AGREEMENT AND PLAN OF MERGER AND REORGANIZATION among EASYKNIT ENTERPRISES HOLDINGS LIMITED RACE MERGER, INC. and WITS BASIN PRECIOUS MINERALS INC. Dated as of April 20, 2007
Exhibit
10.1
AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION
among
EASYKNIT
ENTERPRISES HOLDINGS LIMITED
RACE
MERGER, INC.
and
Dated
as
of April 20, 2007
TABLE
OF CONTENTS
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Page
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ARTICLE
I THE
MERGER
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2
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SECTION
1.01 The
Merger
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2
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SECTION
1.02 Effective
Time; Closing
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2
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SECTION
1.03 Effect
of the Merger
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2
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SECTION
1.04 Articles
of Incorporation; By-laws
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2
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SECTION
1.05 Directors
and Officers
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2
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SECTION
1.06 Further
Action
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3
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ARTICLE
II CONVERSION
OF SECURITIES; EXCHANGE OF CERTIFICATES
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3
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SECTION
2.01 Conversion
of Securities
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3
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SECTION
2.02 Exchange
of Certificates.
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4
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SECTION
2.03 Stock
Transfer Books
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7
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SECTION
2.04 Company
Stock Options
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8
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SECTION
2.05 Company
Warrants
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9
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SECTION
2.06 Section
16
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10
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SECTION
2.07 Appraisal
Rights
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10
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ARTICLE
III REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
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11
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SECTION
3.01 Corporate
Organization
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11
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SECTION
3.02 Certificate
of Incorporation and By-laws
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12
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SECTION
3.03 Capitalization
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13
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SECTION
3.04 Authority
Relative to This Agreement
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15
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SECTION
3.05 No
Conflict; Required Filings and Consents
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15
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SECTION
3.06 Permits;
Compliance
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16
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SECTION
3.07 SEC
Filings; Financial Statements
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17
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SECTION
3.08 Absence
of Certain Changes or Events
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20
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SECTION
3.09 Absence
of Litigation
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20
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SECTION
3.10 Employee
Benefit Plans
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21
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SECTION
3.11 Labor
and Employment Matters
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24
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SECTION
3.12 Real
Property; Title to Assets
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27
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SECTION
3.13 Intellectual
Property
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29
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SECTION
3.14 Taxes
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31
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i
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SECTION
3.15 Environmental
Matters
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32
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SECTION
3.16 Material
Contracts
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33
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SECTION
3.17 Insurance
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35
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SECTION
3.18 Board
Approval; Vote Required
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35
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SECTION
3.19 Certain
Business Practices
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36
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SECTION
3.20 Interested
Party Transactions
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36
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SECTION
3.21 Ownership
of Parent Ordinary Shares
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36
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SECTION
3.22 Brokers
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36
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ARTICLE
IV REPRESENTATIONS
AND WARRANTIES OF PARENT
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37
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SECTION
4.01 Corporate
Organization
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37
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SECTION
4.02 Memorandum
of Association and Bye-Laws
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38
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SECTION
4.03 Capitalization
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39
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SECTION
4.04 Authority
Relative to This Agreement
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41
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SECTION
4.05 No
Conflict; Required Filings and Consents
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41
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SECTION
4.06 Permits;
Compliance
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42
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SECTION
4.07 Hong
Kong and Bermuda Filings; Financial Statements
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43
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SECTION
4.08 Absence
of Certain Changes or Events
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46
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SECTION
4.09 Absence
of Litigation
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46
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SECTION
4.10 Employee
Benefit Plans
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46
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SECTION
4.11 Labor
and Employment Matters
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48
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SECTION
4.12 Real
Property; Title to Assets
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50
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SECTION
4.13 Intellectual
Property
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52
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SECTION
4.14 Taxes
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54
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SECTION
4.15 Environmental
Matters
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54
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SECTION
4.16 Material
Contracts
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56
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SECTION
4.17 Insurance
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58
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|
SECTION
4.18 Board
Approval; Vote Required
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58
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|
SECTION
4.19 Certain
Business Practices
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59
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SECTION
4.20 Interested
Party Transactions
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59
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SECTION
4.21 Operations
of Merger Sub
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59
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SECTION
4.22 Ownership
of Company Capital Stock
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59
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SECTION
4.23 Brokers
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59
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ARTICLE
V CONDUCT
OF BUSINESS PENDING THE MERGER
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59
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ii
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SECTION
5.01 Conduct
of Business by the Company Pending the Merger
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59
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SECTION
5.02 Conduct
of Business by Parent Pending the Merger
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63
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SECTION
5.03 Control
of Other Party’s Business
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66
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ARTICLE
VI ADDITIONAL
AGREEMENTS
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66
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SECTION
6.01 Disclosure
Documents
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66
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SECTION
6.02 Stockholders’
Meetings
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69
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SECTION
6.03 Access
to Information; Confidentiality
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69
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SECTION
6.04 No
Solicitation of Transactions
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70
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SECTION
6.05 Employee
Benefits Matters
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73
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SECTION
6.06 Directors’
and Officers’ Indemnification and Insurance
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74
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SECTION
6.07 Notification
of Certain Matters
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75
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SECTION
6.08 Affiliate
Agreements
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75
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SECTION
6.09 Further
Action; Reasonable Best Efforts
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75
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SECTION
6.10 Plan
of Reorganization
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76
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SECTION
6.11 Obligations
of Merger Sub
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76
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SECTION
6.12 Stock
Exchange Listing/Quotation
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76
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SECTION
6.13 Public
Announcements
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76
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SECTION
6.14 Board
of Directors; Corporate Headquarters; Corporate Name
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77
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SECTION
6.15 Accounting
Matters
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77
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SECTION
6.16 Stock
Transfer Taxes
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77
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SECTION
6.17 Deposit
Agreement
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77
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SECTION
6.18 Parent
Assumption of Obligations
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77
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SECTION
6.19 Title
to Properties
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78
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ARTICLE
VII CONDITIONS
TO THE MERGER
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78
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SECTION
7.01 Conditions
to the Obligations of Each Party
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78
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SECTION
7.02 Conditions
to the Obligations of Parent and Merger Sub
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79
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SECTION
7.03 Conditions
to the Obligations of the Company
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81
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ARTICLE
VIII TERMINATION,
AMENDMENT AND WAIVER
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82
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SECTION
8.01 Termination
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82
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SECTION
8.02 Effect
of Termination
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84
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SECTION
8.03 Fees
and Expenses; Termination Fees.
