ACT.
TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM BY REGULATION
S."
(3) Notwithstanding the foregoing, each of Chan
Holdings and Chan agrees and acknowledges that any securities held from time to
time by "affiliates" (as that term is used in the Securities Act) shall bear
the following legend:
4.
10
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE HELD BY A
PERSON WHO MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR
PURPOSES OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED."
(4) Neither Chan Holdings nor Chan shall convey
their Purchaser Stock or any interest therein during a period of forty (40)
days from, with respect to the Escrow Shares, the Closing Date or, with respect
to the Earn-Out Shares, if applicable, the date the Earn-Out Shares are issued.
(5) In the event that the provisions of
Regulation S are amended or any successor provision is adopted, the Earn- Out
Shares shall be subject to the restriction and legends contained in Section
1.4(a).
1.5 CONVERSION OF PURCHASER STOCK. If Purchaser's American
Depositary Shares ("AMERICAN DEPOSITARY SHARES"), are publicly traded, then
after the issuance and delivery of the Earn-Out Shares to the Selling
Shareholders, if applicable, or at any time after the release of the Escrow
Shares and delivery of such Escrow Shares to the Selling Shareholders pursuant
to the terms of the Escrow Agreement, each share of Earn- Out Shares or Escrow
Shares, as applicable, shall be convertible at any time, at the option of the
Holder thereof, into American Depositary Shares, subject to compliance with
applicable law and the terms and provisions of the Depositary Agreement of
Purchaser then in effect. Before any Holder shall be entitled to convert the
same into American Depositary Shares, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of Purchaser, its
depositary and any transfer agent for the Purchaser Stock, and shall give
written notice to Purchaser at such office that he elects to convert the same
and shall state therein the name or names in which he wishes the certificate(s)
for American Depositary Shares to be issued. Purchaser shall, as soon as
practicable thereafter, issue and deliver to such Holder a certificate(s) for
the number of American Depositary Shares to which he shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of surrender of the shares of Purchaser
Stock to be converted, and the person or persons entitled to receive the
American Depositary Shares issuable upon such conversion shall be treated for
all purposes as the record Holder or Holders of such American Depositary Shares
on such date.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SUBSIDIARY, PARENT, THE SELLING
SHAREHOLDERS AND THE PRINCIPAL HYP SHAREHOLDERS.
Each of Subsidiary, Parent, the Selling Shareholders and the Principal
HYP Shareholders jointly and severally (except with respect to the
representations contained in Section 2.31 hereof which is being made solely by
the Chan and Chan Holdings and except with respect to the representations
contained in Section 2.32 hereof which is being made solely by HYP and the
Principal HYP Shareholders) represents and warrants to Purchaser that, except
as disclosed or otherwise referred to in the Disclosure Schedule or in any of
the documents identified in the Disclosure Schedule and provided to Purchaser
or its counsel, or as set forth in the Financial Statements or the notes to the
Financial Statements, the following statements are true and accurate:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of Hong Kong. Parent is a
corporation duly organized, validly existing and in good standing under the
laws of the Cayman Islands. Each of the Joint Ventures is a contractual joint
venture duly organized, validly existing and in good standing under the laws of
the PRC. Each of Subsidiary and Parent and the Joint Ventures (collectively,
the "COMPANIES") has all necessary power and authority: (1) to conduct its
business
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in the manner in which its business is currently being conducted and in the
manner in which its business is proposed to be conducted; (2) to own and use
its assets in the manner in which its assets are currently owned and used and
in the manner in which its assets are proposed to be owned and used; and (3) to
perform its obligations under all Contracts.
(b) None of the Companies has ever conducted any business
under or otherwise used, for any purpose or in any jurisdiction, any fictitious
name, assumed name, trade name or other name, other than the names "Xxx Xxxx
Printing Holdings Co. Limited," "Xxx Xxxx Holdings Co. Limited," "Shenzhen
Huaxuan Printing Product Co., Ltd." and "Guangzhou Xxx Xx Advertising Company
Limited."
(c) None of the Companies is or has ever been required to
be qualified, authorized, registered or licensed to do business as a foreign
corporation or entity in any jurisdiction.
(d) Part 2.1 of the Disclosure Schedule accurately sets
forth, as to each of the Companies (if applicable), (1) the names of the
members of the board of directors, (2) the names of the members of each
committee of the board of directors and (3) the names and titles of the
executive officers.
(e) None of the Companies nor any of their respective
shareholders or equityholders has ever approved, or commenced any proceeding or
made any election contemplating, the dissolution or liquidation of the
Companies or the winding up or cessation of the business or affairs of the
Companies.
(f) None of the Companies has any subsidiaries (except
that Subsidiary is a wholly-owned subsidiary of Parent and other than the Joint
Ventures), and none of the Companies has ever owned, beneficially or otherwise,
any shares or other securities of, or any direct or indirect ownership interest
of any nature in, any Entity.
2.2 ARTICLES OF ASSOCIATION, MEMORANDUM OF ASSOCIATION AND JOINT VENTURE
AGREEMENTS; RECORDS.
(a) Each of the Companies has delivered to Purchaser
accurate and complete copies of (as appropriate): (1) its articles of
association, memorandum of association and joint venture agreements, including
all amendments thereto; (2) its stock or equity records; and (3) the minutes
and other records of the meetings and other proceedings (including any actions
taken by written consent or otherwise without a meeting) of its shareholders,
equityholders, its board of directors or governing board and all committees
thereof. There have been no meetings or other proceedings of the shareholders,
the board of directors or governing board or any committee thereof of the
Companies that are not fully reflected in such minutes or other records.
(b) To the best of the Knowledge of the Companies, the
Selling Shareholders and the Principal HYP Shareholders, there has not been any
violation of any of the provisions of, as to each of the Companies, (1) the
articles of association, memorandum of association or joint venture agreements
or (2) any resolution adopted by its shareholders or equityholders, board of
directors or governing board or any committee thereof; and no event has
occurred, and no condition or circumstance exists, that might (with or without
notice or lapse of time) constitute or result directly or indirectly in such a
violation.
(c) The books of account, stock records, minute books and
other records of each of the Companies are accurate, up-to-date and complete,
and have been maintained in accordance with sound and prudent business
practices in Hong Kong, the Cayman Islands and the PRC. All of the records of
the Companies are in the actual possession and direct control of Subsidiary,
Parent or the Joint Ventures. Each of the Companies has at all times had in
place an adequate and appropriate system of internal controls that is
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at least as comprehensive and effective as the systems of internal controls
customarily maintained by Comparable Entities.
2.3 CAPITALIZATION.
(a) Subsidiary's authorized capital stock consists of
10,000 Subsidiary Ordinary Shares, of which 1,000 shares are issued and
outstanding. Parent holds 999 of the issued and outstanding Subsidiary
Ordinary Shares and Xxxxxx Xxxxx holds 1 of the issued and outstanding
Subsidiary Ordinary Shares. Parent's authorized capital stock consists of (a)
30,000,000 Parent Ordinary Shares, of which 20,176,471 shares (constituting all
of the Parent Ordinary Shares) are issued and outstanding, and (b)
3,000,000,000 Parent Preferred Shares, of which 241,350,000 shares
(constituting all of the Parent Preferred Shares) are issued and outstanding.
(b) The Selling Shareholders have, and Purchaser shall
acquire at the Closing, good and valid title to the Parent Shares free and
clear of any Encumbrances. HYP owns beneficially and of record 15,000,000
Parent Ordinary Shares, and 181,012,500 Parent Preferred Shares; Chan Holdings
owns beneficially and of record 5,000,000 Parent Ordinary Shares and 60,337,500
Parent Preferred Shares; and Chan owns beneficially and of record 176,471
Parent Ordinary Shares and no Parent Preferred Shares, which constitute all of
the outstanding shares of capital stock of Parent. Upon the consummation of
the transactions contemplated by this Agreement, Purchaser shall have acquired
all of the outstanding shares of capital stock of Parent.
(c) Subsidiary holds 100% of the issued and outstanding
registered capital of Shenzhen Huaxuan Printing Product Co., Ltd. Parent,
Subsidiary and Shenzhen Huaxuan Printing Product Co., Ltd. collectively hold
90% of the issued and outstanding registered capital of Guangzhou Xxx Xx
Advertising Company Limited.
(d) All of the Parent Shares and the outstanding shares
of capital stock of Subsidiary (1) have been duly authorized and validly
issued, (2) are fully paid-up and (3) have been issued in full compliance with
all applicable securities laws and other applicable Legal Requirements. The
Selling Shareholders have delivered to Purchaser accurate and complete share
transfer forms evidencing the Parent Ordinary Shares.
(e) There is no: (1) outstanding subscription, option,
call, warrant or right (whether or not currently exercisable) to acquire any
shares of the capital stock or other securities of the Companies; (2)
outstanding security, instrument or obligation that is or may become
convertible into or exchangeable for any shares of the capital stock or other
securities of the Companies; (3) Subsidiary Contract under which the Companies
is or may become obligated to sell or otherwise issue any shares of its capital
stock or any other securities; or (4) condition or circumstance that may
directly or indirectly give rise to or provide a basis for the assertion of a
claim by any Person to the effect that such Person is entitled to acquire or
receive any shares of capital stock or other securities of the Companies.
(f) Except as set forth herein, none of the Companies has
ever repurchased, redeemed or otherwise reacquired any shares of capital stock
or other securities.
2.4 FINANCIAL STATEMENTS.
(a) Parent has delivered to Purchaser the following
financial statements and notes (collectively, the "FINANCIAL STATEMENTS"):
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(1) the audited consolidated balance sheets of
Parent and its subsidiaries as of March 31, 1996 and 1997, and the related
audited consolidated statements of operations, consolidated statements of cash
flows and consolidated statements of changes in shareholders' equity of Parent
and its subsidiaries for the period from January 17, 1995 to March 31, 1995 and
for the years ended March 31, 1996 and 1997, together with the notes thereto
and the unqualified report and certification of Xxxxxx Xxxxxxxx & Co. relating
thereto;
(2) the unaudited consolidated balance sheets of
Parent and its subsidiaries as of December 31, 1997 (the "UNAUDITED INTERIM
BALANCE SHEET"), and the related unaudited consolidated statements of
operations, consolidated statements of cash flows and consolidated statements
of changes in shareholders' equity of Parent and its subsidiaries for the six
months ended December 31, 1997, together with the notes thereto.
(b) All of the Financial Statements are accurate and
complete in all material respects, and the dollar amount of each line item
included in the Financial Statements is accurate in all material respects. The
financial statements and notes referred to in Section 2.4(a)(1) present fairly
the consolidated financial position of the Companies and the consolidated
results of operations, changes in shareholders' equity and cash flows of the
Companies for the periods presented. The financial statements and notes
referred to in Section 2.4(a)(2) present fairly the financial position of the
Companies as of the date thereof and the results of operations, changes in
shareholders' equity and cash flows of the Companies for the period covered
thereby, subject to normally recurring year-end adjustments, which adjustments
will not be material either individually or in the aggregate. The Financial
Statements have been prepared in accordance with GAAP, applied on a consistent
basis throughout the periods covered.
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the
Disclosure Schedule, since March 31, 1997:
(a) there has not been any material adverse change in the
business, condition, assets, liabilities, operations, financial performance,
net income or prospects (or in any aspect or portion thereof) of the Companies,
and no event has occurred that might have an adverse effect on the business,
condition, assets, liabilities, operations, financial performance, net income
or prospects (or on any aspect or portion thereof) of the Companies;
(b) there has not been any loss, damage or destruction
to, or any interruption in the use of, any assets (whether or not covered by
insurance) of the Companies;
(c) none of the Companies has declared, accrued, set
aside or paid any dividend or made any other distribution in respect of any
shares of capital stock or equity (other than as provided in Section 4.2(i)
hereof);
(d) none of the Companies has sold or otherwise issued
any shares of capital stock or any other securities;
(e) none of the Companies has amended its articles of
association, memorandum of association or joint venture agreement or has
effected or been a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(f) none of the Companies has purchased or otherwise
acquired any material asset from any other Person, except for supplies acquired
by Subsidiary in the Ordinary Course of Business;
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(g) none of the Companies has leased or licensed any
material asset from any other Person;
(h) none of the Companies has made any capital
expenditure outside the Ordinary Course of Business or in excess of $100,000
(individually);
(i) none of the Companies has sold or otherwise
transferred, or has leased or licensed, any asset to any other Person except
for products sold by each of Subsidiary or the Joint Ventures from its
inventory in the Ordinary Course of Business;
(j) none of the Companies has written off as
uncollectible, or established any extraordinary reserve with respect to, any
account receivable or other indebtedness;
(k) none of the Companies has pledged or hypothecated any
of its assets or otherwise permitted any of its assets to become subject to any
Encumbrance other than in the Ordinary Course of Business;
(l) none of the Companies has made any loan or advance to
any other Person;
(m) none of the Companies has (1) established or adopted
any Employee Benefit Plan, or (2) paid any bonus or made any profit-sharing or
similar payment to, or increased the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers or employees;
(n) none of the Companies has entered into, and neither
the Companies nor any of the assets owned or used by either of them has become
bound by, any Contract that is not an Excluded Contract;
(o) no Subsidiary Contract has been amended or
terminated;
(p) none of the Companies has incurred, assumed or
otherwise become subject to any Liability, other than accounts payable (of the
type required to be reflected as current liabilities in the "liabilities"
column of a balance sheet prepared in accordance with GAAP) incurred by
Subsidiary in the Ordinary Course of Business;
(q) none of the Companies has discharged any Encumbrance
or discharged or paid any indebtedness or other Liability, except for accounts
payable that (1) are reflected as current liabilities in the "liabilities"
column of the Unaudited Interim Balance Sheet or have been incurred by
Subsidiary since September 30, 1997 in the Ordinary Course of Business and (2)
have been discharged or paid in the Ordinary Course of Business;
(r) none of the Companies has forgiven any debt or
otherwise released or waived any right or claim;
(s) none of the Companies has changed any of its methods
of accounting or accounting practices in any respect;
(t) none of the Companies has entered into any
transaction outside the Ordinary Course of Business or taken any other action
outside the Ordinary Course of Business; and
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(u) none of the Companies has agreed, committed or
offered (in writing or otherwise), or has attempted, to take any of the actions
referred to in clauses (c) through (t) above.
2.6 TITLE TO ASSETS.
(a) Each of the Companies owns, and has good, valid and
marketable title to, all assets purported to be owned by it, including: (1)
all assets reflected on the Unaudited Interim Balance Sheet (except for
inventory sold by Subsidiary since September 30, 1997 in the Ordinary Course of
Business); (2) all assets acquired by Subsidiary since September 30, 1997
(except for inventory sold by Subsidiary since September 30, 1997 in the
Ordinary Course of Business); (3) all assets referred to in the Disclosure
Schedule and all of its rights under Subsidiary Contracts; and (4) all other
assets reflected in its books and records as being owned by it. Except as set
forth in Part 2.6 of the Disclosure Schedule, all of said assets are owned by
either Subsidiary or Parent, as the case may be, free and clear of any
Encumbrances.
(b) Part 2.6 of the Disclosure Schedule identifies all
material assets that are being leased or licensed to the Companies.
2.7 BANK ACCOUNTS. Part 2.7 of the Disclosure Schedule accurately
sets forth, with respect to each account maintained by or for the benefit of
the Companies at any bank or other financial institution: (a) the name and
location of the institution at which such account is maintained; (b) the name
in which such account is maintained and the account number of such account; (c)
a description of such account and the purpose for which such account is used;
(d) the current balance in such account; (e) the rate of interest being earned
on the funds in such account; and (f) the names of all individuals authorized
to draw on or make withdrawals from such account. There are no safe deposit
boxes or similar arrangements maintained by or for the benefit of the
Companies.
2.8 RECEIVABLES; MAJOR CUSTOMERS.
(a) Part 2.8 of the Disclosure Schedule provides an
accurate and complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of each of the Companies as of September 30,
1997.
(b) Except as set forth in Part 2.8 of the Disclosure
Schedule, all existing accounts receivable of each of the Companies (including
those accounts receivable reflected on the Unaudited Interim Balance Sheet that
have not yet been collected and those accounts receivable that have arisen
since September 30, 1997 and have not yet been collected) represent valid
obligations of customers of Subsidiary arising from bona fide transactions
entered into in the Ordinary Course of Business.
(c) Part 2.8 of the Disclosure Schedule accurately
identifies, and provides an accurate and complete breakdown of the revenues
received from, each customer or other Person that accounted for more than ten
percent (10%) of the consolidated gross revenues of the Companies in any of the
last three completed fiscal years or in the six-month period ended September
30, 1997. None of the Companies has received any notice or other communication
(in writing or otherwise), and has not received any other information,
indicating that any customer or other Person may cease dealing with the
Companies or may otherwise reduce the volume of business transacted by such
Person with the Companies below historical levels.
2.9 INVENTORY. All of the Companies' existing inventory
(including all inventory that is reflected on the Unaudited Interim Balance
Sheet and that has not been disposed of by the Companies since September 30,
1997) (a) is of such quality and quantity as to be usable and saleable by
Subsidiary in the Ordinary Course of Business, (b) has been priced at the lower
of cost or market value using the "last-in, first-
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out" method, and (c) is free of any defect or deficiency. The inventory levels
maintained by the Companies (x) are not excessive in light of the Companies'
normal operating requirements and (y) are adequate for the conduct of the
Companies' operations in the Ordinary Course of Business.
2.10 TANGIBLE ASSETS. Each tangible asset owned or leased by the
Companies (a) is structurally sound, free of defects and deficiencies and in
good condition and repair (ordinary wear and tear excepted), (b) complies in
all respects with, and is being operated and otherwise used in full compliance
with, all applicable Legal Requirements of which each of the Companies, the
Selling Shareholders and the Principal HYP Shareholders is aware and (c) is
adequate for the uses to which it is being put. Such assets are adequate for
the conduct of the Companies' business in the manner in which such business is
currently being conducted and in the manner in which such business is proposed
to be conducted.
2.11 REAL PROPERTY. None of the Companies owns any real property
or any interest in real property, except for the leaseholds created under the
real property leases identified in Part 2.11 of the Disclosure Schedule. The
Companies enjoy peaceful and undisturbed possession of such premises.
2.12 PROPRIETARY ASSETS.
(a) Except as set forth in Part 2.12 of the Disclosure
Schedule, there is no Proprietary Asset that is owned by or licensed to the
Companies or that is otherwise used or useful in connection with the Companies'
business.
(b) Each of the Companies has taken all measures and
precautions necessary to protect the confidentiality and value of each
Proprietary Asset identified or required to be identified in Part 2.12 of the
Disclosure Schedule.
(c) None of the Companies is infringing, or has at any
time infringed or received any notice or other communication (in writing or
otherwise) of any actual, alleged, possible or potential infringement of, any
Proprietary Asset owned or used by any other Person. To the best of the
Knowledge of the Companies, the Selling Shareholders and the Principal HYP
Shareholders, no other Person is infringing, and no Proprietary Asset owned or
used by any other Person infringes or conflicts with, any Proprietary Asset
owned or used by the Companies.
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(d) The Proprietary Assets identified in Part 2.12 of the
Disclosure Schedule constitute all of the Proprietary Assets necessary to
enable the Companies to conduct their business in the manner in which their
business is currently being conducted and in the manner in which their business
is proposed to be conducted.
2.13 SUBSIDIARY CONTRACTS.
(a) Part 2.13 of the Disclosure Schedule identifies and
provides an accurate and complete description of each Subsidiary Contract,
except for any Excluded Contract. Subsidiary has delivered to Purchaser and
counsel to Purchaser accurate and complete copies of all Subsidiary Contracts
identified in Part 2.13 of the Disclosure Schedule, including all amendments
thereto.
(b) Each Subsidiary Contract is valid and in full force
and effect, and is enforceable by in accordance with its terms.
(c) Except as set forth in Part 2.13 of the Disclosure
Schedule:
(1) no Person has violated or breached, or
declared or committed any default under, any Subsidiary Contract;
(2) no event has occurred, and no circumstance or
condition exists, that might (with or without notice or lapse of time) (A)
result in a violation or breach of any of the provisions of any Subsidiary
Contract, (B) give any Person the right to declare a default or exercise any
remedy under any Subsidiary Contract, (C) give any Person the right to
accelerate the maturity or performance of any Subsidiary Contract or (D) give
any Person the right to cancel, terminate or modify any Subsidiary Contract;
(3) none of the Companies has received any notice
or other communication (in writing or otherwise) regarding any actual, alleged,
possible or potential violation or breach of, or default under, any Subsidiary
Contract; and
(4) none of the Companies has waived any of its
rights under any Subsidiary Contract.
(d) To the best of the Knowledge of the Companies, the
Selling Shareholders and the Principal HYP Shareholders, each Person against
which the Companies has or may acquire any rights under any Subsidiary Contract
is solvent and is able to satisfy all of such Person's current and future
monetary obligations and other obligations and Liabilities to the Companies.
(e) Except as set forth in Part 2.13 of the Disclosure
Schedule: (1) none of the Companies has ever guaranteed or otherwise agreed to
cause, insure or become liable for, and none of the Companies has ever pledged
any of its assets to secure, the performance or payment of any obligation or
other Liability of any other Person; and (2) none of the Companies has ever
been a party to or bound by (A) any joint venture agreement, partnership
agreement, profit-sharing agreement, cost-sharing agreement, loss-sharing
agreement or similar Contract, or (B) any Contract that creates or grants to
any Person, or provides for the creation or grant of, any stock appreciation
right, phantom stock right or similar right or interest.
(f) The performance of the Subsidiary Contracts will not
result in any violation of or failure to comply with any Legal Requirement.
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(g) No Person is renegotiating, or has the right to
renegotiate, any amount paid or payable to the Companies under any Contract or
any other term or provision of any Contract.
(h) The Subsidiary Contracts identified in Part 2.13 of
the Disclosure Schedule and the Excluded Contracts collectively constitute all
of the Contracts necessary to enable the Companies to conduct their business in
the manner in which their business is currently being conducted and in the
manner in which their business is proposed to be conducted.
(i) Part 2.13 of the Disclosure Schedule identifies and
provides an accurate and complete description of each material proposed
Contract as to which any bid, offer, written proposal, term sheet or similar
document has been submitted or received by the Companies.
2.14 LIABILITIES; MAJOR SUPPLIERS.
(a) None of the Companies has any Liabilities, except
for: (1) liabilities identified as such in the "liabilities" column of the
Unaudited Interim Balance Sheet; (2) accounts payable (of the type required to
be reflected as current liabilities in the "liabilities" column of a balance
sheet prepared in accordance with GAAP) incurred by Subsidiary in the Ordinary
Course of Business since September 30, 1997; and (3) obligations under the
Subsidiary Contracts listed in Part 2.13 of the Disclosure Schedule and under
Excluded Contracts.
(b) None of the Companies has paid, and none of the
Companies is or will become liable for the payment of, any fees, costs or
expenses of the type referred to in Section 11.5(a).
2.15 COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) Except as set forth in Part 2.15 of the Disclosure
Schedule:
(1) each of the Companies is in full compliance
with each Legal Requirement that is applicable to it or to the conduct of its
business or the ownership or use of any of its assets;
(2) each of the Companies has at all times been
in full compliance with each Legal Requirement that is or was applicable to it
or to the conduct of its business or the ownership or use of any of its assets;
(3) no event has occurred, and no condition or
circumstance exists, that might (with or without notice or lapse of time)
constitute or result directly or indirectly in a violation by the Companies of,
or a failure on the part of the Companies to comply with, any Legal
Requirement; and
(4) none of the Companies has received, at any
time, any written notice or other communication from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible or potential
violation of, or failure to comply with, any Legal Requirement or (B) any
actual, alleged, possible or potential obligation on the part of any of the
Companies to undertake, or to bear all or any portion of the cost of, any
cleanup or any remedial, corrective or response action of any nature.
(b) The Companies have delivered to Purchaser an accurate
and complete copy of each report, study, survey or other document to which the
Companies has access that addresses or otherwise relates to the compliance of
the Companies with, or the applicability to the Companies of, any Legal
Requirement.
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(c) To the best of the Knowledge of the Companies, the
Selling Shareholders and the Principal HYP Shareholders, no Governmental Body
has proposed or is considering any Legal Requirement that, if adopted or
otherwise put into effect, (1) may have a material adverse effect on the
business, condition, assets, liabilities, operations, financial performance,
net income or prospects of the Companies or on the ability of the Companies,
any of the Selling Shareholders or any of the Principal HYP Shareholders to
comply with or perform any covenant or obligation under any of the
Transactional Agreements or (2) may have the effect of preventing, delaying,
making illegal or otherwise interfering with any of the Transactions.
2.16 GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth in Part 2.16 of the Disclosure
Schedule:
(1) Each of the Companies and their respective
employees is and has at all times been in substantial compliance with all of
the terms and requirements of each Governmental Authorization identified or
required to be identified in Part 2.16 of the Disclosure Schedule;
(2) To the best of the Knowledge of the
Companies, the Selling Shareholders and the Principal HYP Shareholders, no
event has occurred, and no condition or circumstance exists, that might (with
or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization identified or required to be
identified in Part 2.16 of the Disclosure Schedule or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, termination
or modification of any Governmental Authorization identified or required to be
identified in Part 2.16 of the Disclosure Schedule;
(3) none of the Companies has ever received, and,
to the best of the Knowledge of the Companies, the Selling Shareholders and the
Principal HYP Shareholders, no employee of the Companies has ever received, any
notice or other communication (in writing or otherwise) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible or
potential violation of or failure to comply with any term or requirement of any
Governmental Authorization or (B) any actual, proposed, possible or potential
revocation, withdrawal, suspension, cancellation, termination or modification
of any Governmental Authorization; and
(4) all applications required to have been filed
for the renewal of the Governmental Authorizations required to be identified in
Part 2.16 of the Disclosure Schedule have been duly filed on a timely basis
with the appropriate Governmental Bodies, and each other notice or filing
required to have been given or made with respect to such Governmental
Authorizations has been duly given or made on a timely basis with the
appropriate Governmental Body.
(b) The Governmental Authorizations identified in Part
2.16 of the Disclosure Schedule constitute all of the principal business
licenses currently in effect.
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2.17 TAX MATTERS.
(a) Each Tax required to have been paid, or claimed by
any Governmental Body to be payable, by the Companies (whether pursuant to any
Tax Return or otherwise) has been duly paid in full or on a timely basis. Any
Tax required to have been withheld or collected by the Companies has been duly
withheld and collected and (to the extent required) each such Tax has been paid
to the appropriate Governmental Body.
(b) Part 2.17 of the Disclosure Schedule accurately
identifies all Tax Returns required to be filed by or on behalf of the
Companies with any Governmental Body with respect to any taxable period ending
on or before the Closing Date ("RETURNS"). All Returns (1) have been or shall
be filed when due and (2) have been, or shall be when filed, accurately and
completely prepared in full compliance with all applicable Legal Requirements.
All amounts shown on the Returns to be due on or before the Closing Date, and
all amounts otherwise payable in connection with the Returns on or before the
Closing Date, have been or shall be paid on or before the Closing Date. The
Companies have delivered to Purchaser accurate and complete copies of all
Returns filed since January 17, 1995.
(c) The Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with GAAP. The Companies shall establish, in the
Ordinary Course of Business, reserves adequate for the payment of all Taxes for
the period from September 30, 1997 through the Closing Date, and shall disclose
the dollar amount of such reserves to Purchaser on or prior to the Closing
Date.
(d) Each Return relating to income Taxes that has been
filed with respect to any period ended on or prior to January 17, 1995 has
either (1) been examined and audited by all relevant Governmental Bodies or (2)
by virtue of the expiration of the limitation period under applicable Legal
Requirements, is no longer subject to examination or audit by any Governmental
Body. Part 2.17 of the Disclosure Schedule accurately identifies each
examination or audit of any Return that has been conducted. The Companies have
delivered to Purchaser accurate and complete copies of all audit reports and
similar documents to which the Companies have access relating to Returns.
Except as set forth in Part 2.17 of the Disclosure Schedule, no extension or
waiver of the limitation period applicable to any of the Returns has been
granted (by the Companies or any other Person), and no such extension or waiver
has been requested from the Companies.
(e) Except as set forth in Part 2.17 of the Disclosure
Schedule, no claim or other Proceeding is pending or has been threatened
against or with respect to the Companies in respect of any Tax. There are no
unsatisfied Liabilities for Taxes (including liabilities for interest,
additions to tax and penalties thereon and related expenses) with respect to
any notice of deficiency or similar document received by the Companies.
2.18 EMPLOYEE AND LABOR MATTERS.
(a) Part 2.18 of the Disclosure Schedule (1) contains a
true and correct list of all employees (including employees who are on a leave
of absence or on layoff status) to whom each of the Companies is paying
compensation, including bonuses and incentives, at an annual rate in excess of
$100,000 for services rendered or otherwise, and in the case of salaried
employees such list identifies the current annual rate of compensation for each
employee and in the case of hourly or commission employees identifies certain
reasonable ranges of rates and the number of employees falling within each such
range; (2) lists each Current Benefit Plan in which such employees participate
or are eligible to
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participate; and (3) lists any Governmental Authorization that is held by any
such employee and that relates to or is useful in connection with the
Companies' business.
(b) Part 2.18 of the Disclosure Schedule accurately
identifies each former employee of any of the Companies who is receiving or is
scheduled to receive (or whose spouse or other dependent is receiving or is
scheduled to receive) any benefits (whether from the Companies or otherwise)
relating to such former employee's employment with the Companies. Part 2.18 of
the Disclosure Schedule accurately describes such benefits.
(c) Except as set forth in Part 2.18 of the Disclosure
Schedule, none of the Companies is a party to or bound by, has ever been a
party to or bound by, or is required to be bound by, any employment agreement
or any union contract, collective bargaining agreement or similar Contract.
(d) The employment of each employee of each of the
Companies is terminable by the employer at will. Subsidiary delivered to
Purchaser and counsel for Purchaser accurate and complete copies of all
employee manuals and handbooks, disclosure materials, policy statements and
other materials relating to the employment of the current and former employees
of each of the Companies and the Joint Ventures.
(e) To the best of the Knowledge of the Companies, the
Selling Shareholders and the Principal HYP Shareholders: (1) no key employee of
the Companies intends to terminate his or her employment with the Companies;
(2) no key employee of the Companies has received an offer to join a business
that may be competitive with the Companies' business; and (3) no employee of
the Companies is a party to or is bound by any confidentiality agreement,
noncompetition agreement or other Contract that may have an adverse effect on
(A) the performance by such employee of any of his duties or responsibilities
as an employee of Subsidiary or Parent, or (B) the business or operations of
the Companies.
(f) None of the Companies is or has ever been engaged in
any unfair labor practice of any nature. There has never been any slowdown,
work stoppage, labor dispute or union organizing activity, or any similar
activity or dispute, affecting the Companies or any of their respective
employees. There is not now pending, and no Person has threatened to commence,
any such slowdown, work stoppage, labor dispute or union organizing activity or
any similar activity or dispute. No event has occurred, and no condition or
circumstance exists, that might directly or indirectly give rise to or provide
a basis for the commencement of any such slowdown, work stoppage, labor dispute
or union organizing activity or any similar activity or dispute.
2.19 BENEFIT PLANS.
(a) Part 2.19 of the Disclosure Schedule identifies and
provides an accurate and complete description of each Current Benefit Plan and
each Past Benefit Plan. None of the Companies has ever established, adopted,
maintained, sponsored, contributed to, participated in or incurred any
Liability with respect to any Employee Benefit Plan, except for the Plans
identified in Part 2.19 of the Disclosure Schedule. None of the Companies has
ever provided or made available any fringe benefit, post-retirement or
post-employment benefit or other benefit of any nature to any of its employees
except as set forth in Part 2.19 of the Disclosure Schedule.
(b) Subsidiary has delivered to Purchaser, with respect
to each Company Plan:
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(1) an accurate and complete copy of such Company
Plan and all amendments thereto (including any amendment that is scheduled to
take effect in the future);
(2) an accurate and complete copy of each
Contract (including any trust agreement, funding agreement, service provider
agreement, insurance agreement, investment management agreement or
recordkeeping agreement) relating to such Company Plan;
(3) an accurate and complete copy of any
description, summary, notification, report or other document that has been
furnished to any employee of any of the Companies with respect to such Company
Plan;
(4) an accurate and complete copy of any form,
report, registration statement or other document that has been filed with or
submitted to any Governmental Body with respect to such Company Plan; and
(5) an accurate and complete copy of any
determination letter, notice or other document that has been issued by, or that
has been received by any of the Companies from, any Governmental Body with
respect to such Company Plan.
(c) Each Company Plan has at all times been operated and
administered in full compliance with the provisions thereof. Each contribution
or other payment that is required to have been accrued or made under or with
respect to any Company Plan has been duly accrued and made on a timely basis.
(d) Each Company Plan has at all times complied and been
operated and administered in full compliance with all applicable Legal
Requirements. None of the Companies has ever incurred any Liability to any
Governmental Body with respect to any Company Plan, and no event has occurred,
and no condition or circumstance exists, that might (with or without notice or
lapse of time) give rise directly or indirectly to any such Liability. None of
the Companies, and no Person that is or was an administrator or fiduciary of
any Company Plan (or that acts or has acted as an agent of any of the Companies
or any such administrator or fiduciary), has engaged in any transaction or has
otherwise acted or failed to act in a manner that has subjected or may subject
the Companies to any Liability for breach of any fiduciary duty or any other
duty.
(e) No inaccurate or misleading representation, statement
or other communication has been made or directed (in writing or otherwise) to
any current or former employee of the Companies (1) with respect to such
employee's participation, eligibility for benefits, vesting, benefit accrual or
coverage under any Company Plan or with respect to any other matter relating to
any Company Plan or (2) with respect to any proposal or intention on the part
of the Companies to establish or sponsor any Employee Benefit Plan or to
provide or make available any fringe benefit or other benefit of any nature.
(f) Except as set forth in Part 2.19 of the Disclosure
Schedule, none of the Companies has advised any of its employees (in writing or
otherwise) that it intends or expects to establish or sponsor any Employee
Benefit Plan or to provide or make available any fringe benefit or other
benefit of any nature in the future.
(g) Subsidiary's employees in Hong Kong are not and are
not required to be covered by any Employee Benefit Plan. The Joint Ventures'
employees in the PRC are all hired on a contractual basis and consequently
neither Subsidiary, Parent nor the Joint Ventures have any obligation for any
pension liabilities for such employees.
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2.20 ENVIRONMENTAL MATTERS.
(a) None of the Companies has ever received any notice or
other communication (in writing or otherwise) from any Governmental Body or
other Person regarding any actual, alleged, possible or potential Liability
arising from or relating to the presence, generation, manufacture, production,
transportation, importation, use, treatment, refinement, processing, handling,
storage, discharge, release, emission or disposal of any Hazardous Material.
No Person has ever commenced or threatened to commence any contribution action
or other Proceeding against any of the Companies in connection with any such
actual, alleged, possible or potential Liability; and no event has occurred,
and no condition or circumstance exists, that may directly or indirectly give
rise to, or result in the Companies becoming subject to, any such Liability.
(b) Except as set forth in Part 2.20 of the Disclosure
Schedule, none of the Companies has ever generated, manufactured, produced,
transported, imported, used, treated, refined, processed, handled, stored,
discharged, released or disposed of any Hazardous Material (whether lawfully or
unlawfully). Except as set forth in Part 2.20 of the Disclosure Schedule, none
of the Companies has ever permitted (knowingly or otherwise) any Hazardous
Material to be generated, manufactured, produced, used, treated, refined,
processed, handled, stored, discharged, released or disposed of (whether
lawfully or unlawfully): (1) on or beneath the surface of any real property
that is, or that has at any time been, owned by, leased to, controlled by or
used by the Companies; (2) in or into any surface water, groundwater, soil or
air associated with or adjacent to any such real property; or (3) in or into
any well, pit, pond, lagoon, impoundment, ditch, landfill, building, structure,
facility, improvement, installation, equipment, pipe, pipeline, vehicle or
storage container that is or was located on or beneath the surface of any such
real property or that is or has at any time been owned by, leased to,
controlled by or used by any of the Companies.
(c) All property that is owned by, leased to, controlled
by or used by the Companies, and all surface water, groundwater, soil and air
associated with or adjacent to such property: (1) is in clean and healthful
condition; (2) is free of any Hazardous Material and any harmful chemical or
physical conditions; and (3) is free of any environmental contamination of any
nature.
(d) Each storage tank or other storage container that is
or has been owned by, leased to, controlled by or used by the Companies, or
that is located on or beneath the surface of any real property owned by, leased
to, controlled by or used by the Companies: (1) is in sound condition; and (2)
has been demonstrated by accepted testing methodologies to be free of any
corrosion or leaks.
2.21 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.
(a) Each product that has been sold by the Companies to
any Person: (1) conformed and complied in all respects with the terms and
requirements of any applicable warranty or other Contract and with all
applicable Legal Requirements; and (2) was free of any design defects,
construction defects or other defects or deficiencies at the time of sale. All
repair services and other services that have been performed by the Companies
were performed properly and in full conformity with the terms and requirements
of all applicable warranties and other Contracts and with all applicable Legal
Requirements.
(b) None of the Companies shall incur or otherwise become
subject to any Liability arising directly or indirectly from any product
manufactured or sold, or any repair services or other services performed by,
the Companies on or at any time prior to the Closing Date.
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(c) No product manufactured or sold by the Companies has
been the subject of any recall or other similar action; and no event has
occurred, and no condition or circumstance exists, that might (with or without
notice or lapse of time) directly or indirectly give rise to or serve as a
basis for any such recall or other similar action relating to any such product.
(d) Except as set forth in Part 2.21 of the Disclosure
Schedule, no customer or other Person has ever asserted or threatened to assert
any claim against the Companies (1) under or based upon any warranty provided
by or on behalf of the Companies, or (2) under or based upon any other warranty
relating to any product sold by the Companies or any services performed by the
Companies. To the best of the Knowledge of the Companies, the Selling
Shareholders and the Principal HYP Shareholders, no event has occurred, and no
condition or circumstance exists, that might (with or without notice or lapse
of time) directly or indirectly give rise to or serve as a basis for the
assertion of any such claim.
(e) Each of the Companies has at all times had in place,
an adequate and appropriate quality control system that is at least as
comprehensive and effective as the quality control systems customarily
maintained by Comparable Entities.
2.22 INSURANCE.
(a) Part 2.22 of the Disclosure Schedule accurately sets
forth, with respect to each insurance policy maintained by or at the expense
of, or for the direct or indirect benefit of, the Companies: (1) the name of
the insurance carrier that issued such policy and the policy number of such
policy; (2) whether such policy is a "claims made" or an "occurrences" policy;
(3) a description of the coverage provided by such policy and the material
terms and provisions of such policy (including all applicable coverage limits,
deductible amounts and co-insurance arrangements and any non-customary
exclusions from coverage); (4) the annual premium payable with respect to such
policy, and the cash value (if any) of such policy; and (5) a description of
any claims pending, and any claims that have been asserted in the past, with
respect to such policy.
Part 2.22 also identifies (a) each pending application for insurance
that has been submitted by or on behalf of the Companies, and (b) each
self-insurance or risk-sharing arrangement affecting the Companies or any of
their assets. Subsidiary has delivered to Purchaser accurate and complete
copies of all of the insurance policies identified in Part 2.22 of the
Disclosure Schedule (including all renewals thereof and endorsements thereto)
and all of the pending applications identified in Part 2.22 of the Disclosure
Schedule.
(b) Each of the policies identified in Part 2.22 of the
Disclosure Schedule is valid, enforceable and in full force and effect. All of
the information contained in the applications submitted in connection with said
policies was (at the times said applications were submitted) accurate and
complete, and all premiums and other amounts owing with respect to said
policies have been paid in full on a timely basis. The nature, scope and
dollar amounts of the insurance coverage provided by said policies are
sufficient to adequately insure the Companies' business, assets, operations,
key employees, services and potential liabilities; and said insurance coverage
is at least as comprehensive as the insurance coverage customarily maintained
by Comparable Entities.
(c) Except as set forth in Part 2.22 of the Disclosure
Schedule, there is no pending claim under or based upon any of the policies
identified in Part 2.22 of the Disclosure Schedule; and no event has occurred,
and no condition or circumstance exists, that might (with or without notice or
lapse of time) directly or indirectly give rise to or serve as a basis for any
such claim.
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(d) None of the Companies has received: (1) any notice
or other communication (in writing or otherwise) regarding the actual or
possible cancellation or invalidation of any of the policies identified in Part
2.22 of the Disclosure Schedule or regarding any actual or possible adjustment
in the amount of the premiums payable with respect to any of said policies; (2)
any notice or other communication (in writing or otherwise) regarding any
actual or possible refusal of coverage under, or any actual or possible
rejection of any claim under, any of the policies identified in Part 2.22 of
the Disclosure Schedule; or (3) any indication that the issuer of any of the
policies identified in Part 2.22 of the Disclosure Schedule may be unwilling or
unable to perform any of its obligations thereunder.
2.23 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.23
of the Disclosure Schedule: (a) no Related Party has, and no Related Party has
at any time since January 17, 1995 had, any direct or indirect interest of any
nature in any asset used in or otherwise relating to the business of the
Companies; (b) no Related Party is, or has at any time since January 17, 1995
been, indebted to the Companies; (c) since January 17, 1995, no Related Party
has entered into, or has had any direct or indirect financial interest in, any
Contract, transaction or business dealing of any nature involving the
Companies; (d) no Related Party is competing, or has at any time since January
17, 1995 competed, directly or indirectly, with the Companies in any market
served by the Companies; (e) no Related Party has any claim or right against
the Companies; and (f) no event has occurred, and no condition or circumstance
exists, that might (with or without notice or lapse of time) directly or
indirectly give rise to or serve as a basis for any claim or right in favor of
any Related Party against the Companies.
2.24 CERTAIN PAYMENTS, ETC. None of the Companies, and no officer,
employee, agent or other Person associated with or acting for or on behalf of
the Companies, has at any time, directly or indirectly:
(a) used any corporate funds (1) to make any unlawful
political contribution or gift or for any other unlawful purpose relating to
any political activity, (2) to make any unlawful payment to any governmental
official or employee or (3) to establish or maintain any unlawful or unrecorded
fund or account of any nature;
(b) made any false or fictitious entry, or failed to make
any entry that should have been made, in any of the books of account or other
records of the Companies;
(c) made any payoff, influence payment, bribe, rebate,
kickback or unlawful payment to any Person;
(d) made any payment (whether or not lawful) to any
Person, or provided (whether lawfully or unlawfully) any favor or anything of
value (whether in the form of property or services, or in any other form) to
any Person, for the purpose of obtaining or paying for (1) favorable treatment
in securing business or (2) any other special concession; or
(e) agreed, committed, offered or attempted to take any
of the actions described in clauses (a) through (d) above.