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84
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SECTION
8.04 Amendment
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85
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SECTION
8.05 Waiver
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85
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iii
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ARTICLE
IX GENERAL
PROVISIONS
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86
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SECTION
9.01 Survival
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86
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SECTION
9.02 Notices
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86
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SECTION
9.03 Certain
Definitions
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87
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SECTION
9.04 Severability
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95
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SECTION
9.05 Entire
Agreement; Assignment
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95
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SECTION
9.06 Parties
in Interest; Third Parties
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95
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SECTION
9.07 Specific
Performance
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95
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SECTION
9.08 Governing
Law
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96
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SECTION
9.09 Headings
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96
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SECTION
9.10 Counterparts
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96
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SECTION
9.11 Waiver
of Jury Trial
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96
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| EXHIBITS AND SCHEDULES | |||
| Exhibits | |||
| Exhibit 6.08(a)- Form of Affiliate Letter for Affiliates of the Company |
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| Schedules | |||
| Company Disclosure Schedule |
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| Parent Disclosure Schedule |
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iv
AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION, dated as of April 20, 2007 (this
“Agreement”),
among
Easyknit Enterprises Holdings Limited, a company incorporated in Bermuda
(“Parent”),
Race
Merger, Inc., a Minnesota corporation and a wholly owned subsidiary of Parent
(“Merger
Sub”),
and
Wits Basin Precious Minerals Inc., a Minnesota corporation (the “Company”).
WHEREAS,
upon the terms and subject to the conditions of this Agreement and in accordance
with the Business Corporation Act of the State of Minnesota (the “MBCA”),
Parent and the Company will enter into a business combination transaction
pursuant to which Merger Sub will merge with and into the Company (the
“Merger”);
WHEREAS,
the Board of Directors of the Company (the “Company
Board”)
by a
unanimous vote (i) has determined that the Merger is consistent with and in
furtherance of the long-term business strategy of the Company and fair to,
and
in the best interests of, the Company and its stockholders and has approved
and
adopted this Agreement and declared its advisability and approved the Merger
and
the other transactions contemplated by this Agreement and (ii) on the terms
and
subject to the conditions set forth herein, has resolved to recommend the
approval and adoption of this Agreement by the stockholders of the
Company;
WHEREAS,
the Board of Directors of Parent (the “Parent
Board”)
by a
unanimous vote (i) on the terms and subject to the conditions set forth herein,
has determined that the Merger is consistent with and in furtherance of the
long-term business strategy of Parent and fair to, and in the best interests
of,
Parent and its shareholders and has approved and adopted this Agreement, the
Merger and the other transactions contemplated by this Agreement and (ii) has
resolved to recommend that the shareholders of Parent vote to approve (A) this
Agreement, the Merger and the other transactions contemplated by this Agreement,
(B) the issuance of ordinary shares, par value HK$0.01 per share, of Parent
(“Parent
Ordinary Shares”)
underlying the Parent ADSs (as defined in Section 9.03(a))
that
will be issued to the stockholders of the Company pursuant to the terms of
the
Merger, (C) the issuance of the Substitute Options (as defined in Section 2.04)
as set
forth in Section 2.04
and the
issuance of Parent Ordinary Shares underlying the Parent ADSs to be issued
upon
exercise of the Substitute Options, (D) the assumption of certain obligations
under the Company Warrants (as defined below), the Company Convertible Notes
(as
defined below) and the Company Additional Share and Warrant Obligations (as
defined below), the entry into any agreements in connection with such assumption
and the issuance of Parent Ordinary Shares underlying the Parent ADSs to be
issued upon conversion of the Company Warrants, the Company Convertible Notes
and the Company Additional Share and Warrant Obligations (the matters in clauses
(A), (B) and (C) being together referred to as the “Share
Issuance”),
(E)
the adoption of the New Stock Option Plans (as defined in Section 2.04(a))
(the
“New
Stock Option Plans Adoption”)
and
(F) the appointment of the Company Designated Directors (as defined in
Section 6.14)
as set
forth in Section 6.14(a)(ii)
(the
“Parent
Board Appointments”);
WHEREAS,
for United States federal income tax purposes, the Merger is intended to qualify
as a reorganization under the provisions of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the “Code”),
and
that this Agreement shall be, and is hereby, adopted as a plan of reorganization
within the meaning of Treasury Regulations Section 1.368-2(g).
1
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, Parent,
Merger Sub and the Company hereby agree as follows:
ARTICLE
I
THE
MERGER
SECTION
1.01 The
Merger.
Upon the
terms and subject to the conditions set forth in this Agreement, and in
accordance with the MBCA, at the Effective Time (as defined in Section 1.02),
Merger
Sub shall be merged with and into the Company. As a result of the Merger, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation of the Merger (the “Surviving
Corporation”).
SECTION
1.02 Effective
Time; Closing.
Within
two business days after the satisfaction or, if permissible, waiver of the
conditions set forth in Article VII,
the
parties hereto shall cause the Merger to be consummated by filing articles
of
merger (the “Articles
of Merger”)
with
the Secretary of State of the State of Minnesota, in such form as is required
by, and executed in accordance with, the relevant provisions of the MBCA (the
date and time of such filing of the Articles of Merger (or such later time
as
may be agreed by each of the parties hereto and specified in the Articles of
Merger) being the “Effective
Time”).
Immediately prior to such filing of the Articles of Merger, a closing (the
“Closing”)
shall
be held at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, 14/F., ▇▇▇▇▇▇▇▇▇ House, 10
Harcourt Road, Hong Kong, or such other place as the parties shall agree, for
the purpose of confirming the satisfaction or waiver, as the case may be, of
the
conditions set forth in Article VII.
SECTION
1.03 Effect
of the Merger.
At the
Effective Time, the effect of the Merger shall be as provided in this Agreement
and the applicable provisions of the MBCA. Without limiting the generality
of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and duties of each of the Company and Merger Sub
shall become the debts, liabilities, obligations, restrictions, disabilities
and
duties of the Surviving Corporation.
SECTION
1.04 Articles
of Incorporation; By-laws. a)
At the
Effective Time, the Articles of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
of the Surviving Corporation until thereafter amended as provided by law and
such Articles of Incorporation.
(b) At
the
Effective Time, the By-laws of Merger Sub, as in effect immediately prior to
the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by law, the Articles of Incorporation of the
Surviving Corporation and such By-laws.
SECTION
1.05 Directors
and Officers.
At the
Effective Time, the Board of Directors of Merger Sub shall resign and ▇. ▇▇▇▇▇
White, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ and ▇▇▇ Wing ▇▇▇▇, ▇▇▇▇▇ shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors
are
duly elected or appointed and qualified or until the earlier of their death,
resignation or removal.