2.25 PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.25 of the Disclosure
Schedule, there is no pending Proceeding, and no Person has threatened to
commence any Proceeding: (1) that involves the Companies or that otherwise
relates to or might affect the Companies' business or any of the assets owned
or used by the Companies (whether or not the Companies is named as a party
thereto); or (2) that challenges, or
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that may have the effect of preventing, delaying, making illegal or otherwise
interfering with, any of the Transactions. Except as set forth in Part 2.25 of
the Disclosure Schedule, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that might directly or indirectly give rise
to or serve as a basis for the commencement of any such Proceeding.
(b) Except as set forth in Part 2.25 of the Disclosure
Schedule, no Proceeding has ever been commenced by or against the Companies;
and no Proceeding otherwise involving or relating to the Companies has been
pending or threatened at any time.
(c) Subsidiary has delivered to Purchaser accurate and
complete copies of all pleadings, correspondence and other written materials to
which the Companies has access that relate to the Proceedings identified in
Part 2.25 of the Disclosure Schedule.
(d) There is no Order to which the Companies, or any of
the assets owned or used by the Companies, is subject; and none of the Selling
Shareholders is subject to any Order that relates to the Companies' business or
to any of the assets owned or used by the Companies.
(e) To the best of the Knowledge of the Companies, the
Selling Shareholders and the Principal HYP Shareholders, no officer or key
employee of the Companies is subject to any Order that prohibits such officer
or key employee from engaging in or continuing any conduct, activity or
practice relating to the Companies' business.
(f) To the best of the Knowledge of the Companies, the
Selling Shareholders and the Principal HYP Shareholders, there is no proposed
Order that, if issued or otherwise put into effect, (1) may have an adverse
effect on the Companies' business, condition, assets, liabilities, operations,
financial performance, net income or prospects (or on any aspect or portion
thereof) or on the ability of the Companies or any of the Selling Shareholders
or Principal HYP Shareholders to comply with or perform any covenant or
obligation under any of the Transactional Agreements, or (2) may have the
effect of preventing, delaying, making illegal or otherwise interfering with
any of the Transactions.
2.26 AUTHORITY; BINDING NATURE OF AGREEMENTS.
(a) Each of Parent and Subsidiary has the absolute and
unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance
by each of Parent and Subsidiary of this Agreement have been duly authorized by
all necessary action on the part of each of Parent and Subsidiary and their
shareholders, board of directors and officers. This Agreement constitutes the
legal, valid and binding obligation of each of Parent and Subsidiary,
enforceable against each of Parent and Subsidiary in accordance with its terms.
(b) Each Selling Shareholder and Principal HYP
Shareholder has the absolute and unrestricted right, power and capacity to
enter into and to perform its obligations under each of the Transactional
Agreements to which such Selling Shareholder is or may become a party. This
Agreement constitutes the legal, valid and binding obligation of each of the
Selling Shareholders and Principal HYP Shareholders, enforceable against each
of them in accordance with its terms. Upon the execution of each of the other
Transactional Agreements at the Closing, each of such other Transactional
Agreements will constitute the legal, valid and binding obligation of each
Selling Shareholder and Principal HYP Shareholder who is a party thereto, and
will be enforceable against such Selling Shareholder and Principal HYP
Shareholder in accordance with its terms.
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2.27 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.27
of the Disclosure Schedule, neither the execution and delivery of any of the
Transactional Agreements, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of
(as appropriate) (1) any of the provisions of the memorandum of association,
articles of association or joint venture agreements of the Companies, or (2)
any resolution adopted by the shareholders or equityholders, board of directors
or governing board or any committee thereof of the Companies;
(b) contravene, conflict with or result in a violation
of, or give any Governmental Body or other Person the right to challenge any of
the Transactions or to exercise any remedy or obtain any relief under, any
Legal Requirement or any Order to which the Companies, any of the Selling
Shareholders or any of the Principal HYP Shareholders, or the Parent Shares or
any of the assets owned or used by the Companies, is subject;
(c) cause the Companies, Purchaser or any affiliate of
Purchaser to become subject to, or to become liable for the payment of, any
Tax;
(d) cause any of the assets owned or used by the
Companies to be reassessed or revalued by any taxing authority or other
Governmental Body;
(e) contravene, conflict with or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by the Companies or any of their employees or that
otherwise relates to the Companies' business or to any of the assets owned or
used by the Companies;
(f) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any Subsidiary
Contract;
(g) give any Person the right to (1) declare a default or
exercise any remedy under any Subsidiary Contract, (2) accelerate the maturity
or performance of any Subsidiary Contract, or (3) cancel, terminate or modify
any Subsidiary Contract;
(h) contravene, conflict with or result in a violation or
breach of or a default under any provision of, or give any Person the right to
declare a default under, any Contract to which any of the Selling Shareholders
or Principal HYP Shareholders is a party or by which any of the Selling
Shareholders or Principal HYP Shareholders is bound; or
(i) result in the imposition or creation of any
Encumbrance upon or with respect to any of the Parent Shares or any asset owned
or used by the Companies.
Except as set forth in Part 2.27 of the Disclosure Schedule, neither the
Companies nor any of the Selling Shareholders or Principal HYP Shareholders
was, is or will be required to make any filing with or give any notice to, or
to obtain any Consent from, any Person in connection with the execution and
delivery of any of the Transactional Agreements or the consummation or
performance of any of the Transactions.
2.28 BROKERS. None of the Companies nor any of the Selling
Shareholders or Principal HYP Shareholders has agreed or become obligated to
pay, or has taken any action that might result in any
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Person claiming to be entitled to receive, any brokerage commission, finder's
fee or similar commission or fee in connection with any of the Transactions.
2.29 SELLING SHAREHOLDERS AND PRINCIPAL HYP SHAREHOLDERS.
(a) Each Selling Shareholder and Principal HYP
Shareholder has the capacity and financial capability to comply with and
perform all of its covenants and obligations under each of the Transactional
Agreements to which it is or may become a party.
(b) No Selling Shareholder or Principal HYP Shareholder:
(1) has, at any time, (A) made a general
assignment for the benefit of creditors, (B) filed, or had filed against such
Selling Shareholder or Principal HYP Shareholder, any bankruptcy petition or
similar filing, (C) suffered the attachment or other judicial seizure of all or
a substantial portion of the assets of such Selling Shareholder or Principal
HYP Shareholder, (D) admitted in writing the inability to pay the debts of such
Selling Shareholder or Principal HYP Shareholder as they become due, (E) been
convicted of, or pleaded guilty to, any felony, or (F) taken or been the
subject of any action that may have an adverse effect on its ability to comply
with or perform any of its covenants or obligations under any of the
Transactional Agreements; or
(2) is subject to any Order that may have an
adverse effect on its ability to comply with or perform any of its covenants or
obligations under any of the Transactional Agreements.
(c) There is no Proceeding pending, and no Person has
threatened to commence any Proceeding, that may have an adverse effect on the
ability of any Selling Shareholder or Principal HYP Shareholder to comply with
or perform any of the covenants or obligations of such Selling Shareholder or
Principal HYP Shareholder under any of the Transactional Agreements. No event
has occurred, and no claim, dispute or other condition or circumstance exists,
that might directly or indirectly give rise to or serve as a basis for the
commencement of any such Proceeding.
2.30 FULL DISCLOSURE.
(a) None of the Transactional Agreements contains or will
contain any untrue statement of fact and none of the Transactional Agreements
omits or will omit to state any fact necessary to make any of the
representations, warranties or other statements or information contained
therein not misleading.
(b) Except as set forth in Part 2.30 of the Disclosure
Schedule, there is no fact within the Knowledge the Companies or any of the
Selling Shareholders or Principal HYP Shareholders (other than publicly known
facts relating exclusively to political or economic matters of general
applicability that will adversely affect all Comparable Entities) that (1) may
have an adverse effect on the Companies' business, condition, assets,
liabilities, operations, financial performance, net income or prospects (or on
any aspect or portion thereof) or on the ability of the Companies or any of the
Selling Shareholders or Principal HYP Shareholders to comply with or perform
any covenant or obligation under any of the Transactional Agreements, or (2)
may have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions.
2.31 CHAN HOLDINGS AND CHAN ONLY REPRESENTATIONS.
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(a) Neither Chan Holdings nor Chan is a "U.S. person" (as
such term is defined in Regulation S promulgated under the Securities Act
("REGULATION S") and neither Chan Holdings nor Chan is purchasing the Purchaser
Stock for the account of any "U.S. person."
(b) Neither Chan Holdings nor Chan nor any of its
affiliates or any other person acting on its or their behalf has engaged or
will engage in any directed selling efforts with respect to the Purchaser
Stock, and all such persons have complied and will comply with the offering
restrictions of Regulation S.
(c) Each of Chan Holdings and Chan is purchasing the
Purchaser Stock pursuant to a private sale exempt from registration under the
Securities Act and understands that the Purchaser Stock has not been registered
under the Securities Act and may not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons except pursuant to
an exemption from, or in transactions not subject to, the registration
requirements of the Securities Act.
2.32 HYP AND PRINCIPAL HYP SHAREHOLDER ONLY REPRESENTATIONS.
(a) By reason of its, or of its management's, business or
financial experience, each of HYP and the Principal HYP Shareholders has the
capacity to protect its own interests in connection with the transactions
contemplated in this Agreement. Further, each of HYP and the Principal HYP
Shareholders is aware of no publication of any advertisement in connection with
the transactions contemplated in the Agreement.
(b) It is an accredited investor within the meaning of
Regulation D under the Securities Act.
(c) Each of HYP and the Principal HYP Shareholders has
received and read the Financial Statements and the Unaudited Interim Balance
Sheet and has had an opportunity to discuss Purchaser's business, management
and financial affairs with directors, officers and management of Purchaser and
has had the opportunity to review Purchaser's operations and facilities.
Purchaser has also had the opportunity to ask questions of and receive answers
from, Purchaser and its management regarding the terms and conditions of the
Purchaser Stock.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants, to and for the benefit of the
Selling Shareholders and Principal HYP Shareholders, as follows:
3.1 VALID ISSUANCE OF PURCHASER STOCK. The Purchaser Stock that
is being issued to the Selling Shareholders hereunder, when issued, sold, and
delivered in accordance with the terms of this Agreement for the consideration
expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable state and
Federal securities laws.
3.2 SEC FILINGS. Purchaser has delivered to the Agent (or the
Agent has otherwise obtained) a complete and accurate copy of each report,
schedule, registration statement and definitive proxy statement filed by
Purchaser with the SEC on or after March 15, 1997 (the "PURCHASER SEC
REPORTS"), which are all the forms, reports and documents required to be filed
by Purchaser with the SEC since such date. The Purchaser SEC Reports (i)
complied with the requirements of the Securities Act or the Exchange Act, as
the case may be, at and as of the times they were filed (or, if amended or
superseded
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by a filing prior to the date of this Agreement, then on the date of such
filing) and (ii) did not at and as of the time they were filed (or, if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
3.3 ACQUISITION OF SHARES. Purchaser is not acquiring the Parent
Shares with the current intention of making a public distribution thereof.
3.4 AUTHORITY; BINDING NATURE OF AGREEMENT. Purchaser has the
absolute and unrestricted right, power and authority to enter into and, subject
to shareholder approval, perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement by Purchaser has been
duly authorized by all necessary action on the part of Purchaser and its board
of directors. This Agreement and the Escrow Agreement will constitute legal,
valid and binding obligations of Purchaser, enforceable against Purchaser in
accordance with their terms.
3.5 SECURITIES ACT. Based upon the representations and warranties
of the Selling Shareholders and the Principal HYP Shareholders contained
herein, the issuance and sale of the Purchaser Stock will not require
registration under the Securities Act.
SECTION 4. PRE-CLOSING COVENANTS OF PARENT, SUBSIDIARY, THE SELLING SHAREHOLDERS
AND THE PRINCIPAL HYP SHAREHOLDERS.
4.1 ACCESS AND INVESTIGATION. Parent, Subsidiary, the Selling
Shareholders and the Principal HYP Shareholders will ensure that, at all times
during the Pre-Closing Period:
(a) Parent and Subsidiary and their Representatives
provide Purchaser and its Representatives with free and complete access to
their Representatives, personnel and assets and to all existing books, records,
Tax Returns, work papers and other documents and information relating to the
Companies;
(b) Parent and Subsidiary and their Representatives
provide Purchaser and its Representatives with such copies of existing books,
records, Tax Returns, work papers and other documents and information relating
to the Companies as Purchaser may request in good faith; and
(c) Parent and Subsidiary and their Representatives
compile and provide Purchaser and its Representatives with such additional
financial, operating and other data and information regarding the Companies as
Purchaser may request in good faith.
4.2 OPERATION OF BUSINESS. Parent, Subsidiary, the Selling
Shareholders and the Principal HYP Shareholders will ensure that, without the
prior written consent of Purchaser, during the Pre-Closing Period:
(a) none of the Selling Shareholders or the Principal HYP
Shareholders directly or indirectly sells or otherwise transfers, or offers,
agrees or commits (in writing or otherwise) to sell or otherwise transfer, any
of the Parent Shares or shares of capital stock of HYP or any interest in or
right relating to any of the Parent Shares or shares of capital stock of HYP;
(b) none of the Selling Shareholders permits, and none of
the Selling Shareholders offers, agrees or commits (in writing or otherwise) to
permit, any of the Parent Shares to become subject,
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directly or indirectly, to any Encumbrance, other than the lockup agreement in
favor of Xxx Xxxxxx & Company;
(c) each of the Companies conducts its operations
exclusively in the Ordinary Course of Business or as set forth in the Business
Plan of Subsidiary (the "BUSINESS PLAN") previously delivered to Purchaser and
in the same manner as such operations have been conducted prior to the date of
this Agreement;
(d) each of the Companies preserves intact its current
business organization, keeps available the services of its current officers and
key employees and maintains its relations and good will with all suppliers,
customers, landlords, creditors, licensors, licensees, employees and other
Persons having business relationships with each of the Companies;
(e) each of the Companies keeps in full force all
insurance policies identified in Part 2.22 of the Disclosure Schedule;
(f) the officers of each of the Companies confer
regularly with Purchaser concerning operational matters and otherwise report
regularly to Purchaser concerning the status of the Companies' business,
condition, assets, liabilities, operations, financial performance and
prospects;
(g) each of the Companies immediately notifies Purchaser
of any inquiry, proposal or offer from any Person relating to any Acquisition
Transaction;
(h) none of the Companies declares, accrues, sets aside
or pays any dividend or make any other distribution in respect of any shares of
capital stock, or repurchases, redeems or otherwise reacquires any shares of
capital stock or other securities, provided, however, that prior to the
Closing, Prior to the Closing (as defined below), Parent may redeem all or a
portion of the Parent Preferred Shares for an aggregate redemption price not to
exceed $5,000,000 (which shall only be distributed by Parent to the Selling
Shareholders or the Agent) (the "PERMITTED REDEMPTION");
(i) except as disclosed in Part 2.3 of the Disclosure
Schedule, none of the Companies sells or otherwise issues any shares of capital
stock or any other securities;
(j) none of the Companies amends its articles of
association or memorandum of association or effects or becomes a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(k) none of the Companies forms any subsidiary or
acquires any equity interest or other interest in any other Entity;
(l) none of the Companies makes any capital expenditure,
except for capital expenditures that are made in the Ordinary Course of
Business;
(m) none of the Companies enters into or permits any of
the assets owned or used by it to become bound by any Contract, except for any
Excluded Contract or as described in the Business Plan;
(n) none of the Companies incurs, assumes or otherwise
becomes subject to any Liability, except for current liabilities (of the type
required to be reflected in the "liabilities" column of a balance sheet
prepared in accordance with GAAP) incurred in the Ordinary Course of Business;
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(o) none of the Companies establishes or adopts any
Employee Benefit Plan, or pays any bonus or makes any profit-sharing or similar
payment to, or increases the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its
directors, officers or key employees, other than the adoption of an Employee
Benefit Plan similar to the Employee Benefit Plan maintained by Purchaser;
(p) none of the Companies makes any Tax election;
(q) none of the Companies commences any Proceeding except
in the Ordinary Course of Business;
(r) none of the Companies enters into any transaction or
take any other action of the type referred to in Section 2.5 hereof;
(s) none of the Companies enters into any transaction or
take any other action outside the Ordinary Course of Business;
(t) none of the Companies enters into any transaction or
take any other action that might cause or constitute a Breach of any
representation or warranty made by the Companies or any of the Selling
Shareholders or Principal HYP Shareholders in this Agreement or in the Closing
Certificate; and
(u) none of the Companies agrees, commits or offers (in
writing or otherwise), or attempts, to take any of the actions described in
clauses (i) through (v) of this Section 4.2.
4.3 FILINGS AND CONSENTS. Parent, Subsidiary, the Selling
Shareholders and the Principal HYP Shareholders will ensure that:
(a) each filing or notice required to be made or given
(pursuant to any applicable Legal Requirement, Order or Contract or otherwise)
by the Companies or any of the Selling Shareholders or Principal HYP
Shareholders in connection with the execution and delivery of any of the
Transactional Agreements or in connection with the consummation or performance
of any of the Transactions (including each of the filings and notices
identified in Part 2.28 of the Disclosure Schedule) is made or given as soon as
possible after the date of this Agreement;
(b) each Consent required to be obtained (pursuant to any
applicable Legal Requirement, Order or Contract, or otherwise) by the Companies
or any of the Selling Shareholders or Principal HYP Shareholders in connection
with the execution and delivery of any of the Transactional Agreements or in
connection with the consummation or performance of any of the Transactions
(including each of the Consents identified in Part 2.28 of the Disclosure
Schedule) is obtained as soon as possible after the date of this Agreement and
remains in full force and effect through the Closing Date;
(c) Subsidiary promptly delivers to Purchaser a copy of
each filing made, each notice given and each Consent obtained by the Companies
or any Selling Shareholder or Principal HYP Shareholder during the Pre-Closing
Period; and
(d) during the Pre-Closing Period, each of the Companies
and their Representatives cooperate with Purchaser and with Purchaser's
Representatives, and prepare and make available such documents and take such
other actions as Purchaser may request in good faith, in connection with any
filing, notice or Consent that Purchaser is required or elects to make, give or
obtain.
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4.4 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, Parent, Subsidiary,
the Selling Shareholders and the Principal HYP Shareholders will promptly
notify Purchaser in writing of:
(1) the discovery by any of them of any event,
condition, fact or circumstance that occurred or existed on or prior to the
date of this Agreement and that caused or constitutes a Breach of any
representation or warranty made by any of them in this Agreement;
(2) any event, condition, fact or circumstance
that occurs, arises or exists after the date of this Agreement and that would
cause or constitute a Breach of any representation or warranty made by any of
them in this Agreement if (A) such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or (B) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement;
(3) any Breach of any covenant or obligation
contained in this Agreement by any of them; and
(4) any event, condition, fact or circumstance
that may make the timely satisfaction of any of the conditions set forth in
Sections 6 or 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.4(a) requires any change in the
Disclosure Schedule, or if any such event, condition, fact or circumstance
would require such a change assuming the Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then Parent, Subsidiary, the Selling Shareholders and the
Principal HYP Shareholders will promptly deliver to Purchaser an update to the
Disclosure Schedule specifying such change. No such update will be deemed to
supplement or amend the Disclosure Schedule for the purpose of (1) determining
the accuracy of any of the representations and warranties made by Parent,
Subsidiary, the Selling Shareholders and the Principal HYP Shareholders in this
Agreement or in the Closing Certificate, or (2) determining whether any of the
conditions set forth in Section 6 has been satisfied.
4.5 PAYMENT OF INDEBTEDNESS BY RELATED PARTIES. Parent,
Subsidiary, the Selling Shareholders and the Principal HYP Shareholders will
cause all indebtedness and other Liabilities of each Related Party to the
Companies (including any such indebtedness or other Liability identified in
Part 2.23 of the Disclosure Schedule) to be discharged and paid in full prior
to the Closing.
4.6 NO NEGOTIATION. Parent, Subsidiary, the Selling Shareholders
and the Principal HYP Shareholders will ensure that, during the Pre-Closing
Period, none of the Companies nor any of their Representatives directly or
indirectly: (a) solicits or encourages the initiation of any inquiry, proposal
or offer from any Person (other than Purchaser) relating to any Acquisition
Transaction; (b) participates in any discussions or negotiations with, or
provides any non-public information to, any Person (other than Purchaser)
relating to any Acquisition Transaction; or (c) considers the merits of any
unsolicited inquiry, proposal or offer from any Person (other than Purchaser)
relating to any Acquisition Transaction.
4.7 BEST EFFORTS. During the Pre-Closing Period, Parent,
Subsidiary, the Selling Shareholders and the Principal HYP Shareholders will
use their Best Efforts to cause the conditions set forth in Sections 6 and 7.3
to be satisfied on a timely basis.
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4.8 CONFIDENTIALITY. Parent, Subsidiary, the Selling Shareholders
and the Principal HYP Shareholders will ensure that, during the Pre-Closing
Period: (a) they and their Representatives keep strictly confidential the
existence and terms of this Agreement; (b) neither they nor any of their
Representatives issue or disseminate any press release or other publicity or
otherwise make any disclosure of any nature (to any suppliers, customers,
landlords, creditors or employees of the Companies or to any other Person)
regarding any of the Transactions, except to the extent that any of the
Companies is required by law to make any such disclosure regarding the
Transactions; and (c) if any of the Companies is required by law to make any
disclosure regarding the Transactions, it will advise Purchaser, at least five
(5) business days before making such disclosure, of the nature and content of
the intended disclosure.
SECTION 5. PRE-CLOSING COVENANTS OF PURCHASER.
5.1 BEST EFFORTS. During the Pre-Closing Period, Purchaser will
use its Best Efforts to cause the conditions set forth in Section 6 (so far as
applicable to Purchaser) and Section 7 to be satisfied.
SECTION 6. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE.
Purchaser's obligation to acquire the Parent Shares and to take the
other actions required to be taken by Purchaser at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Purchaser, in whole or in part, in
accordance with Section 11.14 hereof):
6.1 SATISFACTORY COMPLETION OF PRE-ACQUISITION REVIEW. Purchaser
will have satisfactorily completed its pre-acquisition investigation and review
of the business, condition, assets, liabilities, operations, financial
performance, net income and prospects of each of the Companies and will be
satisfied with the results of that investigation and review.
6.2 ACCURACY OF REPRESENTATIONS. All of the representations and
warranties made by Parent, Subsidiary, the Selling Shareholders and the
Principal HYP Shareholders in this Agreement (considered collectively), and
each of said representations and warranties (considered individually), will
have been accurate in all material respects as of the date of this Agreement,
and will be accurate in all material respects as of the Scheduled Closing Time
as if made at the Scheduled Closing Time, without giving effect to any update
to the Disclosure Schedule.
6.3 PERFORMANCE OF OBLIGATIONS.
(a) The Selling Shareholders will have delivered to
Purchaser share transfer forms representing the Parent Shares as required by
Section 1.3(b) hereof, and each Selling Shareholder and Principal HYP
Shareholders will have executed and delivered each of the other documents
required to be executed and delivered by it pursuant to Section 1.3(b).
(b) All of the other covenants and obligations that
Parent, Subsidiary, the Selling Shareholders and the Principal HYP Shareholders
are required to comply with or to perform at or prior to the Closing
(considered collectively), and each of said covenants and obligations
(considered individually), will have been duly complied with and performed in
all material respects.
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6.4 APPROVAL OF PURCHASER'S BOARD OF DIRECTORS AND SHAREHOLDERS;
CONSENTS.
(a) Purchaser's board of directors will have ratified the
execution of this Agreement by Purchaser and will have approved the
consummation of the Transactions.
(b) Purchaser's shareholders will have approved the
issuance of the Purchaser Stock in accordance with Hong Kong law.
(c) Each of the Consents identified in Part 2.28 of the
Disclosure Schedule will have been obtained and will be in full force and
effect.
6.5 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business, condition, assets, liabilities, operations,
financial performance, net income or prospects (or in any aspect or portion
thereof) of any of the Companies since the date of this Agreement.
6.6 ADDITIONAL DOCUMENTS. Purchaser will have received the
following documents:
(a) opinion letters from Xxxxxxxx Xxxxxxxxx and Xxxxxxx
Xxxxx Xxxxxxx Xxx & Co., dated the Closing Date, in form and substance
acceptable to Purchaser;
(b) a "fairness opinion" from Xxx Xxxxxx & Company, with
an update thereto dated as of the Closing Date, in form and substance
acceptable to Purchaser;
(c) such other documents as Purchaser may request in good
faith for the purpose of (1) evidencing the accuracy of any representation or
warranty made by Parent, Subsidiary or any of the Selling Shareholders or
Principal HYP Shareholders, (2) evidencing the compliance by Parent, Subsidiary
or any of the Selling Shareholders or Principal HYP Shareholders with, or the
performance by Parent, Subsidiary or any of the Selling Shareholders or
Principal HYP Shareholders of, any covenant or obligation set forth in this
Agreement, (3) evidencing the satisfaction of any condition set forth in this
Section 6 or (4) otherwise facilitating the consummation or performance of any
of the Transactions.
6.7 NO PROCEEDINGS. Since the date of this Agreement, there will
not have been commenced or threatened against Purchaser, or against any Person
affiliated with Purchaser, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Transactions or
(b) that may have the effect of preventing, delaying, making illegal or
otherwise interfering with any of the Transactions.
6.8 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. No
Person will have made or threatened any claim asserting that such Person (a)
may be the holder or the beneficial owner of, or may have the right to acquire
or to obtain beneficial ownership of, any capital stock or other securities of
the Companies, or (b) may be entitled to all or any portion of the
consideration set forth in Section 1.2.
6.9 NO PROHIBITION. Neither the consummation nor the performance
of any the Transactions will, directly or indirectly (with or without notice or
lapse of time), contravene or conflict with or result in a violation of, or
cause Purchaser or any Person affiliated with Purchaser to suffer any adverse
consequence under, (a) any applicable Legal Requirement or Order, or (b) any
Legal Requirement or Order that has been proposed by or before any Governmental
Body.
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6.10 FINANCING. Purchaser shall have raised $35,000,000 in
additional funds on terms acceptable to Purchaser so as to enable Purchaser to
pay the cash portion of the Consideration pursuant to Section 1.2 hereof.
6.11 XXXX MANAGEMENT AGREEMENT. The Management Agreement dated on
or about June 1997 between Parent and Xxxxxx X. Xxxx shall have been
terminated.
6.12 CHAN EMPLOYMENT AGREEMENT. Parent shall have entered into an
employment agreement with Chan satisfactory to Purchaser.
SECTION 7. CONDITIONS PRECEDENT TO SELLING SHAREHOLDERS' OBLIGATION TO CLOSE.
The Selling Shareholders' obligation to exchange the Parent Shares and
to take the other actions required to be taken by the Selling Shareholders at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by the Agent, in whole
or in part, in accordance with Section 11.14 hereof):
7.1 ACCURACY OF REPRESENTATIONS. All of the representations and
warranties made by Purchaser in this Agreement (considered collectively), and
each of said representations and warranties (considered individually), will
have been accurate in all material respects as of the date of this Agreement
and will be accurate in all material respects as of the Scheduled Closing Time
as if made at the Scheduled Closing Time.
7.2 PURCHASER'S PERFORMANCE.
(a) Purchaser will have delivered the cash portion of the
Consideration to the Agent and the Escrow Shares to the Escrow Agent.
(b) All of the other covenants and obligations that
Purchaser is required to comply with or to perform pursuant to this Agreement
at or prior to the Closing (considered collectively), and each of said
covenants and obligations (considered individually), will have been complied
with and performed in all material respects.
7.3 NO INJUNCTION. There will not be in effect any injunction
that will have been entered by a court of competent jurisdiction since the date
of this Agreement that prohibits the exchange of the Parent Shares by the
Selling Shareholders with Purchaser.
7.4 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business, condition, assets, liabilities, operations,
financial performance, net income or prospects (or in any aspect or portion
thereof) of any of the Companies since the date of this Agreement.
SECTION 8. TERMINATION.
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to
the Closing:
(a) by Purchaser if (1) there is a material Breach of any
covenant or obligation of Parent, Subsidiary or any of the Selling Shareholders
or Principal HYP Shareholders or (2) Purchaser reasonably determines that the
timely satisfaction of any condition set forth in Section 6 has become
impossible or impractical (other than as a result of any failure on the part of
Purchaser comply with or perform its covenants and obligations under this
Agreement);
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(b) by the Agent if (1) there is a material Breach of any
covenant or obligation of Purchaser or (2) the Agent reasonably determines that
the timely satisfaction of any condition set forth in Section 7 has become
impossible or impractical or (3) the condition set forth in Section 6.10 has
not been satisfied by 5:00 p.m. (California time) on February 15, 1998 (other
than as a result of any failure on the part of Parent, Subsidiary or any of the
Selling Shareholders or Principal HYP Shareholders to comply with or perform
any covenant or obligation set forth in this Agreement);
(c) by Purchaser at or after the Scheduled Closing Time
if any condition set forth in Section 6 has not been satisfied or waived by the
Scheduled Closing Time;
(d) by the Agent at or after the Scheduled Closing Time
if any condition set forth in Section 7 has not been satisfied or waived by the
appropriate party by the Scheduled Closing Time;
(e) by Purchaser if the Closing has not taken place on or
before January 31, 1998 (other than as a result of any failure on the part of
Purchaser to comply with or perform its covenants and obligations under this
Agreement);
(f) by the Agent if the Closing has not taken place on or
before January 31, 1998 (other than as a result of the failure on the part of
Parent, Subsidiary or any of the Selling Shareholders or Principal HYP
Shareholders to comply with or perform any covenant or obligation set forth in
this Agreement); or
(g) by the mutual consent of Purchaser and the Agent.
8.2 TERMINATION PROCEDURES. If Purchaser wishes to terminate this
Agreement pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e),
Purchaser will deliver to the Agent a written notice stating that Purchaser is
terminating this Agreement and setting forth a brief description of the basis
on which Purchaser is terminating this Agreement. If the Agent wishes to
terminate this Agreement pursuant to Section 8.1(b), Section 8.1(d) or Section
8.1(f), the Agent will deliver to Purchaser a written notice stating that the
Agent is terminating this Agreement and setting forth a brief description of
the basis on which the Agent is terminating this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 8.1, all further obligations of the parties under this
Agreement will terminate; provided, however, that: (a) no party will be
relieved of any obligation or other Liability arising from any Breach by such
party of any provision of this Agreement; (b) the parties will, in all events,
remain bound by and continue to be subject to the provisions set forth in
Section 11 (except for Section 11.1); and (c) Parent, Subsidiary, the Selling
Shareholders and the Principal HYP Shareholders will, in all events, remain
bound by and continue to be subject to Section 4.8.
SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS AND COVENANTS.
(a) The representations, warranties, covenants and
obligations of each party will survive (without limitation): (1) the Closing
and the exchange of the Parent Shares as provided for herein; (2) any sale or
other disposition of any or all of the Parent Shares by Purchaser; and (3) any
Acquisition Transaction effected by or otherwise involving Purchaser or Parent
or Subsidiary. All of said representations, warranties, covenants and
obligations will remain in full force and effect and will survive until the
second (2nd) anniversary of the Closing Date.
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(b) The representations and warranties, covenants and
obligations of Parent, Subsidiary, the Selling Shareholders and the Principal
HYP Shareholders, and the rights and remedies that may be exercised by the
Indemnitees, will not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or Knowledge of, any of
the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or
other item of information set forth in the Disclosure Schedule or in any update
to the Disclosure Schedule will be deemed to be a representation and warranty
made by Parent, Subsidiary, the Selling Shareholders and the Principal HYP
Shareholders in this Agreement.
9.2 INDEMNIFICATION BY SELLING SHAREHOLDERS AND PRINCIPAL HYP
SHAREHOLDERS.
(a) The Selling Shareholders and Principal HYP
Shareholders, jointly and severally, will hold harmless and indemnify each of
the Indemnitees from and against, and will compensate and reimburse each of the
Indemnitees for, any Damages that are directly or indirectly suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject at any time (regardless of whether or not such Damages
relate to any third-party claim) and which arise directly or indirectly from or
as a direct or indirect result of, or are directly or indirectly connected
with:
(1) any Breach of any representation or warranty
made by Parent, Subsidiary or any of the Selling Shareholders or Principal HYP
Shareholders in this Agreement (without giving effect to any update to the
Disclosure Schedule) or in the Closing Certificate;
(2) any Breach of any representation, warranty,
statement, information or provision contained in the Disclosure Schedule or in
any other document delivered or otherwise made available to Purchaser or any of
its Representatives by or on behalf of Parent, Subsidiary or any of their
Representatives;
(3) any Breach of any covenant or obligation of
Parent, Subsidiary or any of the Selling Shareholders or Principal HYP
Shareholders;
(4) any Liability to which the Companies or any
of the other Indemnitees may become subject and that arises directly or
indirectly from or relates directly or indirectly to (A) any product
manufactured or sold, or any service performed, by or on behalf of any of the
Companies on or at any time prior to the Closing Date, (B) the presence of any
undisclosed Hazardous Material at any site owned, leased, occupied or
controlled by any of the Companies on or at any time prior to the Closing Date,
or (C) the generation, manufacture, production, transportation, importation,
use, treatment, refinement, processing, handling, storage, discharge, release
or disposal of any undisclosed Hazardous Material (whether lawfully or
unlawfully) by or on behalf of any of the Companies on or at any time prior to
the Closing Date;
(5) any matter identified or referred to in Part
2.15 or Part 2.25 of the Disclosure Schedule; or
(6) any Proceeding relating directly or
indirectly to any Breach, alleged Breach, Liability or matter of the type
referred to in clause (1), (2), (3), (4) or (5) above (including any Proceeding
commenced by any Indemnitee for the purpose of enforcing any of its rights
under this Section 9).
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(b) The Selling Shareholders acknowledge and agree that,
if there is any Breach of any representation, warranty or other provision
relating to the Companies or the business, condition, assets, liabilities,
operations, financial performance, net income or prospects (or any aspect or
portion thereof of the Companies), or if the Companies becomes subject to any
Liability of the type referred to in clause (4) of Section 9.2(a), then
Purchaser itself will be deemed, by virtue of its ownership of the Companies,
to have incurred Damages as a result of such Breach or Liability. Nothing
contained in this Section 9.2(b) will have the effect of (1) limiting the
circumstances under which Purchaser may otherwise be deemed to have incurred
Damages for purposes of this Agreement, (2) limiting the other types of Damages
that Purchaser may be deemed to have incurred (whether in connection with any
such Breach or Liability or otherwise), or (3) limiting the rights of Parent or
Subsidiary or any of the other Indemnitees under this Section 9.2.
9.3 THRESHOLD.
(a) Subject to Section 9.3(b), the Selling Shareholders
and Principal HYP Shareholders will not be required to make any indemnification
payment pursuant to Section 9.2 for any Breach of any of their representations
and warranties until such time as the total amount of all Damages (including
the Damages arising from such Breach and all other Damages arising from any
other Breaches of any representations or warranties) that have been directly or
indirectly suffered or incurred by any one or more of the Indemnitees, or to
which any one or more of the Indemnitees has or have otherwise become subject,
exceeds $2,000,000 in the aggregate. At such time as the total amount of such
Damages exceeds $2,000,000 in the aggregate, the Indemnitees will be entitled
to be indemnified against the full amount of such Damages (and not merely the
portion of such Damages exceeding $2,000,000).
(b) The limitation on the Selling Shareholders' and
Principal HYP Shareholders' indemnification obligations that is set forth in
Section 9.3(a) shall not apply to any Breach of any of the Specified
Representations or any Breach of the covenants contained in Section 11.1 hereof
and any indemnification payment arising from any Breach of any of the Specified
Representations shall not apply to the calculation of the threshold amount
described in Section 9.3(a) above.
9.4 MAXIMUM LIABILITY.
(a) The total amount of the payments that any Selling
Shareholder can be required to make under or in connection with this Agreement
(including all indemnification payments required to be made to Purchaser and
all amounts payable to any counsel retained by a Selling Shareholder in
accordance with Section 9.10) shall be limited in the aggregate to the sum of
(i) the amount of the Consideration (valuing each share of Purchaser Stock at
the closing bid price of the American Depositary Shares on the most recent
trading date prior to or on the date of issuance of the Purchaser Stock) which
such Selling Shareholder receives from the exchange of his Shares hereunder and
(ii) the amount of the Permitted Redemption which such Selling Shareholder
receives, and such Selling Shareholder's cumulative liability shall in no event
exceed such amount.
(b) The aggregate total amount of the payments that all
the Principal HYP Shareholders can be required to make under or in connection
with this Agreement (including all indemnification payments required to be made
to Purchaser and all amounts payable to any counsel retained by a Principal HYP
Shareholder in accordance with Section 9.10) shall be limited in the aggregate
to the amount of HYP's maximum liability calculated in Section 9.4(a) above
multiplied by 0.965, less any amount paid by HYP pursuant to Section 9.4(a)
above, and the Principal HYP Shareholders' cumulative liability shall in no
event exceed such amount.
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9.5 RIGHT TO REQUIRE CURE OF BREACH. Subject to the threshold
amount described in Section 9.3(a), without limiting the generality of anything
contained in Section 9.2, if there is any Breach of any representation or
warranty made by Parent, Subsidiary or any of the Selling Shareholders or
Principal HYP Shareholders, then the Selling Shareholders and Principal HYP
Shareholders, jointly and severally, will be obligated to take such other
actions as Purchaser may in good faith request for the purpose of causing such
Breach to be corrected, cured and eliminated in all respects (at no cost to
Parent, Subsidiary or Purchaser).
9.6 NO CONTRIBUTION. Each Selling Shareholder and Principal HYP
Shareholders waives, and acknowledges and agrees that such Selling Shareholder
and Principal HYP Shareholders will not have and will not exercise or assert or
attempt to exercise or assert, any right of contribution or right of indemnity
or any other right or remedy against the Companies in connection with any
indemnification obligation or any other Liability to which such Selling
Shareholder and Principal HYP Shareholders may become subject under any of the
Transactional Agreements or otherwise in connection with any of the
Transactions.
9.7 INTEREST. Any party that is required to indemnify any other
Person pursuant to this Section 9 with respect to any Damages will also be
required to pay such other Person interest on the amount of such Damages (for
the period commencing as of the date on which such other Person first incurred
or otherwise became subject to such Damages and ending on the date on which the
applicable indemnification payment is made by such party) at a floating rate
one (1) percentage point above the rate of interest publicly announced by Bank
of America, N.T.&S.A., from time to time as its prime, base or reference rate.
9.8 SETOFF. Subject to the threshold amount described in Section
9.3(a), in addition to any rights of setoff or other rights that Purchaser or
any of the other Indemnitees may have at common law or otherwise, Purchaser
will have the right to set off any amount that may be owed to any Indemnitee
under this Section 9 against any amount otherwise payable by any Indemnitee to
the Agent or any of the Selling Shareholders.
9.9 NONEXCLUSIVITY OF INDEMNIFICATION REMEDIES. The
indemnification remedies and other remedies provided in this Section 9 will be
deemed to be exclusive; provided, however, such limitation shall not apply to
rights arising from Sections 4.8, 10.7, 11.1 and 11.20 hereof, and the exercise
by any Person of any of its rights under this Section 9 with respect to
Sections 4.8, 10.7, 11.1 and 11.20 hereof will not be deemed to be an election
of remedies and will not be deemed to prejudice, or to constitute or operate as
a waiver of, any other right or remedy that such Person may be entitled to
exercise (whether under this Agreement, under any other Contract, under any
statute, rule or other Legal Requirement, at common law, in equity or
otherwise).
9.10 DEFENSE OF THIRD PARTY CLAIMS. Subject to the threshold
amount described in Section 9.3(a), in the event of the assertion or
commencement by any Person of any claim or Proceeding (whether against Parent,
Subsidiary, against any other Indemnitee or against any other Person) with
respect to which any of the Selling Shareholders and the Principal HYP
Shareholders may become obligated to indemnify, hold harmless, compensate or
reimburse any Indemnitee pursuant to this Section 9, Purchaser will have the
right, at its election, to designate the Agent to assume the defense of such
claim or Proceeding at the sole expense of the Selling Shareholders and the
Principal HYP Shareholders. If Purchaser so elects to designate the Agent to
assume the defense of any such claim or Proceeding: (a) the Agent will proceed
to defend such claim or Proceeding in a diligent manner with counsel
satisfactory to Purchaser; (b) Purchaser will make available to the Agent any
non- privileged documents and materials in the possession of Purchaser that may
be necessary to the defense of such
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claim or Proceeding; (c) the Agent will keep Purchaser informed of all material
developments and events relating to such claim or Proceeding; (d) Purchaser
will have the right to participate in the defense of such claim or Proceeding;
(e) the Agent will not settle, adjust or compromise such claim or Proceeding
without the prior written consent of Purchaser; and (f) Purchaser may at any
time (notwithstanding the prior designation of the Agent to assume the defense
of such claim or Proceeding) assume the defense of such claim or Proceeding.
If Purchaser does not elect to designate the Agent to assume the defense of any
such claim or Proceeding (or if, after initially designating the Agent to
assume such defense, Purchaser elects to assume such defense), Purchaser may
proceed with the defense of such claim or Proceeding on its own. If Purchaser
so proceeds with the defense of any such claim or Proceeding on its own: (1)
all reasonable expenses relating to the defense of such claim or Proceeding
(whether or not incurred by Purchaser) will be borne and paid exclusively by
the Selling Shareholders and the Principal HYP Shareholders; (2) the Selling
Shareholders and the Principal HYP Shareholders will make available to
Purchaser any documents and materials in the possession or control of any of
the Selling Shareholders and the Principal HYP Shareholders that may be
necessary to the defense of such claim or Proceeding; (3) Purchaser will keep
the Agent informed of all material developments and events relating to such
claim or Proceeding; and (4) Purchaser will have the right to settle, adjust or
compromise such claim or Proceeding with the consent of the Agent; provided,
however, that the Agent will not unreasonably withhold such consent.
9.11 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PURCHASER. No
Indemnitee (other than Purchaser or any successor thereto or assign thereof)
will be permitted to assert any indemnification claim or exercise any other
remedy under this Agreement unless Purchaser (or any successor thereto or
assign thereof) will have consented to the assertion of such indemnification
claim or the exercise of such other remedy.
SECTION 10. REGISTRATION RIGHTS.
10.1 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 10.1, if
Purchaser shall receive a written request from Holders of more than a majority
in interest of the Registrable Securities (the "INITIATING HOLDERS") that
Purchaser file a registration statement under the Securities Act covering the
registration of the American Depositary Shares issuable upon exchange of such
Purchaser Stock, Purchaser shall file with the SEC one or more registration
statements on Form F-3 or S-3 (together with the prospectus included therein, a
"REGISTRATION STATEMENT") pursuant to Rule 415 of the Securities Act in order
to register with the SEC the continuous resale by the Holders, from time to
time, of the American Depositary Shares through each securities exchange on
which the American Depositary Shares are then traded, or in
privately-negotiated transactions. Purchaser shall use its Best Efforts to
cause such Registration Statement to be declared effective as soon thereafter
as possible and in any event within sixty (60) days thereafter. Each Holder
agrees to furnish promptly to Purchaser in writing all information required
from time to time to be disclosed in order to make the information previously
furnished to Purchaser by such Holder not misleading.