2
SECTION
1.06 Further
Action. At
and
after the Effective Time, the officers and directors of Parent and the Surviving
Corporation will be authorized to execute and deliver, in the name and on behalf
of the Company and Merger Sub, any deeds, bills of sale, assignments or
assurances and to take and do, in the name and on behalf of the Company and
Merger Sub, any other actions and things necessary or advisable in the opinion
of Parent to vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and under any of the
rights, properties or assets acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
ARTICLE
II
CONVERSION
OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION
2.01 Conversion
of Securities.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
any party:
(a) each
share of common stock, par value US$0.01 per share, of the Company
(“Company
Common Stock”)
(all
shares of Company Common Stock issued and outstanding immediately prior to
the
Effective Time being hereinafter collectively referred to as the “Company
Shares”)
issued
and outstanding immediately prior to the Effective Time (other than any Company
Shares to be canceled pursuant to Section 2.01(b))
shall
be canceled and shall be converted automatically, subject to Section 2.02,
into
the right to receive Parent ADSs issued in accordance with a deposit agreement
to be entered into by and among Parent, a depositary bank, as Depositary, and
the registered owners and holders from time to time of Parent ADSs (the
“Parent
Deposit Agreement”).
The
Parent ADSs may be evidenced by one or more Parent ADRs (as defined in
Section 9.03(a)).
The
Parent ADSs to be issued upon conversion of Company Shares pursuant to this
Section 2.01(a),
any
cash to be paid in lieu of fractional Parent ADSs as contemplated in
Section 2.02(e),
and any
Parent ADSs to be issued upon conversion or exercise of Substitute Warrants,
Company Convertible Notes, Company Additional Share and Warrant Obligations
and
Substitute Options are referred to collectively as “Merger
Consideration.”
As
of
the Effective Time, persons holding, immediately prior to the Effective Time,
Company Shares, Company Warrants, Company Stock Options, Company Convertible
Notes, Company Additional Share and Warrant Obligations and
any
other security convertible into capital stock of
the
Company shall receive their pro rata share of the Merger Consideration,
calculated on a fully-diluted basis, subject to adjustment for any issuances
of
Company Shares after the date hereof by the Company and shall not hold, in
the
aggregate, more than 46% of the Parent Ordinary Shares (whether represented
by
ADRs or otherwise) on a fully-diluted basis. For the avoidance of doubt, the
parties agree that the Merger Consideration shall consist of 33,452,863 Parent
ADSs representing 3,345,286,315 newly issued Parent Ordinary Shares representing
46% of the Parent Ordinary Shares as of the Effective Time on a fully-diluted
basis (upon giving effect to the Merger and the Share Issuance) and that the
Merger Consideration will be allocated among all issued and outstanding shares
of capital stock, options, warrants, convertible notes and other equity
securities of the Company outstanding at the Effective Time, including any
Company Shares that may be issued by the Company prior to the Effective Time.
Such underlying Parent Ordinary Shares shall be in the same class and of the
same ranking as currently outstanding Parent Ordinary Shares;
3
(b) each
Company Share held in the treasury of the Company and each Company Share owned
by Merger Sub, Parent or any direct or indirect wholly owned subsidiary of
Parent or of the Company immediately prior to the Effective Time (collectively,
the “Excluded
Company Shares”)
shall
be canceled without any conversion thereof and no payment or distribution shall
be made with respect thereto; and
(c) each
share of common stock, par value US$0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into
and
exchanged for one validly issued, fully paid and nonassessable share of common
stock, par value US$0.01 per share, of the Surviving Corporation (the
“Surviving
Corporation Common Stock”).
SECTION
2.02 Exchange
of Certificates.
(a) Exchange
Agent.
i)
Prior to the Effective Time, Parent shall appoint a bank or trust company
reasonably acceptable to the Company as exchange agent (the “Exchange
Agent”)
for
the purpose of accepting Certificates (as defined below) to be surrendered
by
holders of Company Shares in exchange for the Merger Consideration. Promptly
after the Effective Time, the Surviving Corporation will mail, or shall cause
the Exchange Agent to mail, to each person who was, at the Effective Time,
a
holder of record of Company Shares entitled to receive the Merger Consideration
pursuant to Section 2.01(a):
(A) a
letter of transmittal, which shall be in customary form and shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Company Shares (the “Certificates”)
shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall have such other provisions as Parent may reasonably specify and (B)
instructions for use in effecting the surrender of the Certificates pursuant
to
such letter of transmittal.
(ii) At
the
Effective Time, Parent shall issue to and deposit with the Depositary, for
the
benefit of the holders of Company Shares converted into the right to receive
Parent ADSs in accordance with Section 2.01(a),
Parent
Ordinary Shares in an amount sufficient to permit the Depositary to deliver
the
number of Parent ADSs issuable pursuant to Section 2.01(a).
Parent
shall cause the Depositary to deliver those Parent ADRs to the Exchange Agent
for the benefit of the holders of Company Shares converted into the right to
receive Parent ADSs in accordance with Section 2.01(a).
Any
Parent Ordinary Shares made available to the Depositary pursuant to this
Section 2.02(a)
to be
exchanged for Company Shares for which appraisal rights have properly been
demanded shall be returned to Parent upon demand.
(b) Exchange
Procedures.
Upon
surrender to the Exchange Agent of a Certificate for cancellation, together
with
a letter of transmittal, duly completed and validly executed in accordance
with
the instructions thereto and covering the Company Shares represented by such
Certificate, and such other documents as may be required pursuant to the
instructions to the letter of transmittal, the holder of such Certificate shall
be entitled to receive in exchange therefor (i) the number of whole Parent
ADSs
(excluding any fractional interest in Parent ADSs) to which such holder is
entitled in respect of such Company Shares pursuant to Section 2.01(a),
and
(ii) a check in the amount (after giving effect to any required Tax
withholdings) equal to (A) any cash in lieu of fractional interests in Parent
ADSs to which such holder is entitled pursuant to Section 2.02(e)
and (B)
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.02(c),
and the
Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Company Shares that is not registered in the transfer
records of the Company, certificates representing, in the aggregate, the proper
number of Parent ADSs and a check in the amount equal to any cash in lieu of
any
fractional interest in Parent ADSs to which such holder is entitled pursuant
to
Section 2.02(e)
and any
dividends or other distributions to which such holder is entitled pursuant
to
Section 2.02(c)
may be
issued to a transferee if the Certificate representing such Company Shares
is
presented to the Exchange Agent, properly endorsed and otherwise in proper
form
for transfer, accompanied by all documents required to evidence and effect
such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.02,
each
Certificate shall be deemed at all times after the Effective Time to represent
only the right to receive upon such surrender the Parent ADSs, cash in lieu
of
any fractional interest in Parent ADSs to which such holder is entitled pursuant
to Section 2.02(e)
and any
dividends or other distributions to which such holder is entitled pursuant
to
Section 2.02(c).
No
interest will be paid or will accrue on any cash payable to holders of
Certificates pursuant to this Article II.
4
(c) Distributions
with Respect to Unexchanged Shares.
No
dividends or other distributions declared or made after the Effective Time
with
respect to the Parent Ordinary Shares with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the Parent ADSs represented thereby, and no cash payment in lieu of any
fractional interest in Parent ADSs shall be paid to any such holder pursuant
to
Section 2.02(e),
until
the holder of such Certificate shall surrender such Certificate. Subject to
the
effect of escheat, tax or other applicable Laws (as defined in Section 3.05(a)),
following surrender of any such Certificate, there shall be paid to the holder
of whole Parent ADSs issued in exchange therefor, without interest, (i)
promptly, the amount of any cash payable with respect to a fractional interest
in Parent ADSs to which such holder is entitled pursuant to Section 2.02(e)
and the
amount of dividends or other distributions with a record date after the
Effective Time and theretofore paid with respect to the Parent Ordinary Shares
represented by such whole Parent ADSs, and (ii) at the appropriate payment
date,
the amount of dividends or other distributions, with a record date after the
Effective Time but prior to surrender and a payment date occurring after
surrender, payable with respect to the Parent Ordinary Shares represented by
such whole Parent ADSs.
(d) No
Further Rights in Company Shares.
All
Parent ADSs issued upon conversion of the Company Shares and the surrender
of
the Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 2.02(c)
or
(e))
shall
be deemed to have been issued (and paid) in full satisfaction of all rights
pertaining to such Company Shares.
(e) No
Fractional ADSs.
ii) No
certificates or scrip representing fractional interests in Parent ADSs shall
be
issued upon the surrender for exchange of Certificates, and such fractional
interests will not entitle the owner thereof to vote or to any other rights
of a
shareholder of Parent or a holder of Parent ADRs or Parent ADSs.
5
(ii) As
promptly as practicable following the Effective Time, the Exchange Agent shall
determine the excess of (A) the number of whole Parent Ordinary Shares delivered
to the Depositary by Parent pursuant to Section 2.02(a)(ii)
over (B)
the aggregate number of whole Parent Ordinary Shares represented by the Parent
ADSs to be distributed to holders of Company Shares pursuant to Section 2.02(b)
(such
excess, as issued as Parent ADSs by the Depositary to the Exchange Agent, the
“Excess
ADSs”).
As
soon after the Effective Time as practicable, the Exchange Agent, as agent
for
the holders of Company Shares, who, but for the provisions of this Section 2.02(e),
would
be entitled to fractional interests in Parent ADSs, shall sell the Excess ADSs
on the American Stock Exchange LLC (“AMEX”),
all
in the manner provided in clause (iii) of this Section 2.02(e).
(iii) The
sale
of the Excess ADSs by the Exchange Agent shall be executed on the AMEX through
one or more member firms of the National Association of Securities Dealers,
Inc.
(the “NASD”).
Until
the net proceeds of such sale or sales have been distributed to the holders
of
Company Shares who are entitled to receive such proceeds in lieu of fractional
interests in Parent ADSs, the Exchange Agent will hold such proceeds in trust
for the holders of such Company Shares (the “Company
Shares Trust”).
The
Exchange Agent shall determine the portion of the Company Shares Trust to which
each holder of Company Shares shall be entitled, if any, by multiplying the
amount of the aggregate gross proceeds comprising the Company Shares Trust
by a
fraction, the numerator of which is the amount of the fractional share interest
to which such holder of Company Shares is entitled and the denominator of which
is the aggregate amount of fractional share interests to which all holders
of
Company Shares are entitled.
(iv) As
soon
as practicable after the determination of the amount of cash, if any, to be
paid
to the holders of Company Shares in lieu of any fractional interest in Parent
ADSs and subject to Section 2.02(i)
below,
the Exchange Agent shall make available such amounts to such holders of
Certificates pursuant to Section 2.02(b).
(f) Adjustments
to Exchange Ratio.
The
Exchange Ratio shall be adjusted to reflect appropriately the effect of any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Ordinary Shares, Parent
ADSs
or Company Common Stock), extraordinary cash dividends, reorganization,
recapitalization, reclassification, combination, exchange of shares or other
like change with respect to Parent ADSs, Parent Ordinary Shares or Company
Common Stock occurring on or after the date hereof and prior to the Effective
Time.
(g) Termination
of Unclaimed Exchange.
Any
Parent ADSs issuable or deliverable in respect of Certificates pursuant to
this
Article II
and any
cash in lieu of fractional interests in Parent ADSs payable pursuant to
Section 2.02(e),
plus
any cash dividends or other distributions that such holder has the right to
receive pursuant to Section 2.02(c),
that
remain unclaimed by any holders of Certificates one year after the Effective
Time shall be returned to Parent and shall be held by or on behalf of Parent
in
an account or accounts in the United States designated for such purpose and
on
behalf of such holders of Certificates. Any Merger Consideration (including
any
cash in lieu of fractional interests in Parent ADSs payable pursuant to
Section 2.02(e),
plus
any cash dividends or other distributions that holders of unexchanged
Certificates have the right to receive pursuant to Section 2.02(c)
remaining unclaimed by holders of Certificates or Company Shares three years
after the Effective Time (or such earlier date immediately prior to such time
as
such Merger Consideration (including any cash in lieu of fractional interests
in
Parent ADSs payable pursuant to Section 2.02(e),
plus
any cash dividends or other distributions that holders of unexchanged
Certificates have the right to receive pursuant to Section 2.02(c)
would
otherwise escheat to or become property of any Governmental Authority or as
is
otherwise provided by applicable Law) shall, to the extent permitted by
applicable Law, become the property of the Surviving Corporation or Parent,
as
Parent may determine, free and clear of any claims or interest of any person
previously entitled thereto.
6
(h) No
Liability.
Notwithstanding any provision of this Agreement to the contrary, none of the
Exchange Agent, the Depositary, Parent or the Surviving Corporation shall be
liable to any holder of Company Shares converted into the right to receive
Parent ADSs for any such Company Shares (or dividends or distributions with
respect thereto), or cash delivered to a public official pursuant to any
abandoned property, escheat or similar Law.
(i) Withholding
Rights.