(b) Purchaser shall pay all Registration Expenses in
connection with any registration, qualification or compliance hereunder, and
each Holder shall pay all Selling Expenses and other expenses that are not
Registration Expenses relating to the American Depositary Shares resold by such
Holder.
(c) In the case of the registration effected by Purchaser
pursuant to these registration provisions, Purchaser shall use its Best Efforts
to:
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(1) keep such registration effective until the
earlier of (A) the second anniversary of the Holders' written request for
registration, (B) such date as all of the American Depositary Shares have been
resold or (C) such time as all of the American Depositary Shares held by the
Holders can be sold (i) without restrictions pursuant to Regulation S under the
Securities Act or (ii) within a given three-month period without compliance
with the registration requirements of the Securities Act pursuant to Rule 144;
(2) prepare and file with the SEC such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
Registration Statement;
(3) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request;
(4) cause all American Depositary Shares
registered as described herein to be listed on each securities exchange and
quoted on each quotation service on which the American Depositary Shares are
then listed or quoted;
(5) provide a transfer agent and registrar for
all American Depositary Shares registered pursuant to the Registration
Statement and a CUSIP number for all such American Depositary Shares;
(6) otherwise use its Best Efforts promptly to
comply with all applicable rules and regulations of the SEC;
(7) file the documents required of Purchaser and
otherwise use its Best Efforts promptly to obtain, if applicable, and maintain
requisite blue sky clearance in (A) all jurisdictions in which any of the
American Depositary Shares are originally sold and (B) all other states
specified in writing by a Holder, provided as to clause (B) however, that
Purchaser shall not be required to qualify to do business or consent to service
of process in any state in which it is not now so qualified or has not so
consented; and
(8) with respect to the initial filing of the
Registration Statement, as of the date of declaration of effectiveness, obtain
an opinion of counsel to Purchaser acceptable to Purchaser, addressed to each
Holder selling registrable securities pursuant to the Registration Statement.
Purchaser shall use its Best Efforts to qualify for use of Form F-3 or S-3
under the Securities Act to register the resale of the American Depositary
Shares and to maintain such qualification during the periods described in
subsection (c)(1) hereof.
(d) Purchaser shall furnish to each Holder upon request a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary in order to facilitate the public sale or other
disposition of all or any of the American Depositary Shares held by the
Purchaser.
(e) At any time Purchaser may refuse to permit a Holder
to resell any American Depositary Shares pursuant to the Registration
Statement; provided, however, Purchaser must deliver a certificate in writing
to the Holders to the effect that suspension of the sale of shares under the
Registration Statement, until such time as Purchaser can make an appropriate
filing with the SEC, is
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necessary because a sale pursuant to the Registration Statement, in its
then-current form, could constitute a violation of the Federal securities laws.
In such an event, Purchaser shall use its Best Efforts to amend the
Registration Statement if necessary and take all other actions necessary to
allow such sale under the Federal securities laws, and shall notify the Holders
promptly after it has determined that such sale has become permissible under
the Federal securities laws. Notwithstanding the foregoing, Purchaser shall
not under any circumstances be entitled to exercise its right to suspend sales
under the registration statement more than two (2) times in any twelve (12)
month period, and the period during which such Registration Statement may be
withdrawn shall not exceed sixty (60) days.
10.2 PIGGYBACK REGISTRATIONS. Purchaser shall notify all Holders
in writing at least thirty (30) days prior to the filing of any registration
statement under the Securities Act for purposes of a public offering of
securities of Purchaser (including, but not limited to, registration statements
relating to secondary offerings of securities of Purchaser, but excluding
registration statements relating to employee benefit plans or with respect to
corporate reorganizations or other transactions under Rule 145 of the
Securities Act) and will afford each such Holder an opportunity to include in
such registration statement all or part of the American Depositary Shares
issuable upon exchange of the Purchaser Stock held by such Holder. Each Holder
desiring to include in any such registration statement all or any part of such
American Depositary Shares shall, within fifteen (15) days after the
above-described notice from Purchaser, so notify Purchaser in writing. Such
notice shall state the intended method of disposition of the American
Depositary Shares by such Holder. If a Holder decides not to include all of
its American Depositary Shares in any registration statement thereafter filed
by Purchaser, such Holder shall nevertheless continue to have the right to
include any American Depositary Shares in any subsequent registration statement
or registration statements as may be filed by Purchaser with respect to
offerings of its securities, all upon the terms and conditions set forth
herein.
(a) UNDERWRITING. If the registration statement under
which Purchaser gives notice under this Section 10.2 is for an underwritten
offering, Purchaser shall so advise the Holders. In such event, the right of
any such Holder to be included in a registration pursuant to this Section 10.2
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's American Depositary Shares in the underwriting
to the extent provided herein. All Holders proposing to distribute their
American Depositary Shares through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by Purchaser. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to Purchaser; second, to the Holders on a pro rata
basis based on the total number of American Depositary Shares to be held by the
Holders; and third, to any shareholder of Purchaser (other than a Holder) on a
pro rata basis. No such reduction shall reduce the securities being offered by
Purchaser for its own account to be included in the registration and
underwriting. In no event will shares of any other selling shareholder be
included in such registration which would reduce the number of shares which may
be included by Holders without the written consent of Holders of not less than
a majority in interest of the American Depositary Shares proposed to be sold in
the offering.
(b) RIGHT TO TERMINATE REGISTRATION. Any Holder shall
have the right to terminate or withdraw any registration initiated by it under
this Section 10.2 prior to the effectiveness of such registration whether or
not any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by
Purchaser in accordance with Section 10.3 hereof.
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10.3 EXPENSES OF REGISTRATION. Except as specifically provided
herein, all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Sections 10.1 and 10.2 herein shall be
borne by Purchaser. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the Holders of the securities so
registered pro rata on the basis of the number of shares so registered.
Purchaser shall not, however, be required to pay for expenses of any
registration proceeding begun pursuant to Sections 10.1 and 10.2, the request
of which has been subsequently withdrawn by the Initiating Holders unless (a)
the withdrawal is based upon material adverse information concerning Purchaser
of which the Initiating Holders were not aware at the time of such request or
(b) the holders of a majority of the American Depositary Shares agree to
forfeit their right to one requested registration pursuant to Sections 10.1 and
10.2, in which event such right shall be forfeited by all Holders). If the
Holders are required to pay the Registration Expenses, such expenses shall be
borne by the Holders of securities (including American Depositary Shares)
requesting such registration in proportion to the number of shares for which
registration was requested. If Purchaser is required to pay the Registration
Expenses of a withdrawn offering pursuant to clause (a) above, then the Holders
shall not forfeit their rights pursuant to Section 10.1 to a demand
registration.
10.4 OBLIGATIONS OF PURCHASER. Whenever required to effect the
registration of any American Depositary Shares, Purchaser shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such American Depositary Shares and use all
reasonable efforts to cause such registration statement to become effective,
and, upon the request of the Holders of a majority of the American Depositary
Shares registered thereunder, keep such registration statement effective for up
to ninety (90) days or, if earlier, until the Holder or Holders have completed
the distribution related thereto.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of American
Depositary Shares owned by them.
(d) Use all reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that Purchaser shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter(s) of such offering.
Each Holder participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
(f) Notify each Holder covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated
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therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such American Depositary
Shares are delivered to the underwriters for sale, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing Purchaser for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of American Depositary Shares and (ii) a letter
dated as of such date, from the independent certified public accountants of
Purchaser, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
American Depositary Shares.
10.5 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Section 10 shall terminate and be of no further force and
effect on the fourth (4th) anniversary of the Closing Date. In addition, a
Holder's registration rights shall expire if all American Depositary Shares
held by and issuable to such Holder (and its affiliates, partners and former
partners) may be sold within a given three-month period without compliance with
the registration requirements of the Securities Act pursuant to Rule 144.
10.6 DELAY OF REGISTRATION; FURNISHING INFORMATION. No Holder
shall have any right to obtain or seek an injunction restraining or otherwise
delaying any such registration as the result of any controversy that might
arise with respect to the interpretation or implementation of this Section 10.
It shall be a condition precedent to the obligations of Purchaser to take any
action pursuant to Sections 10.1 and 10.2 that the selling Holders shall
furnish to Purchaser such information regarding themselves, the American
Depositary Shares held by them and the intended method of disposition of such
securities as shall be required to effect the registration of their American
Depositary Shares.
10.7 INDEMNIFICATION. In the event any American Depositary Shares
are included in a registration statement under Sections 10.1 or 10.2:
(a) To the extent permitted by law, Purchaser will
indemnify and hold harmless each Holder, the partners, officers, directors and
legal counsel of each Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "VIOLATION") by
Purchaser: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (iii) any violation or alleged violation
by Purchaser of the Securities Act, the Exchange Act, any state securities law
or any rule or regulation promulgated under the Securities Act, the Exchange
Act or any state securities law in connection with the offering covered by such
registration statement; and Purchaser will reimburse each such Holder, partner,
officer, director, legal counsel,
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underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided however, that the indemnity
agreement contained in this Section 10.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Purchaser, which consent shall
not be unreasonably withheld, nor shall Purchaser be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, legal
counsel, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
American Depositary Shares held by such Holder is included in the securities as
to which such registration qualifications or compliance is being effected,
indemnify and hold harmless Purchaser, each of its directors, its officers, and
legal counsel and each person, if any, who controls Purchaser within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which
Purchaser or any such director, officer, controlling person, underwriter or
other such Holder, or partner, director, officer or controlling person of such
other Holder may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder under an instrument duly executed by such Holder and
stated to be specifically for use in connection with such registration; and
each such Holder will reimburse any legal or other expenses reasonably incurred
by Purchaser or any such director, officer, legal counsel, controlling person,
underwriter or other Holder, or partner, officer, director, legal counsel or
controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Violation; provided, however, that the
indemnity agreement contained in this Section 10.7(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall
any indemnity under this Section 10.7 exceed the proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 10.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 10.7,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 10.7, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
10.7.
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(d) If the indemnification provided for in this Section
10.7 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the Violation(s) that
resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by a court of law by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided, that in
no event shall any contribution by a Holder hereunder exceed the proceeds from
the offering received by such Holder.
(e) The obligations of Purchaser and Holders under this
Section 10.7 shall survive completion of any offering of American Depositary
Shares in a registration statement and the termination of this agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
10.8 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
Purchaser to register American Depositary Shares pursuant to this Section 10
may be assigned by a Holder to a transferee or assignee of American Depositary
Shares which (a) is a subsidiary, parent, general partner, limited partner or
retired partner of a Holder, (b) is a Holder's family member or trust for the
benefit of an individual Holder, or (c) acquires at least 100,000 shares of
American Depositary Shares (as adjusted for stock splits and combinations);
provided, however, (A) the transferor shall, within ten (10) days after such
transfer, furnish to Purchaser written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned and (B) such transferee shall agree to
be subject to all restrictions set forth in this Agreement.
10.9 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Section 10 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of Purchaser and the Holders of
at least a majority in interest of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10.9 shall be binding upon
each Holder and Purchaser. By acceptance of any benefits under this Section
10, Holders of American Depositary Shares hereby agree to be bound by the
provisions hereunder.
10.10 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date
of this Agreement, Purchaser shall not, without the prior written consent of
the Holders of a majority in interest of the American Depositary Shares then
outstanding, enter into any agreement with any holder or prospective holder of
any securities of Purchaser that would grant such holder registration rights
senior to those granted to the Holders hereunder.
10.11 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that
such Holder shall not sell or otherwise transfer or dispose of any ordinary
shares (or other securities) of Purchaser held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of Purchaser not to
exceed one hundred eighty (180)
42.
48
days following the effective date of a registration statement of Purchaser
filed under the Securities Act. Each Holder agrees to execute and deliver such
other agreements as may be reasonably requested by Purchaser or the underwriter
which are consistent with the foregoing or which are necessary to give further
effect thereto. The obligations described in this Section 10.11 shall not
apply to a registration relating solely to employee benefit plans on Form F-1
or Form F-8 or similar forms that may be promulgated in the future, or a
registration relating solely to a SEC Rule 145 transaction on Form F-4 or
similar forms that may be promulgated in the future. Purchaser may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
10.12 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of American Depositary Shares to the public without
registration, Purchaser agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 of the Securities Act or any
similar or analogous rule promulgated under the Securities Act, at all times
after the effective date of the first registration filed by Purchaser for an
offering of its securities to the general public;
(b) File with the SEC, in a timely manner, all reports
and other documents required of Purchaser under the Exchange Act;
(c) So long as a Holder owns any American Depositary
Shares, furnish to such Holder forthwith upon request: a written statement by
Purchaser as to its compliance with the reporting requirements of said Rule 144
of the Securities Act, and of the Exchange Act (at any time after it has become
subject to such reporting requirements); a copy of the most recent annual or
quarterly report of Purchaser; and such other reports and documents as a Holder
may reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.
SECTION 11. MISCELLANEOUS PROVISIONS.
11.1 NONCOMPETITION; CONFIDENTIALITY. Subject to the Closing, and
as an inducement to Purchaser to execute this Agreement and complete the
transactions contemplated hereby, and in order to preserve the goodwill
associated with the business of Parent and Subsidiary being acquired pursuant
to this Agreement.
(a) COVENANT NOT TO COMPETE. For a period of two (2)
years from the Closing Date, none of the Selling Shareholders will directly or
indirectly engage in any Competitive Activities (as hereinafter defined). The
term "COMPETITIVE ACTIVITIES" as used herein shall mean:
(1) directly or indirectly engaging in,
continuing in or carrying on the business of manufacturing or selling die-cast,
injection-molded products, hand-made books, specialty packaging and other paper
products or any business similar thereto, including owning or controlling any
financial interest in any corporation, partnership, joint venture, firm or
other form of business organization which competes with or is engaged in or
carries on any aspect of such business or any business substantially similar
thereto;
(2) serving as a trustee, director, officer,
partner or employee of, or consulting with, advising or assisting in any way,
whether or not for consideration, any corporation, partnership, joint venture,
firm, proprietorship or other business organization which is now, becomes or
43.
49
may become a competitor of Purchaser in any aspect with respect to the business
which Purchaser is acquiring hereunder, including, but not limited to,
advertising or otherwise endorsing the products of any such competitor;
soliciting customers or otherwise serving as an intermediary for any such
competitor; loaning money or rendering any other form of financial assistance
to or engaging in any form of business transaction on other than an arm's
length basis with any such competitor;
(3) engaging in any practice the purpose of which
is to evade the provisions of this covenant not to compete or to commit any act
which is detrimental to the successful continuation of the business which
Purchaser is acquiring hereunder by Purchaser after the Closing or which
adversely affects such business;
provided, however, that the term "Competitive Activities" shall not
include the ownership of securities of corporations which are listed on a
national securities exchange or traded in the national over-the-counter market
in an amount which shall not exceed 5% of the outstanding shares of any such
corporation. The parties agree that the geographic scope of this covenant not
to compete shall extend throughout Mongolia, Hong Kong, China, Korea, Southeast
Asia, Malaysia, the Philippines, Australia, Japan, the United States, Mexico,
Europe and Canada. The parties agree that Purchaser may sell, assign or
otherwise transfer this covenant not to compete, in whole or in part, to any
person, corporation, firm or entity that purchases all or part of the business
being acquired by Purchaser hereunder. In the event a court of competent
jurisdiction determines that the provisions of this covenant not to compete are
excessively broad as to duration, geographical scope or activity, it is
expressly agreed that this covenant not to compete shall be construed so that
the remaining provisions shall not be affected, but shall remain in full force
and effect, and any such over broad provisions shall be deemed, without further
action on the part of any person, to be modified, amended and/or limited, but
only to the extent necessary to render the same valid and enforceable in such
jurisdiction.
(b) NON-INTERFERENCE. Each of Chan Holdings and Chan
further agrees that until three (3) years from the Closing Date, it or he will
not, without the prior written consent of Purchaser, (i) interfere with the
business of Parent, Subsidiary or Purchaser by soliciting, attempting to
solicit, inducing, or otherwise causing any employee or consultant of Parent,
Subsidiary or Purchaser to terminate his or her employment as such in order to
become an employee, consultant or independent contractor to or for any
competitor of Parent, Subsidiary or Purchaser or to or for any company with
which either of Chan Holdings or Chan is associated in any way; or (ii) induce
or attempt to induce any customers, suppliers, distributors, resellers, or
independent contractor of Parent, Subsidiary or Purchaser to terminate their
relationships with, or to take any action that would be disadvantageous to the
business of, Parent, Subsidiary or Purchaser.
(c) COVENANT OF CONFIDENTIALITY. Neither Chan Holdings
nor Chan shall at any time subsequent to the Closing, except as explicitly
requested by Purchaser, (i) use for any purpose, (ii) disclose to any person,
or (iii) keep or make copies of documents, tapes, discs or programs containing,
any confidential information concerning Parent and Subsidiary. For purposes
hereof, "CONFIDENTIAL INFORMATION" shall mean and include, without limitation,
all Trade Rights in which either Parent or Subsidiary has an interest, all
customer lists and customer information, and all other information concerning
either Parent's or Subsidiary's processes, apparatus, equipment, packaging,
products, marketing and distribution methods, not previously disclosed to the
public directly by either Parent or Subsidiary.
(d) INDEPENDENCE OF OBLIGATIONS. The covenants of Chan
Holdings and Chan set forth in this Agreement shall be construed as independent
of any other agreement or arrangement between Chan Holdings and Chan, on the
one hand, and Purchaser or any of its subsidiaries, on the other hand,
44.
50
and the existence of any claim or cause of action by Chan Holdings or Chan
against Purchaser or any of its subsidiaries shall not constitute a defense to
the enforcement of such covenants against Chan Holdings or Chan.
(e) EQUITABLE RELIEF FOR VIOLATIONS. Chan Holdings and
Chan agree that the provisions and restrictions contained in this Section 11.1
are necessary to protect the legitimate continuing interests of Purchaser in
acquiring the business and goodwill of the business through the purchase of the
Parent Shares, and that any violation or breach of these provisions will result
in irreparable injury to Purchaser for which a remedy at law would be
inadequate and that, in addition to any relief at law which may be available to
Purchaser for such violation or breach and regardless of any other provision
contained in this Agreement, Purchaser shall be entitled to injunctive and
other equitable relief as a court may grant after considering the intent of
this Section 11.1.
11.2 JOINT AND SEVERAL LIABILITY. Subject to Section 9.6 hereof:
(a) the Selling Shareholders and Principal HYP
Shareholders jointly and severally agree that they will be jointly and
severally liable with Parent and Subsidiary for the due and timely compliance
with and performance of each of the covenants and obligations of Parent and
Subsidiary set forth in this Agreement;
(b) each Selling Shareholder and Principal HYP
Shareholder agrees that such Selling Shareholder or Principal HYP Shareholder
will be jointly and severally liable with each of the other Selling
Shareholders and Principal HYP Shareholders for the due and timely compliance
with and performance of each of the covenants and obligations of such other
Selling Shareholders and Principal HYP Shareholders set forth in this
Agreement; and
(c) Each of Parent and Subsidiary agrees that, prior to
the Closing, it will be jointly and severally liable with each Selling
Shareholder for the due and timely compliance with and performance of each of
the covenants and obligations of such Selling Shareholder or Principal HYP
Shareholder set forth in this Agreement (including the indemnification
obligations (and limitations on such obligations) of such Selling Shareholder
or Principal HYP Shareholder set forth in Section 9).
11.3 AGENT.
(a) The Selling Shareholders and Principal HYP
Shareholders hereby irrevocably nominate, constitute and appoint ChinaVest
Management Limited as the agent and true and lawful attorney-in-fact of the
Selling Shareholders and Principal HYP Shareholders, with full power of
substitution, to act in the name, place and stead of the Selling Shareholders
and Principal HYP Shareholders for purposes of executing any documents and
taking any actions that the Agent may, in its sole discretion, determine to be
necessary, desirable or appropriate in connection with any of the Transactional
Agreements or any of the Transactions. ChinaVest Management Limited hereby
accepts its appointment as Agent, subject to its right to appoint a successor
Agent in its sole discretion.
(b) The Selling Shareholders and Principal HYP
Shareholders hereby grant to the Agent full authority to execute, deliver,
acknowledge, certify and file on behalf of the Selling Shareholders and
Principal HYP Shareholders (in the name of any or all of the Selling
Shareholders and Principal HYP Shareholders or otherwise) any and all documents
that the Agent may, in its sole discretion, determine to be necessary,
desirable or appropriate, in such forms and containing such provisions as the
Agent may, in its sole discretion, determine to be appropriate (including the
General Release referred to in Section 1.3(b), the Closing Certificate and any
amendment to or waiver of rights
45.
51
under any of the Transactional Agreements). Notwithstanding anything to the
contrary contained in any of the Transactional Agreements: (1) Purchaser will
be entitled to deal exclusively with the Agent on all matters relating to the
respective Transactional Agreements and the respective Transactions (including
all matters relating to any notice to, or any Consent to be given or action to
be taken by, any Selling Shareholder and Principal HYP Shareholder); and (2)
each Indemnitee will be entitled to rely conclusively (without further evidence
of any kind whatsoever) on any document executed or purported to be executed on
behalf of any Selling Shareholder and Principal HYP Shareholder by the Agent,
and on any other action taken or purported to be taken on behalf of any Selling
Shareholder and Principal HYP Shareholder by the Agent, as fully binding upon
such Selling Shareholder and Principal HYP Shareholder.
(c) The Selling Shareholders and Principal HYP
Shareholders recognize and intend that the power of attorney granted in Section
11.3(a): (1) is coupled with an interest and is irrevocable; (2) may be
delegated by the Agent; and (3) will survive the death or incapacity of each of
the Selling Shareholders.
(d) The Agent will be entitled to treat as genuine, and
as the document it purports to be, any letter, facsimile, telex or other
document that is believed by it to be genuine and to have been telexed,
telegraphed, faxed or cabled by a Selling Shareholder or to have been signed
and presented by a Selling Shareholder and Principal HYP Shareholder.
(e) If the Agent is unable to fulfill its
responsibilities hereunder, the Selling Shareholders and Principal HYP
Shareholders will, within ten days after such death or disability, appoint a
successor to the Agent and immediately thereafter notify Purchaser of the
identity of such successor. Any such successor will succeed the Agent as Agent
hereunder. If for any reason there is no Agent at any time, all references
herein to the Agent will be deemed to refer to the Selling Shareholders and
Principal HYP Shareholders.
(f) All expenses incurred by the Agent in connection with
the performance of its duties as Agent will be borne and paid by the Selling
Shareholders and Principal HYP Shareholders.
11.4 FURTHER ASSURANCES. Each party hereto will execute and cause
to be delivered to each other party hereto such instruments and other
documents, and will take such other actions, as such other party may reasonably
request (prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the Transactions.
11.5 FEES AND EXPENSES.
(a) Without limiting the generality of anything contained
in Section 11.5(b), the Selling Shareholders will bear and pay all fees, costs
and expenses (including all legal fees and expenses payable to Xxxxxxxx
Xxxxxxxxx, and any local counsel retained by him that have been incurred or
that are in the future incurred by, on behalf of or for the benefit of Parent,
Subsidiary or any of the Selling Shareholders or Principal HYP Shareholders in
connection with: (1) the negotiation, preparation and review of any term sheet
or similar document relating to any of the Transactions; (2) the investigation
and review conducted by Purchaser and its Representatives with respect to the
Companies' business (and the furnishing of information to Purchaser and its
Representatives in connection with such investigation and review); (3) the
negotiation, preparation and review of this Agreement (including the Disclosure
Schedule), the other Transactional Agreements and all certificates, opinions
and other instruments and documents delivered or to be delivered in connection
with the Transactions; (4) the preparation and submission of any filing or
notice required to be made or given in connection with any of the Transactions,
and the obtaining of any Consent required to be obtained in connection with any
of the
46.
52
Transactions; and (5) the consummation and performance of the Transactions.
None of the Companies will bear or pay, and the Selling Shareholders and the
Principal HYP Shareholders will not permit the Companies to bear or pay, any
such fees, costs or expenses.
(b) Subject to the provisions of Section 9 (including the
indemnification and other obligations of the Selling Shareholders and the
Principal HYP Shareholders thereunder), Purchaser will bear and pay all fees,
costs and expenses (including the expenses of obtaining a fairness opinion from
Xxx Xxxxxx & Company and all legal fees and expenses payable to Xxxxxx X.X.
Xxxx & Co. and Xxxxxx Godward LLP) that have been incurred or that are in the
future incurred by or on behalf of Purchaser in connection with: (1) the
negotiation, preparation and review of any term sheet or similar document
relating to any of the Transactions; (2) the investigation and review conducted
by Purchaser and its Representatives with respect to the Companies' business;
(3) the negotiation, preparation and review of this Agreement, the other
Transactional Agreements and all certificates, opinions and other instruments
and documents delivered or to be delivered in connection with the Transactions;
and (4) the consummation and performance of the Transactions.
11.6 ATTORNEYS' FEES. If any legal action or other legal
proceeding relating to any of the Transactional Agreements or the enforcement
of any provision of any of the Transactional Agreements is brought against any
party hereto, the prevailing party will be entitled to recover reasonable
attorneys' fees, costs and disbursements (in addition to any other relief to
which the prevailing party may be entitled).
11.7 NOTICES. Any notice or other communication required or
permitted to be delivered to any party under this Agreement will be in writing
and will be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery service or by
telecopier) to the address or telecopier number set forth beneath the name of
such party below (or to such other address or telecopier number as such party
will have specified in a written notice given to the other parties hereto):
if to Parent or Subsidiary:
Xxx Xxxx Printing Holdings Co. Limited
Unit B, Block 1, 25F
Tai Ping Industrial Centre
Attention: Xxxxxx Xxxx
President and Chief Executive Officer
Telephone: 000-0000-0000
Telecopier: 000-0000-0000
if to any of the Selling Shareholders or Principal HYP
Shareholders or the Agent:
x/x XxxxxXxxx Xxxxxxx
00/X, 00 Xxxxxxx Xxxxxx
Xxxxxxx Xxxx Xxxx
Attention: Xxxxxxx X. Xxxx
(with a copy to: Xxx Xxxxxxxxx, Esq.)
Telephone: 000-0000-0000
Telecopier: 000-0000-0000
if to Purchaser:
47.
53
Zindart Limited
Flat C&D, 00xx Xxxxx, Xxxxx 0
Xxxxxxx Xxxxxxxxxx Xxxxxx
57 Xxxx Xxx Road
Tai Po, N.T., Hong Kong
Attention: Feather X.X. Xxx
Telephone: 000-0000-0000
Telecopier: 852-2664-7066
with a copy to:
Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: 000-00-000-000-0000
Telecopier: 011-01-415-951-3699
11.8 PUBLICITY. Without limiting the generality of anything
contained in Section 4.8, on and at all times after the Closing Date: (a) no
press release or other publicity concerning any of the Transactions will be
issued or otherwise disseminated by or on behalf of Parent, Subsidiary or any
of the Selling Shareholders or Principal HYP Shareholders without the prior
approval of Purchaser, and Parent, Subsidiary, the Selling Shareholders and the
Principal HYP Shareholders will continue to keep the existence and terms of
this Agreement and the other Transactional Agreements strictly confidential;
and (b) each of Parent, Subsidiary, the Selling Shareholders and the Principal
HYP Shareholders will keep strictly confidential, and will not use or disclose
to any other Person, any non-public document or other information in its
possession that relates directly or indirectly to the business of the
Companies, Purchaser or any affiliate of Purchaser.
11.9 HEADINGS. The headings contained in this Agreement are for
convenience of reference only, will not be deemed to be a part of this
Agreement and will not be referred to in connection with the construction or
interpretation of this Agreement.
11.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which will constitute an original and all of which, when
taken together, will constitute one agreement.
11.11 GOVERNING LAW; VENUE.
(a) This Agreement will be construed in accordance with,
and governed in all respects by, the internal laws of Hong Kong (without giving
effect to principles of conflicts of laws).
(b) Any legal action or other legal proceeding relating
to this Agreement or the enforcement of any provision of this Agreement may be
brought or otherwise commenced in any court located in Hong Kong. Each party
to this Agreement: (1) expressly and irrevocably consents and submits to the
jurisdiction of each court located in Hong Kong in connection with any such
legal proceeding; (2) agrees that each court located in Hong Kong will be
deemed to be a convenient forum; and (3) agrees not to assert (by way of
motion, as a defense or otherwise), in any such legal proceeding commenced in
any court located in Hong Kong, any claim that such party is not subject
personally to the jurisdiction of such court, that such legal proceeding has
been brought in an inconvenient forum, that the
48.
54
venue of such proceeding is improper or that this Agreement or the subject
matter of this Agreement may not be enforced in or by such court.
(c) Each Selling Shareholder and Principal HYP
Shareholder agrees that, if any Proceeding is commenced against any Indemnitee
by any Person in or before any court or other tribunal in Hong Kong, then such
Indemnitee may proceed against such Selling Shareholder or Principal HYP
Shareholder in such court or other tribunal with respect to any indemnification
claim or other claim arising directly or indirectly from or relating directly
or indirectly to such Proceeding or any of the matters alleged therein or any
of the circumstances giving rise thereto.
(d) The Selling Shareholders irrevocably constitute and
appoint the Agent as their agent to receive service of process in connection
with any legal proceeding relating to this Agreement or the enforcement of any
provision of this Agreement.
(e) The Selling Shareholders and the Principal HYP
Shareholders irrevocably waive the right to a jury trial in connection with any
legal proceeding relating to this Agreement or the enforcement of any provision
of this Agreement.
11.12 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon:
each of Parent, Subsidiary and their respective successors and assigns (if
any); the Selling Shareholders and the Principal HYP Shareholders and their
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any); and Purchaser and its successors and assigns
(if any). This Agreement will inure to the benefit of: each of Parent and
Subsidiary; the Selling Shareholders; the Principal HYP Shareholders;
Purchaser; the other Indemnitees (subject to Section 9.11); and the respective
successors and assigns (if any) of the foregoing. Purchaser may freely assign
any or all of its rights under this Agreement (including its indemnification
rights under Section 9), in whole or in part, to any other Person without
obtaining the consent or approval of any other party hereto or of any other
Person.
11.13 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto will be cumulative (and not alternative). Each
of Parent, Subsidiary, the Selling Shareholders and the Principal HYP
Shareholders agrees that:
(a) in the event of any Breach or threatened Breach by it
of any covenant, obligation or other provision set forth in this Agreement,
Purchaser will be entitled (in addition to any other remedy that may be
available to it) to (1) a decree or order of specific performance or mandamus
to enforce the observance and performance of such covenant, obligation or other
provision, and (2) an injunction restraining such Breach or threatened Breach;
and
(b) neither Purchaser nor any other Indemnitee will be
required to provide any bond or other security in connection with any such
decree, order or injunction or in connection with any related action or
Proceeding.
11.14 WAIVER.
(a) No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the
part of any Person in exercising any power, right, privilege or remedy under
this Agreement, will operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy will preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
49.
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(b) No Person will be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver will not be applicable
or have any effect except in the specific instance in which it is given.
11.15 AMENDMENTS. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of Purchaser and the Agent.
11.16 SEVERABILITY. In the event that any provision of this
Agreement, or the application of any such provision to any Person or set of
circumstances, will be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as
to which it is determined to be invalid, unlawful, void or unenforceable, will
not be impaired or otherwise affected and will continue to be valid and
enforceable to the fullest extent permitted by law.
11.17 PARTIES IN INTEREST. Except for the provisions of Section 9
hereof, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
11.18 ENTIRE AGREEMENT. The Transactional Agreements set forth the
entire understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof.
11.19 DOLLARS. Whenever the symbols or words "$" or "dollar" or
"dollars" are used in this Agreement, it shall be a reference to United States
dollars.
11.20 POST-CLOSING COVENANT. Promptly following the Closing, the
parties shall cooperate to have all right, title and interest in the one
Subsidiary Ordinary Share held by Xxxxxx Xxxxx transferred to an executive
officer designated by Purchaser to be held in escrow for the benefit of Parent.
11.21 REPRESENTATIONS. The parties understand and acknowledge that
except as provided in Sections 4.4(b) and 6.2 hereof, references throughout
this Agreement to the representations and warranties of Subsidiary, Parent, the
Selling Shareholders and the Principal HYP Shareholders contained in Section 2
hereof shall include the information contained in the Disclosure Schedule.
11.22 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number will include the plural, and vice versa; the
masculine gender will include the feminine and neuter genders; the feminine
gender will include the masculine and neuter genders; and the neuter gender
will include the masculine and feminine genders.
(b) The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party will not be applied in the construction or interpretation of
this Agreement.
50.
56
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, will not be deemed to be terms of
limitation, but rather will be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of
this Agreement and Exhibits to this Agreement.
51.
57
The parties hereto have caused this Agreement to be executed and
delivered as of the date first above written.
"PURCHASER"
ZINDART LIMITED
By: Feather Fok
---------------------------------
Feather Fok
Chief Financial Officer and
Chief Operating Officer
"SUBSIDIARY"
XXX XXXX PRINTING HOLDINGS CO. LIMITED
By: /s/ Xxxxxx X. Xxxx
---------------------------------
Xxxxxx X. Xxxx
---------------------------------
[Print Name and Title]
"PARENT"
XXX XXXX HOLDINGS CO. LIMITED
By: /s/ Xxxxxx X. Xxxx
---------------------------------
Xxxxxx X. Xxxx
---------------------------------
[Print Name and Title]
THE "AGENT"
CHINAVEST MANAGEMENT LIMITED
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxx
---------------------------------
[Print Name and Title]
"SELLING SHAREHOLDERS"
HYP HOLDINGS LIMITED
By: /s/ Xxxx Xxxx
---------------------------------
Xxxx Xxxx - Director
---------------------------------
[Print Name and Title]
S-1.
58
XXXX XXXX (BVI) HOLDINGS LIMITED
By: /s/ Xxxx Xxxx
---------------------------------
_________________________________
[Print Name and Title]
/s/ Xxxx Xxxx
---------------------------------
XXXX XXXX
"PRINCIPAL HYP SHAREHOLDERS"
CHINAVEST IV, L.P.
By its General Partner:
CHINAVEST PARTNERS IV
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Xxxxxx X. Xxxxx, General Partner
CHINAVEST IV-A, L.P.
By its General Partner:
CHINAVEST PARTNERS IV
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Xxxxxx X. Xxxxx, General Partner
CHINAVEST IV-B, L.P.
By its General Partner:
CHINAVEST MANAGEMENT LIMITED
By: /s/ Xxxxxxx X. Xxxx
----------------------------------
Xxxxxxx X. Xxxx, Director
S-2.
59
ADVENT GLOBAL GECC LIMITED PARTNERSHIP
By its General Partners:
ADVENT GLOBAL MANAGEMENT LIMITED
PARTNERSHIP
ADVENT INTERNATIONAL LIMITED PARTNERSHIP
ADVENT INTERNATIONAL CORPORATION
By: /s/ Tan Xxxx Xxxx
---------------------------------
Tan Xxxx Xxxx
Chief Executive, Asia/Pacific
---------------------------------
[Print Name and Title]
ADVENT INTERNATIONAL INVESTORS II LIMITED
PARTNERSHIP
By its General Partner:
ADVENT INTERNATIONAL CORPORATION
By: /s/ Tan Xxxx Xxxx
---------------------------------
Tan Xxxx Xxxx
Chief Executive, Asia/Pacific
---------------------------------
[Print Name and Title]
GLOBAL PRIVATE EQUITY II - LIMITED PARTNERSHIP
By its General Partners:
ADVENT INTERNATIONAL LIMITED PARTNERSHIP
ADVENT INTERNATIONAL CORPORATION
By: /s/ Tan Xxxx Xxxx
---------------------------------
Tan Xxxx Xxxx
Chief Executive, Asia/Pacific
---------------------------------
[Print Name and Title]
S-3.
60
GLOBAL PRIVATE EQUITY II - PGGM LIMITED
PARTNERSHIP
By its General Partners:
ADVENT INTERNATIONAL LIMITED
PARTNERSHIP
ADVENT INTERNATIONAL CORPORATION
By: /s/ Tan Xxxx Xxxx
---------------------------------
Tan Xxxx Xxxx
Chief Executive, Asia/Pacific
---------------------------------
[Print Name and Title]
ASIA/PACIFIC SPECIAL SITUATIONS FUND LIMITED
PARTNERSHIP
By its General Partners:
ADVENT INTERNATIONAL LIMITED
PARTNERSHIP
ADVENT INTERNATIONAL CORPORATION
By: /s/ Tan Xxxx Xxxx
---------------------------------
Tan Xxxx Xxxx
Chief Executive, Asia/Pacific
---------------------------------
[Print Name and Title]
ADVENT ASIA/PACIFIC FUND LIMITED
PARTNERSHIP
By its General Partners:
ADVENT INTERNATIONAL LIMITED
PARTNERSHIP
ADVENT INTERNATIONAL CORPORATION
By: /s/ Tan Xxxx Xxxx
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Tan Xxxx Xxxx
Chief Executive, Asia/Pacific
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[Print Name and Title]
S-4.
61
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this EXHIBIT A):
"ACQUISITION TRANSACTION" means any transaction involving: (a) the
sale or other disposition of all or any portion of the business or assets
(other than in the Ordinary Course of Business) of the Companies; (b) the
issuance, sale or other disposition of (1) any capital stock of the Companies,
(2) any option, call, warrant or right (whether or not immediately exercisable)
to acquire any capital stock of the Companies, or (3) any security, instrument
or obligation that is or may become convertible into or exchangeable for any
capital stock of the Companies; or (c) any merger, consolidation, business
combination, share exchange, reorganization or similar transaction involving
the Companies.
"AGENT" has the meaning specified in the introductory paragraph of the
Agreement.
"AGREEMENT" means the Exchange Agreement to which this EXHIBIT A is
attached (including the Disclosure Schedule), as it may be amended from time to
time.
"AMERICAN DEPOSITARY SHARES" has the meaning specified in Section 1.5
of the Agreement.
"AUDIT" has the meaning specified in Section 1.2(c) of the Agreement.
"BEST EFFORTS" means the efforts that a prudent Person desiring to
achieve a particular result would use in order to ensure that such result is
achieved as expeditiously as possible.
"BREACH" There will be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been (a)
any material inaccuracy in or breach of, or any failure to comply with or
perform, such representation, warranty, covenant, obligation or other
provision, or (b) any substantiated claim (by any Person) or other circumstance
that is inconsistent with such representation, warranty, covenant, obligation
or other provision; and the term "Breach" will be deemed to refer to any such
inaccuracy, breach, failure, claim or circumstance.
"BUSINESS PLAN" has the meaning specified in Section 4.2(c) of the
Agreement.
"CHAN" and "CHAN HOLDINGS" has the meaning specified in the
introductory paragraph of the Agreement.
"CLOSING" has the meaning specified in Section 1.3(a) of the
Agreement.
"CLOSING CERTIFICATE" has the meaning specified in Section 1.3(b)(3)
of the Agreement.
"CLOSING DATE" has the meaning specified in Section 1.3(a) of the
Agreement.
"COMPANIES" has the meaning specified in Section 2.1(a) of the
Agreement.
"COMPANY PLAN" means any Current Benefit Plan or Past Benefit Plan.
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"COMPARABLE ENTITIES" means Entities (other than the Companies) doing
business in Hong Kong or Southern China that are engaged in businesses similar
to the businesses of Subsidiary and/or the Joint Ventures.
"COMPETITIVE ACTIVITIES" and "CONFIDENTIAL INFORMATION" have the
meanings specified in Section 11.1 of the Agreement.
"CONSENT" means any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization).
"CONSIDERATION" has the meaning specified in Section 1.2 of the
Agreement.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the total
interest expense of Subsidiary, plus, to the extent incurred by Subsidiary in
such period but not included in such interest expense: (i) interest expense
attributable to capitalized lease obligations; (ii) amortization of debt
discount and debt issuance cost; (iii) capitalized interest; (iv) noncash
interest expense; (v) commissions, discounts and other fees and charges with
respect to letters of credit and bankers' acceptance financing; (vi) interest
accruing on an indebtedness of any other Person to the extent that such
indebtedness is guaranteed by Subsidiary, provided that payment of such amounts
is being made to, or is sought by, the holders of such indebtedness pursuant to
such guarantee; and (vii) cash contributions to any employee stock ownership
plan or similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than Subsidiary) in
connection with indebtedness incurred by such plan or trust.
"CONSOLIDATED NET INCOME" means, for any period, the consolidated net
income (loss) of Subsidiary; provided, however, that there shall not be
included in such Consolidated Net Income: (i) any net income (loss) of any
Person acquired by Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition; (ii) any net income (loss) of
Subsidiary if Subsidiary is subject to restrictions, directly or indirectly, on
the payment of dividends or the making of distributions, directly or directly,
to any other Person, except that (A) subject to the limitations contained in
clause (iii) below, Subsidiary's equity in the net income of any such Person
for such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such Person during
such period to Subsidiary as a dividend (subject, in the case of a dividend
that could have been made to another Person, to the limitation contained in
this clause) and (B) Subsidiary's equity in a net loss of any such Person for
such period shall be included in determining such Consolidated Net Income;
(iii) any gain (but not loss) realized upon the sale or other disposition of
any asset of Subsidiary (including pursuant to any sale/leaseback transaction)
that is not sold or otherwise disposed of in the Ordinary Course of Business
and any gain (but not loss) realized upon the sale or other disposition of any
capital stock of any Person; (iv) any extraordinary gain or loss; and (v) the
cumulative effect of a change in accounting principles; provided, further, that
Consolidated Net Income shall be increased by the amount of cash actually
finally paid to Purchaser pursuant to the indemnification provisions of Section
9 of the Agreement if and only to the extent that the liability or expense
resulting in such payment reduced Consolidated Net Income during the Earn-Out
Period.
"CONTRACT" means any written, oral, implied or other agreement,
contract, understanding, arrangement, instrument, note, guaranty, indemnity,
representation, warranty, deed, assignment, power of attorney, certificate,
purchase order, work order, insurance policy, benefit plan, commitment,
covenant, assurance or undertaking of any nature.
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"CURRENT BENEFIT PLAN" means any Employee Benefit Plan that is
currently in effect and: (a) that was established or adopted by, or is
maintained or sponsored by the Companies; (b) in which the Companies
participates; (c) with respect to which the Companies is or may be required or
permitted to make any contribution; or (d) with respect to which the Companies
is or may become subject to any Liability.
"DAMAGES" includes any loss, damage, injury, decline in value, lost
opportunity, Liability, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including any legal fee, expert fee, accounting fee or
advisory fee), charge, cost (including any cost of investigation) or expense of
any nature.
"DISCLOSURE SCHEDULE" means the schedule (dated as of the date of the
Agreement) delivered to Purchaser on behalf of Parent, Subsidiary, the Selling
Shareholders and the Principal HYP Shareholders and incorporated in the
Agreement by reference.
"EARN-OUT PERIOD" means the consecutive two (2) fiscal years ended
March 31, 1999.
"EARN-OUT SHARES" has the meaning specified in Section 1.2(c) of the
Agreement.