Each of
the Surviving Corporation, the Exchange Agent and Parent shall be entitled
to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Shares converted into the right to receive
Parent ADSs such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code, or any provision of state, local
or foreign tax Law. To the extent that amounts are so deducted or withheld
by
the Surviving Corporation, the Exchange Agent or Parent, as the case may be,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Company Shares converted into the right
to
receive Parent ADSs in respect of which such deduction or withholding was made
by the Surviving Corporation, the Exchange Agent or Parent, as the case may
be.
(j) Lost
Certificates.
If any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond, in such reasonable amount as the Surviving Corporation
may direct, as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for
such
lost, stolen or destroyed Certificate the Parent ADSs, any cash in lieu of
fractional interests in Parent ADSs to which the holders thereof are entitled
pursuant to Section 2.02(e)
and any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.02(c).
SECTION
2.03 Stock
Transfer Books.
At the
Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers of Company Shares thereafter
on the records of the Company. From and after the Effective Time, the holders
of
Certificates representing Company Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Company
Shares, except as otherwise provided in this Agreement or by Law. On or after
the Effective Time, any Certificates presented to the Exchange Agent, the
Surviving Corporation or Parent for any reason shall be converted into Parent
ADSs, any cash in lieu of fractional interests in Parent ADSs to which the
holders thereof are entitled pursuant to Section 2.02(e)
and any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.02(c).
7
SECTION
2.04 Company
Stock Options.
iii) At
the Effective Time, Parent shall issue Substitute Options in accordance with
this Section 2.04
to all
holders of options to purchase shares of Company Common Stock (the “Company
Stock Options”)
outstanding, whether or not exercisable and whether or not vested, due to
acceleration of the Company Stock Options or otherwise, immediately prior to
the
Effective Time under the Meteor Industries, Inc. 1993 Employee Stock Option
Plan, the Meteor Industries, Inc. 1997 Incentive Equity Plan, the Company 1998
Incentive Equity Plan, the Company 1999 Employee Stock Option Plan, the 2000
Director Stock Option Plan, the 2001 Employee Stock Option Plan, the 2003
Director Stock Option Plan and the 2007 Stock Incentive Plan and any other
employee or director stock option plan or stock option agreement whether or
not
issued under a plan (collectively, the “Company
Stock Option Plans”).
Parent shall issue the Substitute Options under the terms of the new stock
option plans to be adopted by Parent at the Parent Shareholders’ Meeting (the
“New
Stock Option Plans”)
to
replace each of the Company Stock Option Plans. The Company shall take all
necessary action, including using its good faith efforts to obtain the consent
of any holder of Company Stock Options to the extent obtaining such consent
is
necessary under the terms of the Company Stock Option Plan, to implement the
terms and conditions of the New Stock Option Plans and such terms and conditions
shall be substantially similar in all material respects with the terms and
conditions of each of the Company Stock Option Plans, provided that the New
Stock Option Plans shall differ from the terms and conditions of the Company
Stock Option Plans to the extent necessary to comply with applicable Hong Kong
and Bermuda Laws and the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “HKSE
Listing Rules”).
The
Company shall use reasonable efforts to take all necessary action, including
obtaining the consent of any holder of Company Stock Options, to implement
the
substitution of the Company Stock Options with Substitute Options pursuant
to
the terms of the New Stock Option Plans and in accordance with this Section 2.04.
At the
Effective Time, (a) each Company Stock Option shall be substituted by Parent
with a Substitute Option in such manner that Parent (A) is a corporation
“issuing a stock option in a transaction to which Section 424(a) applies” within
the meaning of Section 424 of the Code and the regulations thereunder (whether
or not Section 424 of the Code applies) or (B), to the extent that Section
424
of the Code does not apply to any such Company Stock Option, would be such
a
corporation were Section 424 of the Code to apply to such Company Stock Option,
and (b) each Substitute Option shall entitle its holder to acquire, on
substantially the same terms and conditions as were applicable to the Company
Stock Option for which the Substitute Option was substituted, (A) a number
of
Parent Ordinary Shares equal to the product (rounded down to the nearest whole
Parent Ordinary Share) of (1) the number of shares of Company Common Stock
that
were issuable upon exercise of the related Company Stock Option immediately
prior to the Effective Time multiplied by (2) the Exchange Ratio and (B) the
per
share exercise price of each Substitute Option shall be equal to the quotient
(rounded up to the nearest cent) arrived at by dividing (1) the per share
exercise price of each related Company Stock Option by (2) the Exchange Ratio
(each, a “Substitute
Option”);
provided,
however,
that,
upon exercise of a Substitute Option, the holder thereof shall receive a number
of Parent ADSs (rather than Parent Ordinary Shares) equal to the number of
Parent Ordinary Shares subject to the Substitute Option divided by 100 (rounded
down to the nearest whole Parent ADS) and provided further
that,
notwithstanding anything to the contrary in this Section 2.04(a),
the per
share exercise price of the Substitute Options may be adjusted to comply with
requirements of the HKSE Listing Rules.
8
(b) Subject
to the approval of the shareholders of Parent, Parent shall take all corporate
action necessary to make available for issuance a sufficient number of Parent
Ordinary Shares to be issued upon exercise of the Substitute Options granted
in
accordance with this
Section 2.04.
(c) As
soon
as practicable after the Effective Time, Parent shall deliver, or cause to
be
delivered, to each person receiving a Substitute Option as a result of the
Merger an appropriate notice setting forth such holder’s rights pursuant
thereto. Parent shall also take such action that it deems appropriate for the
Company Stock Options that are intended to be exempt from the application of
Section 409A of the Code to be adjusted as Substitute Options in a manner that
complies with Treasury Regulation § 1.409A-1(b)(5)(v)(D). Parent shall ensure,
to the extent required by, and subject to the provisions of, the Company Stock
Option Plans, that Company Stock Options that qualified as incentive stock
options under Section 422 of the Code prior to the Effective Time shall be
substituted by Substitute Options that qualify as incentive stock options under
Section 422 of the Code after the Effective Time in a manner compliant with
the
provisions of Section 409A of the Code and the regulations thereunder. As soon
as practicable after the Effective Time, the Parent Ordinary Shares subject
to
Substitute Options shall be covered by an effective registration statement
on
Form S-8 and Form F-6 (or any successor form) or another appropriate form,
and
Parent shall use its reasonable best efforts to maintain the effectiveness
of
such registration statement or registration statements for so long as Substitute
Options remain outstanding. In addition, Parent shall use reasonable best
efforts to cause the Parent Ordinary Shares subject to the Substitute Options
or
underlying any Parent ADSs to be issued upon exercise of the Substitute Options
to be listed on The Stock Exchange of Hong Kong Limited (the “Hong
Kong Stock Exchange”),
and
to cause any Parent ADSs to be issued upon exercise of the Substitute Options
to
be listed on the AMEX.