"EMPLOYEE BENEFIT PLAN" shall have the meaning specified in Section
3(3) of ERISA.
"ENCUMBRANCE" means any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, equity, trust, equitable interest, claim,
preference, right of possession, lease, tenancy, license, encroachment,
covenant, infringement, interference, Order, proxy, option, right of first
refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or
other asset, any restriction on the receipt of any income derived from any
asset, any restriction on the use of any asset and any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset).
"ENTITY" means any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, cooperative, foundation, society, political party,
union, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization or entity.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ESCROW AGREEMENT" has the meaning specified in Section 1.2(b) of the
Agreement.
"ESCROW SHARES" has the meaning specified in Section 1.2(b) of the
Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED CONTRACT" means any Subsidiary Contract that: (a) any of
the Companies have entered into in the Ordinary Course of Business; (b) has a
term of less than 90 days or may be terminated by any of the Companies (without
penalty) within 90 days after the delivery of a termination notice by any of
the Companies; or (c) does not contemplate or involve the payment of cash or
other consideration in an amount or having a value in excess of $100,000.
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"FINANCIAL STATEMENTS" has the meaning specified in Section 2.4(a) of
the Agreement.
"FORM F-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by Purchaser with
the SEC.
"GAAP" means generally accepted accounting principles used in the
United States, applied on a basis consistent with the basis on which the
Financial Statements were prepared.
"GOVERNMENTAL AUTHORIZATION" means any: (a) permit, license,
certificate, franchise, concession, approval, consent, ratification,
permission, clearance, confirmation, endorsement, waiver, certification,
designation, rating, registration, qualification or authorization that is, has
been issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement; or (b)
right under any Contract with any Governmental Body.
"GOVERNMENTAL BODY" means any: (a) nation, principality,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature (including any
governmental division, subdivision, department, agency, bureau, branch, office,
commission, council, board, instrumentality, officer, official, representative,
organization, unit, body or Entity and any court or other tribunal); (d)
multi-national organization or body; or (e) individual, Entity or body
exercising, or entitled to exercise, any executive, legislative, judicial,
administrative, regulatory, police, military or taxing authority or power of
any nature.
"HAZARDOUS MATERIAL" includes: (a) any petroleum, waste oil, crude
oil, asbestos, urea formaldehyde or polychlorinated biphenyl; (b) any waste,
gas or other substance or material that is explosive or radioactive; (c) any
"hazardous substance," "pollutant," "contaminant," "hazardous waste,"
"regulated substance," "hazardous chemical" or "toxic chemical" as designated,
listed or defined (whether expressly or by reference) in any statute,
regulation or other Legal Requirement; (d) any other substance or material
(regardless of physical form) or form of energy that is subject to any Legal
Requirement which regulates or establishes standards of conduct in connection
with, or which otherwise relates to, the protection of human health, plant
life, animal life, natural resources, property or the enjoyment of life or
property from the presence in the environment of any solid, liquid, gas, odor,
noise or form of energy; and (e) any compound, mixture, solution, product or
other substance or material that contains any substance or material referred to
in clause (a), (b), (c) or (d) above.
"HOLDER" means any holder of Purchaser Stock or American Depositary
Shares.
"HYP" has the meaning specified in the introductory paragraph of the
Agreement.
"INDEMNITEES" means the following Persons: (a) Purchaser; (b) the
Companies; (c) the respective Representatives of the Persons referred to in
clauses (a) and (b) above; and (d) the respective successors and assigns of the
Persons referred to in clauses (a), (b) and (c) above; provided, however, that
the Selling Shareholders and Principal HYP Shareholders will not be deemed to
be "Indemnitees."
"JOINT VENTURE" and "JOINT VENTURES" means either or both of Shenzhen
Huaxuan Printing Product Co., Ltd., a contractual joint venture formed under
the laws of the PRC, and Guangzhou Xxx Xx Advertising Company Limited, a
contractual joint venture formed under the laws of the PRC.
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"KNOWLEDGE" An individual will be deemed to have "Knowledge" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or other matter; or (b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the Ordinary
Course of Business. Each of Parent, Subsidiary, Selling Shareholders or
Principal HYP Shareholders will be deemed to have "Knowledge" of a particular
fact or other matter if any of its executive officers, key employees or other
Representatives has Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" means any written local, municipal, foreign or
other law, statute, legislation, constitution, principle of common law,
resolution, ordinance, code, edict, decree, proclamation, treaty, convention,
rule, regulation, ruling, directive, pronouncement, requirement, specification,
determination, decision, opinion or interpretation that is, has been issued,
enacted, adopted, passed, approved, promulgated, made, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
"LIABILITY" means any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, derivative, joint, several or
secondary liability), regardless of whether such debt, obligation, duty or
liability would be required to be disclosed on a balance sheet prepared in
accordance with generally accepted accounting principles and regardless of
whether such debt, obligation, duty or liability is immediately due and
payable.
"ORDER" means any: (a) order, judgment, injunction, edict, decree,
ruling, pronouncement, determination, decision, opinion, verdict, sentence,
subpoena, writ or award that is, has been or may in the future be issued, made,
entered, rendered or otherwise put into effect by or under the authority of any
court, administrative agency or other Governmental Body or any arbitrator or
arbitration panel; or (b) Contract with any Governmental Body that is, has been
or may in the future be entered into in connection with any Proceeding.
"ORDINARY COURSE OF BUSINESS" An action taken by or on behalf of the
Companies will not be deemed to have been taken in the "Ordinary Course of
Business" unless: (a) such action is consistent with its past practices (if
such type of action has been taken in the past) and is similar in nature and
magnitude to actions customarily taken by it; (b) such action is taken in
accordance with sound and prudent business practices in Hong Kong or Southern
China; and (c) such action is not required to be authorized by its shareholders
and does not require any other separate or special authorization of any nature.
"PARENT" has the meaning specified in the introductory paragraph of
the Agreement.
"PARENT ORDINARY SHARES," "PARENT PREFERRED SHARES" and "PARENT
SHARES" have the meanings specified in the recitals to the Agreement.
"PAST BENEFIT PLAN" means any Employee Benefit Plan (other than a
Current Benefit Plan): (a) that has at any time been established, adopted,
maintained or sponsored by the Companies; (b) in which the Companies has ever
participated; (c) with respect to which the Companies has ever made, or has
ever been required or permitted to make, any contribution; or (d) with respect
to which the Companies has ever been subject to any Liability.
"PERMITTED REDEMPTION" has the meaning specified in Section 4.2(i) of
the Agreement.
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"PERSON" means any individual, Entity or Governmental Body.
"PRC" means the People's Republic of China.
"PRE-CLOSING PERIOD" means the period commencing as of the date of the
Agreement and ending on the Closing Date.
"PRINCIPAL HYP SHAREHOLDERS" has the meaning specified in the
introductory paragraph of the Agreement.
"PROCEEDING" means any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding and any informal proceeding), prosecution, contest,
hearing, inquiry, inquest, audit, examination or investigation that is, has
been or may in the future be commenced, brought, conducted or heard by or
before, or that otherwise has involved or may involve, any Governmental Body or
any arbitrator or arbitration panel.
"PROPRIETARY ASSET" means any patent, patent application, trademark
(whether registered or unregistered and whether or not relating to a published
work), trademark application, trade name, fictitious business name, service
xxxx (whether registered or unregistered), service xxxx application, copyright
(whether registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, franchise, system, computer software,
invention, design, blueprint, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset.
"PRO RATA SHARE" means for each Selling Shareholder the number of
shares or amount of cash, as appropriate, multiplied by the following figures:
(i) for HYP, 0.742; (ii) for Chan Holdings, 0.247; and (iii) for Chan, 0.011.
"PURCHASER" has the meaning specified in the introductory paragraph of
the Agreement.
"PURCHASER SEC REPORTS" has the meaning specified in Section 3.2 of
the Agreement.
"PURCHASER STOCK" has the meaning specified in Section 1.2 of the
Agreement.
"REGISTRABLE SECURITIES" includes the ordinary shares (or American
Depositary Shares convertible therefrom) issued pursuant to the Agreement to a
Holder (or qualified transferee) other than registrable securities that: (i)
were issued under the Agreement pursuant to Regulation S; (ii) were registered
and sold pursuant to a registration statement under the Securities Act; or
(iii) may be sold within a given three-month period without compliance with the
registration requirements of the Securities Act pursuant to Rule 144.
"REGISTRATION EXPENSES" means all expenses, except for Selling
Expenses, incurred by Purchaser in complying with the registration provisions
contained in the Agreement, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for Purchaser, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration.
"REGISTRATION STATEMENT" has the meaning specified in Section 10.1(a)
of the Agreement.
"REGULATION S" has the meaning specified in Section 2.31(a) of the
Agreement.
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"RELATED PARTY" means: (a) each of the Selling Shareholders and
Principal HP Shareholders; (b) each individual who is, or who has at any time
been, an officer of the Companies; (c) each member of the family of each of the
individuals referred to in clauses (a) and (b) above; and (d) any Entity (other
than the Companies) in which any one of the individuals referred to in clauses
(a), (b) and (c) above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary
or equity interest.
"REPRESENTATIVES" means officers, directors, employees, agents,
attorneys, accountants, advisors and representatives. All Related Parties will
be deemed to be "Representatives" of the Companies.
"RETURNS" has the meaning specified in Section 2.17(b) of the
Agreement.
"SCHEDULED CLOSING TIME" has the meaning specified in Section 1.3(a)
of the Agreement.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" means selling commissions, underwriting fees and
stock transfer taxes applicable to the American Depositary Shares and all fees
and disbursements of counsel for any Holder.
"SELLING SHAREHOLDERS" has the meaning specified in the introductory
paragraph of the Agreement.
SPECIFIED REPRESENTATIONS. "Specified Representations" shall mean the
representations and warranties set forth in Sections 2.1 (except 2.1(c)), 2.3,
2.4, 2.7, 2.11, 2.12(c), 2.17, 2.19 and 2.23 of the Agreement.
"SUBSIDIARY" has the meaning specified in the introductory paragraph
of the Agreement.
"SUBSIDIARY CONTRACT" means any Contract: (a) to which any of the
Companies is a party; (b) by which the Companies or any of their assets is or
may become bound or under which the Companies has, or may become subject to,
any obligation; or (c) under which any of the Companies has or may acquire any
right or interest.
"SUBSIDIARY EBITDA" for any period means the Consolidated Net Income
for such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense; (ii) Consolidated Interest
Expense; (iii) depreciation expense; (iv) amortization expense; and (v) any
non-cash expense in connection with the transactions contemplated by the
Agreement or any restructuring in connection with such transactions
contemplated at the time of such transactions (excluding any such expense that
(x) requires any accrual of a cash reserve or (y) represents an accrual of, or
reserve for, anticipated cash payments in any future period), in each case for
such period. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization of, Subsidiary
shall be added to Consolidated Net Income to compute Subsidiary EBITDA only to
the extent (and in the same proportion) that the net income of such Person was
included in calculating Consolidated Net Income and only if a corresponding
amount would be permitted at the date of determination to be dividended to
Subsidiary by such Person without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to such Person.
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"SUBSIDIARY ORDINARY SHARES" has the meaning specified in the recitals
to the Agreement.
"TAX" means any tax (including any income tax, franchise tax, capital
gains tax, estimated tax, gross receipts tax, value-added tax, surtax, excise
tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, occupation tax, inventory tax, occupancy tax, withholding tax or
payroll tax), levy, assessment, tariff, impost, imposition, toll, duty
(including any customs duty), deficiency or fee, and any related charge or
amount (including any fine, penalty or interest), that is, has been or may in
the future be (a) imposed, assessed or collected by or under the authority of
any Governmental Body, or (b) payable pursuant to any tax-sharing agreement or
similar Contract.
"TAX RETURN" means any return (including any information return),
report, statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information that is, has been or may
in the future be filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"TRADE RIGHTS" shall mean and include: (i) all United States, state
and foreign trademark rights, business identifiers, trade dress, service marks,
trade names, and brand names, including all claims for infringement, and all
registrations thereof and applications therefor and all goodwill associated
with the foregoing accruing from the dates of first use thereof; (ii) all
United States and foreign copyrights, copyright registrations and copyright
applications, including all claims for infringement, and all other rights
associated with the foregoing and the underlying works of authorship; (iii) all
United States and foreign patents and patent applications, including all claims
for infringement and all international proprietary rights associated therewith;
(iv) all contracts or agreements granting any right, title, license or
privilege under the intellectual property rights of any third party; and (v)
all inventions, mask works and mask work registrations, know-how, discoveries,
improvements, designs, trade secrets, shop and royalty rights, employee
covenants and agreements respecting intellectual property and non-competition
and all other types of intellectual property.
"TRANSACTIONAL AGREEMENTS" means: (a) the Agreement; (b) the General
Release; (c) the Escrow Agreement; and (d) the Closing Certificate.
"TRANSACTIONS" means (a) the execution and delivery of the respective
Transactional Agreements, and (b) all of the transactions contemplated by the
respective Transactional Agreements, including: (1) the sale of the Parent
Shares by the Selling Shareholders to Purchaser in accordance with the
Agreement; and (2) the performance by the parties of their respective
obligations under the Transactional Agreements and the exercise by the parties
of their respective rights under the Transactional Agreements.
"UNAUDITED INTERIM BALANCE SHEET" has the meaning specified in Section
2.4(a)(2) of the Agreement.
"VIOLATION" has the meaning specified in Section 10.7(a) of the
Agreement.
A-8.
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ESCROW AGREEMENT
THIS ESCROW AGREEMENT(this "AGREEMENT") is dated as of ____________,
1998 by and among ZINDART LIMITED, a Hong Kong corporation ("PURCHASER"), XXX
XXXX HOLDINGS CO. LIMITED, a Cayman Islands corporation ("PARENT"), XXX XXXX
PRINTING HOLDINGS CO. LIMITED, a Hong Kong corporation ("SUBSIDIARY"), HYP
HOLDINGS LIMITED, a Cayman Islands corporation ("HYP"), XXXX XXXX (BVI)
HOLDINGS LIMITED, a British Virgin Islands corporation ("CHAN HOLDINGS"), XXXX
XXXX, an individual ("CHAN") (HYP, Chan Holdings and Chan are sometimes
hereinafter collectively referred to as the "SELLING SHAREHOLDERS"), CHINAVEST
MANAGEMENT LIMITED (the "AGENT"), and XXXXXX X.X. XXXX & CO. (including any
successor or assign, the "ESCROW AGENT").
RECITALS
A. Pursuant to that certain Exchange Agreement dated the date
hereof (the "EXCHANGE AGREEMENT") between the parties hereto, the Selling
Shareholders are effecting an exchange of all the issued and outstanding
ordinary shares of Parent to Purchaser for the consideration, and on the terms
and subject to the conditions, set forth in the Exchange Agreement.
B. A condition precedent to the consummation of the Exchange
Agreement is the execution and delivery of this Agreement by the parties
hereto. Certain capitalized terms used in this Agreement are defined in the
Exchange Agreement.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree
as follows.
1. ESTABLISHMENT OF ESCROW ACCOUNTS.
1.1 INDEMNIFICATION ESCROW. At the Closing (as defined in the
Exchange Agreement), Purchaser shall reserve for the ultimate benefit of the
Selling Shareholders 666,667 shares of Purchaser Stock (the "INDEMNIFICATION
ESCROW SHARES") by depositing with the Escrow Agent completed but unexecuted
share certificates in the names of The Bank of New York (as depositary) to hold
the same for each Selling Shareholder in the amounts designated in writing by
the Selling Shareholders as provided for in this Section 1.1 (the
"INDEMNIFICATION ESCROW"). The Escrow Agent shall hold the Indemnification
Escrow Shares until 5:00 p.m. (Pacific Standard Time) on that date (or the
first succeeding business day thereafter) which is one hundred eighty (180)
days after the Closing Date (the "CUT-OFF DATE") for the purpose of securing
any claim(s) (a "CLAIM") for indemnity made by Purchaser pursuant to Section 9
of the Exchange Agreement (subject to the threshold amount specified in Section
9.3 thereof). In the event that Purchaser makes one or more Claims by the
Cut-Off Date, Purchaser shall deliver written notice of the Claim (a "NOTICE")
to the Escrow Agent and the Agent, and the Retained Indemnification Escrow
Shares shall continue
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to be held in the Indemnification Escrow which shall be extended after the
Cut-Off Date until such time as the Claim(s) is/are finally resolved. Any
Indemnification Escrow Shares, if any, in excess of the Retained
Indemnification Escrow Shares, shall be delivered by the Escrow Agent to the
Bank of New York or the Selling Shareholders (or any designee thereof), as
directed by the Selling Shareholders. As used herein, "RETAINED
INDEMNIFICATION ESCROW SHARES" shall mean that number of Indemnification Escrow
Shares equal to the aggregate dollar amount of the Claim(s) specified in any
Notice(s) delivered by Purchaser prior to the Cut-Off Date, as valued by the
following sentence. Each Indemnification Escrow Share shall be valued at the
closing bid price of the American Depositary Shares of Purchaser on the most
recent trading date prior to or on the Cut-Off Date. In the event that no
Notice is delivered by Purchaser to the Escrow Agent by the Cut-Off Date, the
Indemnification Escrow Shares shall be surrendered promptly thereafter (by
utilizing a nationally recognized overnight courier) by the Escrow Agent to the
Agent on behalf of all Selling Shareholders or to the Bank of New York, as
directed by the Selling Shareholders.
1.2 TRANSFERABILITY. The interests of the Selling Shareholders in
the Purchaser Stock held pursuant to this Agreement shall not be assignable or
transferable, other than by operation of law (except that HYP may distribute
its Purchaser Stock to its shareholders). No transfer of any of such interests
by operation of law shall be recognized or given effect until Purchaser shall
have received written notice of such transfer.
1.3 FRACTIONAL SHARES. No fractional shares of Purchaser Stock
shall be retained in escrow hereunder or released pursuant to this Agreement.
1.4 LEGENDS. The Escrow Agent agrees that upon the written
request of Purchaser, it shall add (or allow the Company or the Company's
transfer agent to add) to the certificates representing Purchaser Stock held
pursuant hereto any additional legend(s) required to be printed on such
certificates by the terms of the Exchange Agreement.
1.5 RECEIPT BY ESCROW AGENT. The Escrow Agent acknowledges
receipt from Purchaser of completed but not executed certificates representing
the Indemnification Escrow Shares. The Escrow Agent accepts appointment
hereunder and agrees to hold and distribute the Indemnification Escrow Shares
in accordance herewith.
2. TERMINATION. This Agreement shall terminate upon the earlier of: (a)
that date that the Escrow Agent no longer holds any Purchaser Stock; or (b) the
written agreement of all parties hereto.
3. PAYMENT OF ESCROW AGENT'S FEES AND EXPENSES
The fee of the Escrow Agent for its activities pursuant to this
Agreement shall be HK$10,000, plus reasonable expenses, which fee shall be paid
by Purchaser upon the execution of this Agreement. If, due to disputes or
other reasons, the services of the Escrow Agent become materially greater than
originally contemplated under the terms of this
2.
71
Agreement, the Escrow Agent shall be entitled to charge additional reasonable
fees for such additional services, which shall be paid by Purchaser.
4. REPRESENTATIONS AND WARRANTIES.
Each party hereto hereby makes the following representations and
warranties in respect of itself to every other party hereto, each of which is
true and correct on the date hereof, shall remain true and correct to and
including the Closing Date, shall be unaffected by any investigation heretofore
or hereafter made by any other party hereto, or any knowledge of any other
party and shall survive the Closing.
4.1 CORPORATE. It is an entity duly organized, validly existing
and in good standing under the laws of the state of its organization. It has
all requisite corporate power to enter into this Agreement and the other
documents and instruments to be executed and delivered by it and to carry out
the transactions contemplated hereby and thereby.
4.2 AUTHORITY. The execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by it pursuant
hereto and the consummation of the transactions contemplated hereby and thereby
have been duly authorized. No other corporate act or proceeding on the part of
it or its shareholders or partners is necessary to authorize this Agreement or
the other documents and instruments to be executed and delivered by it pursuant
hereto or the consummation of the transactions contemplated hereby and thereby.
This Agreement constitutes, and when executed and delivered, the other
documents and instruments to be executed and delivered by it pursuant hereto
will constitute, valid and binding agreements of it, enforceable in accordance
with their respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally,
and by general equitable principles.
5. RIGHTS AND OBLIGATIONS OF ESCROW AGENT
5.1 SUCCESSOR ESCROW AGENT. The Escrow Agent may resign as Escrow
Agent at any time by notice to Purchaser and the Agent (a "RESIGNATION
NOTICE"). Upon receipt of a Resignation Notice, the Agent and Purchaser shall
appoint a successor Escrow Agent, which shall be a law firm, banking
corporation or trust company located in Hong Kong. Upon receipt of notice of
appointment from the Agent and Purchaser, the Escrow Agent shall promptly
deliver certificates representing any Purchaser Stock held by it to such
successor. In the event the Agent and Purchaser do not agree upon a successor
and deliver written notice thereof to the Escrow Agent within sixty (60) days
following delivery of a Resignation Notice, any court located in Hong Kong
shall appoint a successor in accordance with the above-mentioned guidelines,
and the Escrow Agent shall promptly deliver certificates representing any
Purchaser Stock held by it to such successor.
5.2 INDEMNIFICATION. Except for Purchaser's obligation to pay the
fees and expenses described in Section 3 hereof, the parties hereto, jointly
and severally, hereby agree to indemnify and hold Escrow Agent harmless from
and against any and all losses, claims,
3.