SECTION
2.05 Company
Warrants.
b) At
the Effective Time, Parent shall issue Substitute Warrants (as defined below)
in
accordance with this Section 2.05
to all
holders of warrants to acquire shares of Company Common Stock (the “Company
Warrants”)
outstanding, whether or not exercisable and whether or not vested, immediately
prior to the Effective Time. Parent shall issue the Substitute Warrants to
replace each of the Company Warrants. The terms and conditions of the Substitute
Warrants shall be substantially similar in all material respects with the terms
and conditions of each of the Company Warrants, provided that the Substitute
Warrants shall differ from the terms and conditions of the Company Warrants
to
the extent necessary to comply with applicable Hong Kong and Bermuda Laws and
the HKSE Listing Rules. The Company shall use reasonable efforts to take all
necessary action, including obtaining the consent of any holder of Company
Warrants, to implement the substitution of the Company Warrants with Substitute
Warrants. At the Effective Time, each Substitute Warrant shall entitle its
holder to acquire, on substantially the same terms and conditions as were
applicable to the Company Warrant for which the Substitute Warrant was
substituted, (A) a number of Parent Ordinary Shares equal to the product
(rounded down to the nearest whole Parent Ordinary Share) of (1) the number
of
shares of Company Common Stock that were issuable upon exercise of the related
Company Stock Warrant immediately prior to the Effective Time multiplied by
(2)
the Exchange Ratio and (B) the per share exercise price of each Substitute
Warrant shall be equal to the quotient (rounded up to the nearest cent) arrived
at by dividing (1) the per share exercise price of each related Company Warrant
by (2) the Exchange Ratio (each, a “Substitute
Warrant”);
provided,
however,
that,
upon exercise of a Substitute Warrant, the holder thereof shall receive a number
of Parent ADSs (rather than Parent Ordinary Shares) equal to the number of
Parent Ordinary Shares subject to the Substitute Warrant divided by 100 (rounded
down to the nearest whole Parent ADS).
9
(b) Subject
to the approval of the shareholders of Parent, Parent shall take all corporate
action necessary to make available for issuance a sufficient number of Parent
Ordinary Shares to be issued upon exercise of the Substitute Warrants issued
in
accordance with this Section 2.05.
(c) As
soon
as practicable after the Effective Time, Parent shall deliver, or cause to
be
delivered, to each person receiving a Substitute Warrant as a result of the
Merger an appropriate notice setting forth such holder’s rights pursuant
thereto.
SECTION
2.06 Section
16. On
or after
the date of this Agreement and prior to the Effective Time, each of Parent
and
the Company shall take all necessary action such that, with respect to each
member of the Company Board and each employee of the Company that is subject
to
Section 16 of the Exchange Act, the acquisition by such person of Parent
ADSs in the Merger and the disposition by any such person of Parent ADSs
pursuant to the transactions contemplated by this Agreement shall be exempt
from
the short-swing profit liability rules of Section 16(b) of the Exchange Act
pursuant to Rule 16b-3 promulgated thereunder.
SECTION
2.07 Appraisal
Rights. In
accordance with Sections 302A.471 and 302A.473 of the MBCA, dissenters’
rights shall be available to holders of Company Common Stock in connection
with
the Merger. As a result, notwithstanding Section 2.01
of this
Agreement, shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time and held by a holder who is entitled to demand
and
has properly exercised his or her demand for dissenters’ rights under, and
complies in all material respects with, Sections 302A.471 and 302A.473 of the
MBCA (the “Dissenting
Shares”)
shall
not be converted into the right to receive the Merger Consideration as of the
Effective Time, but the holders of Dissenting Shares shall be entitled to
payment of the fair value of such shares in accordance with the provisions
of
Sections 302A.471 and 302A.473 of the MBCA; provided
however,
that if
any such holder shall have failed to perfect or otherwise shall effectively
waive, withdraw or lose the right to a court determination of the fair value
and
payment under the MBCA or a court of competent jurisdiction shall determine
that
such holder is not entitled to the relief provided by Sections 302A.471 and
302A.473 of the MBCA, then the right of such holder to be paid the fair value
of
such holder’s Dissenting Shares under Sections 302A.471 and 302A.473 of the MBCA
shall cease to exist and such holder’s shares of Company Common Stock shall
thereupon be deemed to have been converted as of the Effective Time into the
right to receive, without interest, the Merger Consideration and such shares
shall be deemed not be Dissenting Shares. The Company shall give Parent (a)
prompt notice of any notices or demands of payment for shares of Company Common
Stock received by the Company and (b) the opportunity to participate in all
negotiations and proceedings with respect to such notices or demands. The
Company shall not, without the prior written consent of Parent, make any payment
with respect to, or settle, offer to settle or otherwise negotiate any demands
for appraisal or payment for shares of Company Common Stock.
Notwithstanding anything to the contrary contained in this Section 2.07,
if this
Agreement is terminated prior to the Effective Time, then the right of any
holders of Dissenting Shares to be paid the fair market value of such holder’s
Dissenting Shares pursuant to the MBCA shall cease.
10
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except
as
set forth in the Company Disclosure Schedule that has been prepared by the
Company and delivered by the Company to Parent in connection with the execution
and delivery of this Agreement (the “Company
Disclosure Schedule”)
(which
Company Disclosure Schedule shall be arranged in sections corresponding to
the
sections of this Article III,
and any
information disclosed in any such section of the Company Disclosure Schedule
shall be deemed to be disclosed only for purposes of the corresponding section
of this Article III,
unless
it is reasonably apparent that the disclosure contained in such section of
the
Company Disclosure Schedule applies to other representations and warranties
contained in this Article III),
the
Company hereby represents and warrants to Parent that:
SECTION
3.01 Corporate
Organization.
c) Each
of the Company and each subsidiary of the Company (each a “Company
Subsidiary”)
is a
corporation or other organization duly organized, validly existing and, where
applicable, in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite corporate power and
authority and all necessary governmental approvals to own, lease and operate
its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals could not reasonably be
expected, individually or in the aggregate, to prevent or materially delay
consummation of the Merger or any of the transactions contemplated by this
Agreement (the Merger and such transactions are referred to herein collectively
as the “Transactions”)
or
otherwise prevent or materially delay the Company from performing its
obligations under this Agreement and could not reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse Effect
(as
defined in Section 9.03(a)).
The
Company and each Company Subsidiary is duly qualified or licensed to do
business, and, where applicable, is in good standing, in each jurisdiction
where
the character of the properties owned, leased or operated by it or the nature
of
its business makes such qualification or licensing necessary, except where
the
failure to be so qualified or licensed and in good standing could not reasonably
be expected, individually or in the aggregate, to prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially
delay
the Company from performing its obligations under this Agreement and could
not
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect.
(b) A
true
and complete list of all the Company Subsidiaries, together with the
jurisdiction of incorporation or organization of each Company Subsidiary and
the
percentage of the outstanding capital stock of each Company Subsidiary owned
by
the Company and each other Company Subsidiary, is set forth in Section 3.01(b)
of the
Company Disclosure Schedule. Except as set forth in Section 3.01(b)
of the
Company Disclosure Schedule, the Company does not directly or indirectly own
any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
11
(c) No
order
(including administrative order) has been made or petition presented that
remains outstanding or resolution passed for the winding up, liquidation,
dissolution of the Company or any Company Subsidiary or the appointment of
a
provisional liquidator to, or a liquidation committee of the Company or any
Company Subsidiary. No receiver or receiver and manager has been appointed
of
the whole or part of the Company’s or any Company Subsidiary’s business or
assets. No distress, execution or other process has been levied on any of the
Company’s or any Company Subsidiary’s assets. Neither the Company nor any
Company Subsidiary has applied for conciliation in order to settle its debts.
No
liquidation committee has been appointed by the Company or any Company
Subsidiary, any court or any other authority or person for the purpose of
liquidating the business or assets of the Company or any Company Subsidiary
or
any part thereof. No meeting of the creditors of the Company or any Company
Subsidiary has been held or is in prospect, no voluntary arrangement or
compromise or arrangement has been proposed with the creditors of the Company
or
any Company Subsidiary; no ruling declaring the bankruptcy of the Company or
any
Company Subsidiary has been made and no public announcement in respect of the
same has been pronounced by any court of competent jurisdiction; and there
is no
unfulfilled or unsatisfied judgment or order of any court of competent
jurisdiction outstanding against the Company or any Company Subsidiary; and
there has been no delay by the Company or any Company Subsidiary in the payment
of any obligation due for payment except in the ordinary course of
business.
(d) Neither
the Company nor any Company Subsidiary is insolvent or unable to pay its debts,
no receiver or receiver and manager has been appointed by any person of its
business or assets or any part thereof, no power to make any such appointment
has arisen, neither the Company nor any Company Subsidiary has taken any steps
to enter liquidation and there are no grounds on which a petition or application
could be based for the winding up or appointment of a receiver of the Company
or
any Company Subsidiary.
SECTION
3.02 Certificate
of Incorporation and By-laws.
d) The
Company has made available to Parent or its counsel a complete and correct
copy
of the Certificate of Incorporation and the By-laws or equivalent organizational
documents, each as amended to date, of the Company and each Company Subsidiary.
Such Certificates of Incorporation, By-laws or equivalent organizational
documents are in full force and effect. Neither the Company nor any Company
Subsidiary is in violation of any of the provisions of its Certificate of
Incorporation, By-laws or equivalent organizational documents and none of the
activities, agreements, commitments or rights of the Company or any Company
Subsidiary is ultra ▇▇▇▇▇ or unauthorized, except where such violations could
not reasonably be expected, individually or in the aggregate, to prevent or
materially delay consummation of any of the Transactions or otherwise prevent
or
materially delay the Company from performing its obligations under this
Agreement and could not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect.
(b) The
Company and each Company Subsidiary has, at all times, carried on its operations
and conducted its affairs in all material respects in accordance with its
Certificate of Incorporation and By-laws or equivalent organizational
documents.
12
SECTION
3.03 Capitalization.
e) The
authorized capital stock of the Company consists of (i) 150,000,000 shares
of
Company Common Stock, and (ii) 365,000 shares of preferred stock, par value
US$1.00 per share (“Company
Preferred Stock”),
of
which all 365,000 shares have been designated Series B Convertible Preferred
Stock. As of April 18, 2007, (i) 104,251,674 shares of Company Common Stock
were
issued and outstanding, all of which were validly issued, fully paid and
nonassessable, (ii) no shares of Company Common Stock were held in the treasury
of the Company, (iii) no shares of Company Common Stock were held by
subsidiaries of the Company, (iv) 14,532,000 shares of Company Common Stock
were
reserved for future issuance pursuant to outstanding Company Stock Options
and
other purchase rights (the “Company
Stock Awards”)
granted pursuant to the Company Stock Option Plans and other agreements, (v)
21,798,833 shares of Company Common Stock were reserved for issuance upon
exercise of the Company Warrants, (vi) 3,000,000 shares of Company Common Stock
were reserved for future issuance upon conversion of the Company Convertible
Notes issued and to be issued to China Gold, LLC, a Kansas limited liability
company, under a Convertible Notes Purchase Agreement dated April 10, 2007
among
the Company and China Gold LLC (the “Company
Notes Purchase Agreement”),
pursuant to which the Company agreed to sell China Gold LLC up to an aggregate
of US$25,000,000 in 8.25% secured convertible promissory notes due 2012 (the
“Company
Convertible Notes”),
and
(vii) 4,620,000 shares of Company Common Stock were reserved for issuance under
an asset purchase agreement to purchase the ▇▇▇▇▇-▇▇▇▇▇▇ Mine by and among
the
Company and Hunter Gold Mining Corporation, Hunter Gold Mining Inc., Central
City Consolidated Mining Corp., and ▇▇▇▇▇▇ ▇▇▇▇▇, and other arrangements with
investors (the “Company
Additional Share and Warrant Obligations”).
Under
the terms of the Company Notes Purchase Agreement, China Gold LLC purchased
an
initial Company Convertible Note in the principal amount of US$3,000,000, and
agreed to purchase additional Company Convertible Notes in the aggregate minimum
amount of US$9,000,000 and, in the discretion of China Gold LLC and the Company,
up to an aggregate maximum amount of US$22,000,000 within 12 months from date
of
the Convertible Notes Purchase Agreement. Pursuant to the terms of the Company
Convertible Notes, all Company Convertible Notes shall automatically convert
into shares of Company Common Stock immediately prior to the Effective Time.
As
of the date of this Agreement, no shares of Company Preferred Stock are issued
and outstanding. Except as set forth in this Section 3.03,
there
are no options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock
of, or other equity interests in, the Company or any Company Subsidiary or
obligating the Company or any Company Subsidiary to issue or sell any shares
of
capital stock of, or other equity interests in, the Company or any Company
Subsidiary and, to the extent that any such rights, agreements, arrangements
or
commitments previously existed, the Company has no continuing or existing
liability or obligation with respect thereto. The Company has not adopted,
approved or entered into, or proposed to adopt, approve or enter into, any
stockholder “rights plan,” “poison pill” plan or comparable plan or arrangement.