72
damages, actions, suits or other charges incurred by or assessed against the
Escrow Agent in the performance of its duties hereunder, except to the extent
resulting from its own negligence or misconduct.
5.3 LIMITATION OF LIABILITY. The Escrow Agent shall not incur any
liability to anyone for damages, losses or expenses with respect to (a) any
action taken or omitted in good faith upon advice of the Escrow Agent's counsel
given with respect to any questions relating to the Escrow Agent's duties and
responsibilities hereunder, or (b) any action taken or omitted in reliance upon
any instrument (including, without limitation, any Notice provided for herein)
which the Escrow Agent shall in good faith believe to be genuine, to have been
signed or presented by a proper person or persons and to conform with the
provisions hereof. Furthermore, in the event the Escrow Agent shall be
uncertain as to its rights or obligations hereunder, or in the event the Escrow
Agent shall receive any communication from the Agent or Purchaser with respect
to any Purchaser Stock which, in the reasonable opinion of the Escrow Agent, is
in conflict with any of the provisions of this Agreement, the Escrow Agent
shall be entitled to refrain from taking any action until it shall be directed
otherwise in writing by the Agent and Purchaser or by order of a court of
competent jurisdiction.
5.4 CONTROVERSIES. If any controversy arises between the parties
to this Agreement, or with any other party, concerning the subject matter of
this Agreement, its terms or conditions, the Escrow Agent will not be required
to determine the controversy or to take any action regarding it. The Escrow
Agent may hold all documents and funds and may wait for settlement of any such
controversy pursuant to Section 9 of the Exchange Agreement hereof or by final
appropriate legal proceedings or other means as, in the Escrow Agent's
reasonable discretion, the Escrow Agent may require, despite what may be set
forth elsewhere in this Agreement. In such event, the Escrow Agent will not be
liable for interest or damage.
5.4.1 NO INTEREST. Notwithstanding any provision to the
contrary contained in any other agreement between or among any of the parties
hereto, the Escrow Agent shall have no interest in the Purchaser Stock.
5.4.2 NO IMPLIED OBLIGATIONS. This Agreement sets forth
the exclusive obligations of the Escrow Agent with respect to any and all
matters pertinent hereto, and no implied duties or obligations of the Escrow
Agent shall be read into this Agreement.
6. RESOLUTION OF DISPUTES.
6.1 GOVERNING LAW; VENUE.
6.1.1 This Agreement will be construed in accordance with,
and governed in all respects by, the internal laws of Hong Kong (without giving
effect to principles of conflicts of laws).
4.
73
6.1.2 Any legal action or other legal proceeding relating
to this Agreement or the enforcement of any provision of this Agreement may be
brought or otherwise commenced in any court located in Hong Kong. Each party
to this Agreement: (a) expressly and irrevocably consents and submits to the
non-exclusive jurisdiction of each court located in Hong Kong in connection
with any such legal proceeding; (b) agrees that each court located in Hong Kong
will be deemed to be a convenient forum; and (c) agrees not to assert (by way
of motion, as a defense or otherwise), in any such legal proceeding commenced
in any court located in Hong Kong, any claim that such party is not subject
personally to the jurisdiction of such court, that such legal proceeding has
been brought in an inconvenient forum, that the venue of such proceeding is
improper or that this Agreement or the subject matter of this Agreement may not
be enforced in or by such court.
6.1.3 The Selling Shareholders irrevocably constitute and
appoint the Agent as their agent to receive service of process in connection
with any legal proceeding relating to this Agreement or the enforcement of any
provision of this Agreement.
6.1.4 The Selling Shareholders irrevocably waive the right
to a jury trial in connection with any legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement.
6.2 CONFIDENTIALITY. All proceedings under this Section 6, and
all evidence given or discovered pursuant hereto, shall be maintained in
confidence by all parties.
6.3 CONTINUED PERFORMANCE. The fact that the dispute resolution
procedures specified in this Section 6 shall have been or may be invoked shall
not excuse any party from performing its obligations under this Agreement and
during the pendency of any such procedure all parties shall continue to perform
their respective obligations in good faith.
6.4 EXPENSES. The parties agree that the prevailing party in any
action brought with respect to or to enforce any right or remedy under this
Agreement shall be entitled to recover from the other party or parties all
reasonable costs and expenses of any nature whatsoever incurred by the
prevailing party in connection with such action, including without limitation
attorneys' fees.
7. MISCELLANEOUS.
7.1 CONFIRMATION OF APPOINTMENT. The Selling Shareholders confirm
the appointment and authority of the Agent as set forth in Section 11.2 of the
Exchange Agreement with respect to all matters relating to this Agreement. Any
successor to the Agent who is appointed in accordance with the provisions of
Section 11.2 of the Exchange Agreement shall be deemed to be the "Agent" for
purposes of this Agreement. Any document executed or action taken by the Agent
shall be binding upon all of the Selling Shareholders.
7.2 ASSIGNMENT; PARTIES IN INTEREST. Except as expressly provided
herein, the rights and obligations of a party hereunder may not be assigned,
transferred or encumbered
5.
74
without the prior written consent of the other parties. This Agreement shall
be binding upon, inure to the benefit of, and be enforceable by the respective
successors and permitted assigns of the parties hereto. Nothing contained
herein shall be deemed to confer upon any other person any right or remedy
under or by reason of this Agreement.
7.3 AMENDMENT AND MODIFICATION. This Agreement may not be
amended, modified or supplemented without the prior written consent of all
parties hereto.
7.4 WAIVER. No failure on the part of any person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the
part of any person in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy. No person shall be deemed to have waived
any claim arising out of this Agreement, or any power, right, privilege or
remedy under this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly
executed and delivered on behalf of such person; and any such waiver shall not
be applicable or have any effect except in the specific instance in which it is
given.
7.5 SEVERABILITY. In the event that any provision of this
Agreement, or the application of any such provision to any person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to persons or circumstances other than those as
to which it is determined to be invalid, unlawful, void or unenforceable, shall
not be impaired or otherwise affected and shall continue to be valid and
enforceable to the fullest extent permitted by law.
7.6 NOTICE. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a)
personally delivered; (b) sent by telecopier, facsimile transmission or other
electronic means of transmitting written documents; or (c) sent to the parties
at their respective addresses indicated in the Exchange Agreement (or, with
respect to the Escrow Agent, to the address indicated on the signature page
hereto), by registered or certified international courier service. If
personally delivered, such communication shall be deemed delivered upon actual
receipt; if electronically transmitted pursuant to this section, such
communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent
by overnight courier pursuant to this section, such communication shall be
deemed delivered upon receipt. Any party to this Agreement may change its
address for the purposes of this Agreement by giving notice thereof to each
other party hereto.
7.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.
75
7.8 FURTHER DOCUMENTS. The parties hereto each agree to execute
all other documents and to take such other action or corporate proceedings as
may be necessary or desirable to carry out the terms hereof.
7.9 SURVIVAL. All provisions of this Agreement shall survive the
Closing.
7.10 ENTIRE AGREEMENT. This Agreement, the Exchange Agreement and
the Exhibits thereto set forth the entire understanding of the parties relating
to the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
7.11 CONSTRUCTION.
7.11.1 For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
7.11.2 The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in the construction or interpretation of
this Agreement.
7.11.3 As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
7.11.4 Except as otherwise indicated, all references in this
Agreement to "Sections" are intended to refer to sections of this Agreement.
7.11.5 The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
7.12 CONSENT. The parties hereto acknowledge that Xxxxxx X.X. Xxxx
& Co. acts as counsel to Purchaser and each consent to its appointment as the
Escrow Agent hereunder.
7.
76
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
"PURCHASER"
ZINDART LIMITED
By: /s/ Feather Fok
----------------------------
Feather Fok
Chief Financial Officer and
Chief Operating Officer
"PARENT"
XXX XXXX HOLDINGS CO. LIMITED
By: /s/ Xxxxxx X. Xxxx
----------------------------
_____________________________
[Print Name and Title]
"SUBSIDIARY"
XXX XXXX PRINTING HOLDINGS CO.
LIMITED
By: /s/ Xxxxxx X. Xxxx
----------------------------
____________________________
[Print Name and Title]
"SELLING SHAREHOLDERS"
HYP HOLDINGS LIMITED
By: /s/ Xxxx Xxxx
----------------------------
Xxxx Xxxx - Director
----------------------------
[Print Name and Title]
S-1.
77
XXXX XXXX (BVI) HOLDINGS LIMITED
By: /s/ Xxxx Xxxx
-----------------------------
_____________________________
[Print Name and Title]
/s/ Xxxx Xxxx
-----------------------------------
XXXX XXXX
THE "AGENT"
CHINAVEST MANAGEMENT LIMITED
By: /s/ Xxxxxx Xxxxxxx
-----------------------------
_____________________________
[Print Name and Title]
THE "ESCROW AGENT"
XXXXXX X.X. XXXX & CO.
By: /s/ Xxxxxxx Xxxxx
-----------------------------
_____________________________
[Print Name and Title]
Address:
8th & 00xx Xxxxxx
Xxxx Xxxxx'x Xxxx Xxxxxxx
Xxxx Xxxx
Attention: Xxxxxxx Xxxxx
Telephone: 000-000-0000-0000
Telecopier: 011-852-2845-2504
S-2.
78
GENERAL RELEASE
THIS GENERAL RELEASE ("General Release") is being executed and
delivered as of ______________, 1998, on behalf of the parties identified on
the signature pages hereto (all of whom are referred to collectively as the
"RELEASORS," and each of whom is referred to individually as a "RELEASOR") to
and in favor of, and for the benefit of, ZINDART LIMITED, a Hong Kong
corporation ("PURCHASER"), XXX XXXX HOLDINGS CO. LIMITED, a Cayman Islands
corporation ("PARENT"), XXX XXXX PRINTING HOLDINGS CO. LIMITED, a Hong Kong
corporation ("SUBSIDIARY"), and the other Releasees (as defined in Section 2).
RECITALS
A. Contemporaneously with the execution and delivery of this
General Release, certain of the Releasors are selling their shares of the
capital stock of Parent to Purchaser pursuant to an Exchange Agreement dated as
of ___________, 1998 (the "EXCHANGE AGREEMENT").
B. Purchaser has required, as a condition to consummating the
transactions contemplated by the Exchange Agreement, that the Releasors execute
and deliver this General Release.
AGREEMENT
In order to induce Purchaser to consummate the transactions
contemplated by the Exchange Agreement, and for other valuable consideration
(the receipt and sufficiency of which are hereby acknowledged by the
Releasors), the Releasors hereby covenant and agree as follows:
1. RELEASE. Each Releasor, for himself and for each of
such Releasor's Associated Parties (as defined in Section 2), hereby generally,
irrevocably, unconditionally and completely releases and forever discharges
each of the Releasees (as defined in Section 2) from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, each of the Released
Claims (as defined in Section 2).
2. DEFINITIONS.
(a) The term "ASSOCIATED PARTIES," when used herein with
respect to a Releasor, shall mean and include: (i) such Releasor's
predecessors, successors, executors, administrators, heirs and estate; (ii)
such Releasor's past, present and future assigns, agents and representatives;
(iii) each entity that such Releasor has the power to bind (by such Releasor's
acts or signature) or over which such Releasor directly or indirectly exercises
control; and (iv) each entity of which such Releasor owns, directly or
indirectly, at least 50% of the outstanding equity, beneficial, proprietary,
ownership or voting interests.
(b) The term "RELEASEES" shall mean and include: (i)
Purchaser; (ii) Parent; (iii) Subsidiary; (iv) each of the direct and indirect
subsidiaries of Parent and Subsidiary; (v) each
1.
79
other affiliate of Parent and Subsidiary; and (vi) the successors and past,
present and future assigns, directors, officers, employees, agents, attorneys
and representatives of the respective entities identified or otherwise referred
to in clauses "(i)" through "(v)" of this sentence, other than the Releasors.
(c) The term "CLAIMS" shall mean and include all past,
present and future disputes, claims, controversies, demands, rights,
obligations, liabilities, actions and causes of action of every kind and
nature, including: (i) any unknown, unsuspected or undisclosed claim; (ii) any
claim or right that may be asserted or exercised by a Releasor in such
Releasor's capacity as a stockholder, director, officer or employee of Parent
or Subsidiary or in any other capacity; and (iii) any claim, right or cause of
action based upon any breach of any express, implied, oral or written contract
or agreement.
(d) The term "RELEASED CLAIMS" shall mean and include
each and every Claim that (i) any Releasor or any Associated Party of any
Releasor may have had in the past, may now have or may have in the future
against any of the Releasees, and (ii) has arisen or arises directly or
indirectly out of, or relates directly or indirectly to, any circumstance,
agreement, activity, action, omission, event or matter occurring or existing on
or prior to the date of this General Release (excluding only such Releasor's
rights, if any, under the Exchange Agreement).
3. REPRESENTATIONS AND WARRANTIES. Each Releasor represents and
warrants that:
(a) such Releasor has not assigned, transferred, conveyed
or otherwise disposed of any Claim against any of the Releasees, or any direct
or indirect interest in any such Claim, in whole or in part;
(b) to the best of such Releasor's knowledge, no other
person or entity has any interest in any of the Released Claims;
(c) no Associated Party of such Releasor has or had any
Claim against any of the Releasees;
(d) no Associated Party of such Releasor will in the
future have any Claim against any Releasee that arises directly or indirectly
from or relates directly or indirectly to any circumstance, agreement,
activity, action, omission, event or matter occurring or existing on or before
the date of this General Release;
(e) this General Release has been duly and validly
executed and delivered by such Releasor;
(f) this General Release is a valid and binding
obligation of such Releasor and such Releasor's Associated Parties, and is
enforceable against such Releasor and each of such Releasor's Associated
Parties in accordance with its terms;
2.
80
(g) there is no action, suit, proceeding, dispute,
litigation, claim, complaint or investigation by or before any court, tribunal,
governmental body, governmental agency or arbitrator pending or, to the best of
the knowledge of such Releasor, threatened against such Releasor or any of such
Releasor's Associated Parties that challenges or would challenge the execution
and delivery of this General Release or the taking of any of the actions
required to be taken by such Releasor under this General Release;
(h) neither the execution and delivery of this General
Release nor the performance hereof will (i) result in any violation or breach
of any agreement or other instrument to which such Releasor or any of such
Releasor's Associated Parties is a party or by which such Releasor or any of
such Releasor's Associated Parties is bound, or (ii) result in a violation or
any law, rule, regulation, treaty, ruling, directive, order, arbitration award,
judgment or decree to which such Releasor or any of such Releasor's Associated
Parties is subject; and
(i) no authorization, instruction, consent or approval of
any person or entity is required to be obtained by such Releasor or any of such
Releasor's Associated Parties in connection with the execution and delivery of
this General Release or the performance hereof.
4. INDEMNIFICATION. Without in any way limiting any of the
rights or remedies otherwise available to any Releasee, each Releasor shall
indemnify and hold harmless each Releasee against and from any loss, damage,
injury, harm, detriment, lost opportunity, liability, exposure, claim, demand,
settlement, judgment, award, fine, penalty, tax, fee, charge or expense
(including attorneys' fees) that is directly or indirectly suffered or incurred
at any time by such Releasee, or to which such Releasee otherwise becomes
subject at any time, and that arises directly or indirectly out of or by virtue
of, or relates directly or indirectly to, (a) any failure on the part of such
Releasor to observe, perform or abide by, or any other breach of, any
restriction, covenant, obligation, representation, warranty or other provision
contained herein, or (b) the assertion or purported assertion of any of the
Released Claims by such Releasor or any of such Releasor's Associated Parties.
5. MISCELLANEOUS.
(a) This General Release sets forth the entire
understanding of the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings among or between any of the
Releasors and Releasees relating to the subject matter hereof.
(b) If any provision of this General Release or any part
of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (i) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (ii) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (iii)
such invalidity or enforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other
3.
81
provision of this General Release. If any provision of this General Release or
any part of such provision is held to be unenforceable against any Releasor,
then the unenforceability of such provision or part thereof against such
Releasor shall not affect the enforceability thereof against any other
Releasor. Each provision of this General Release is separable from every other
provision of this General Release, and each part of each provision of this
General Release is separable from every other part of such provision.
(c) This General Release shall be construed in accordance
with, and governed in all respects by, the laws of Hong Kong (without giving
effect to principles of conflicts of laws).
(d) Any legal action or other legal proceeding relating
to this General Release or the enforcement of any provision of this General
Release may be brought or otherwise commenced by any Releasee in any court
located in Hong Kong. Each Releasor: (i) expressly and irrevocably consents
and submits to the jurisdiction of each court located in Hong Kong in
connection with any such legal proceeding; (ii) agrees that each court located
in Hong Kong shall be deemed to be a convenient forum; and (iii) agrees not to
assert (by way of motion, as a defense or otherwise), in any such legal
proceeding commenced in any court located in Hong Kong, any claim that such
Releasor is not subject personally to the jurisdiction of such court, that such
legal proceeding has been brought in an inconvenient forum, that the venue of
such proceeding is improper or that this General Release or the subject matter
of this General Release may not be enforced in or by such court. Nothing
contained in this General Release shall be deemed to limit or otherwise affect
the right of any Releasee (1) to commence any legal proceeding or to otherwise
proceed against any of the Releasors or any other person or entity in any other
forum or jurisdiction, or (2) to raise this General Release as a defense in any
legal proceeding in any other forum or jurisdiction.
(e) This General Release may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
(f) Each Releasor shall execute and/or cause to be
delivered to each Releasee such instruments and other documents, and shall take
such other actions, as such Releasee may reasonably request for the purpose of
carrying out or evidencing any of the actions contemplated by this General
Release.
(g) If any legal action or other legal proceeding
relating to this General Release or the enforcement of any provision hereof is
brought by any Releasor or Releasee, the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements to the extent
actually incurred (in addition to any other relief to which the prevailing
party may be entitled).
(h) This General Release shall be effective with respect
to, and shall be binding upon and enforceable against, each Releasor who
executes this General Release, regardless of whether any of the other Releasors
executes this General Release.
4.
82
(i) Whenever required by the context, the singular number
shall include the plural, and vice versa; the masculine gender shall include
the feminine and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
(j) Any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this General Release.
(k) As used in this General Release, the words "include"
and "including," and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words "without
limitation."
5.
83
IN WITNESS WHEREOF, the Releasors have caused this General
Release to be executed as of the date first above written.
RELEASORS:
HYP HOLDINGS LIMITED
By: /s/ Xxxx Xxxx
----------------------------------
_________________________________
[Print Name and Title]
XXXX XXXX (BVI) HOLDINGS LIMITED
By: /s/ Xxxx Xxxx
---------------------------------
---------------------------------
[Print Name and Title]
/s/ Xxxx Xxxx
------------------------------------------
XXXX XXXX
CHINAVEST IV, L.P.
By its General Partner:
CHINAVEST PARTNERS IV
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx, General Partner
CHINAVEST IV-A, L.P.
By its General Partner:
CHINAVEST PARTNERS IV
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx, General Partner
S-1.
84
CHINAVEST IV-B, L.P.
By its General Partner:
CHINAVEST MANAGEMENT LIMITED
By: /s/ Xxxxxxx X. Xxxx
--------------------------------
Xxxxxxx X. Xxxx, Director
ADVENT GLOBAL GECC LIMITED PARTNERSHIP
By its General Partners:
ADVENT GLOBAL MANAGEMENT LIMITED
PARTNERSHIP
ADVENT INTERNATIONAL LIMITED
PARTNERSHIP
ADVENT INTERNATIONAL CORPORATION
By: /s/ Tan Xxxx Xxxx
---------------------------------
Tan Xxxx Xxxx
Chief Executive, Asia/Pacific
---------------------------------
[Print Name and Title]
ADVENT INTERNATIONAL INVESTORS II LIMITED
PARTNERSHIP
By its General Partner:
ADVENT INTERNATIONAL CORPORATION
By: /s/ Tan Xxxx Xxxx
---------------------------------
Tan Xxxx Xxxx
Chief Executive, Asia/Pacific
---------------------------------
[Print Name and Title]
S-2.
85
GLOBAL PRIVATE EQUITY II - LIMITED PARTNERSHIP
By its General Partners:
ADVENT INTERNATIONAL LIMITED
PARTNERSHIP
ADVENT INTERNATIONAL CORPORATION
By: /s/ Tan Xxxx Xxxx
---------------------------------
Tan Xxxx Xxxx
Chief Executive, Asia/Pacific
---------------------------------
[Print Name and Title]
GLOBAL PRIVATE EQUITY II - PGGM LIMITED
PARTNERSHIP
By its General Partners:
ADVENT INTERNATIONAL LIMITED
PARTNERSHIP
ADVENT INTERNATIONAL CORPORATION
By: /s/ Tan Xxxx Xxxx
---------------------------------
Tan Xxxx Xxxx
Chief Executive, Asia/Pacific
---------------------------------
[Print Name and Title]
ASIA/PACIFIC SPECIAL SITUATIONS FUND LIMITED
PARTNERSHIP
By its General Partners:
ADVENT INTERNATIONAL LIMITED
PARTNERSHIP
ADVENT INTERNATIONAL CORPORATION
By: /s/ Tan Xxxx Xxxx
---------------------------------
Tan Xxxx Xxxx
Chief Executive, Asia/Pacific
---------------------------------
[Print Name and Title]
S-3.
86
ADVENT ASIA/PACIFIC FUND LIMITED
PARTNERSHIP
By its General Partners:
ADVENT INTERNATIONAL LIMITED
PARTNERSHIP
ADVENT INTERNATIONAL CORPORATION
By: /s/ Tan Xxxx Xxxx
---------------------------------
Tan Xxxx Xxxx
Chief Executive, Asia/Pacific
---------------------------------
[Print Name and Title]
S-4.