Except for the Company Convertible Notes, there are no bonds, debentures, notes
or other indebtedness of the Company having the right (or convertible into,
or
exchangeable for, securities having the right) to vote on any matter on which
holders of shares of Company Common Stock may vote. Section 3.03(a)
of the
Company Disclosure Schedule sets forth the following information with respect
to
each Company Stock Award outstanding as of the date of this Agreement: (i)
the
name of the Company Stock Award recipient; (ii) the particular plan pursuant
to
which such Company Stock Award was granted; (iii) the number of shares of
Company Common Stock subject to such Company Stock Award; (iv) the exercise
or
purchase price of such Company Stock Award; (v) the date on which such Company
Stock Award was granted; (vi) the applicable vesting schedule; (vii) the date
on
which such Company Stock Award expires; and (viii) whether the exercisability
of
or right to repurchase of such Company Stock Award will be accelerated in any
way by the Transactions, and indicates the extent of acceleration. The Company
has made available to Parent or its counsel or has filed with the SEC accurate
and complete copies of all (A) Company Stock Option Plans pursuant to which
the
Company has granted the Company Stock Awards that are currently outstanding
and
the form of all stock award agreements evidencing such Company Stock Awards,
(B)
the Company Notes Purchase Agreement and the Company Convertible Notes, (C)
the
Company Warrants and (D) any agreements related to the Company Additional Share
and Warrant Obligations. All shares of Company Common Stock subject to issuance
as aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of the Company or any Company Subsidiary to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or any capital
stock of any Company Subsidiary or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any Company
Subsidiary or any other person. There are no shares of Company Common Stock
outstanding that are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with the Company. There are no commitments or
agreements of any character to which the Company is bound obligating the Company
to accelerate the vesting of any Company Stock Award as a result of the Merger.
All outstanding shares of Company Common Stock, all outstanding Company Stock
Awards, and all outstanding shares of capital stock of each Company Subsidiary
have been issued and granted in compliance with (i) all applicable securities
laws and other applicable Laws, rules and regulations and (ii) all requirements
set forth in applicable contracts.
With
respect to the Company Stock Options, (A) each grant of a Company Stock Option
was duly authorized no later than the date on which the grant of such Company
Stock Option was by its terms to be effective (the “Company
Grant Date”)
by all
necessary corporate action, including, as applicable, approval by the Company
Board (or a duly constituted and authorized committee thereof) and any required
shareholder approval by the necessary number of votes or written consents,
and
the award agreement governing such grant (if any) was duly executed and
delivered by each party thereto, (B) each such grant was made in accordance
with
the terms of the applicable Company Stock Option Plan, the Exchange Act and
all
other applicable Laws, (C) the per share exercise price of each Company Stock
Option was equal to the fair market value of a share of Company Common Stock
on
the applicable Company Grant Date and (D) each such grant was properly accounted
for in accordance with US GAAP in the audited financial statements included
in
the Company SEC Reports (as defined in Section 3.07(a))
and
disclosed in the Company SEC Reports in accordance with the Exchange Act and
all
other applicable Laws.
13
(b) Each
outstanding share of capital stock of each Company Subsidiary is duly
authorized, validly issued, fully paid and nonassessable, and each such share
is
owned by the Company or another Company Subsidiary free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company’s or any Company Subsidiary’s voting
rights, charges and other encumbrances of any nature whatsoever.
14
(c) On
and
after the Effective Time, no person shall have any rights whatsoever to acquire
Company Common Stock, and without prejudice to the generality of the foregoing,
all Company Preferred Stock, Company Stock Options, Company Additional Share
and
Warrant Obligations, Company Convertible Notes and Company Warrants shall either
have been terminated, converted into the right to receive the Merger
Consideration or substituted by Substitute Options, Company Additional Share
and
Warrant Obligations or Substitute Warrants, as applicable, in accordance with
the terms of this Agreement, such that none of the Company, Merger Sub, the
Surviving Corporation or Parent shall have any liability with respect
thereto.
SECTION
3.04 Authority
Relative to This Agreement.
The
Company has all legal right and all necessary corporate power and authority
to
execute and deliver this Agreement and to perform its obligations hereunder
and
to consummate the Transactions subject to, in the case of the Merger, the
receipt of the Company Stockholders’ Approval (as defined in Section 3.18(b)).
The
execution and delivery of this Agreement by the Company and the consummation
by
the Company of the Transactions have been duly and validly authorized by all
necessary corporate action on the part of the Company (subject in the case
of
the Merger, to the receipt of the Company Stockholders’ Approval), and the
person who will execute this Agreement and any ancillary agreements on behalf
of
the Company has all power and authority to do so on behalf of the Company.
No
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the receipt of the Company Stockholders’ Approval, and
the filing and recordation of appropriate merger documents as required by the
MBCA). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by the
other
parties hereto, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to the effect of any applicable bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting creditors’ rights generally and subject to
the effect of general principles of equity (regardless of whether considered
in
a proceeding at law or in equity). The Company Board has approved this Agreement
and the Transactions and such approvals are sufficient so that the restrictions
on business combinations set forth in Sections 302A.671 or 302A.673 of the
MBCA
shall not apply to the Merger or any of the Transactions. No other state
takeover statute is applicable to the Merger or the other
Transactions.
SECTION
3.05 No
Conflict; Required Filings and Consents.
f) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Certificate of Incorporation or By-laws or any equivalent
organizational documents of the Company or any Company Subsidiary, (ii) assuming
that all consents, approvals, authorizations and other actions described in
Sections 3.04
and
3.05(b)
have
been obtained and all filings and obligations described in Section 3.05(b)
have
been made, conflict with or violate any United States or non-United States
statute, law, ordinance, regulation, rule, code, executive order, injunction,
judgment, decree or other order at the national, provincial or local level
(“Law”)
applicable to the Company or any Company Subsidiary or by which any property
or
asset of the Company or any Company Subsidiary is bound or affected, or (iii)
result in any breach of, or constitute a default (or an event which, with notice
or lapse of time or both, would become a default) under, or give to others
any
right of termination, amendment, acceleration or cancellation of, or result
in
the creation of a lien or other encumbrance on any property or asset of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is
a
party or by which the Company or any Company Subsidiary or any of their assets
or properties is bound or affected, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences which could not reasonably be expected, individually or in the
aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement and could not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect.
15
(b) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, require the Company
to
obtain any consent, approval, authorization or permit of, or to file with or
to
notify, any United States federal, state, county or local or non-United States
government, governmental (at the national, provincial or local level),
regulatory or administrative authority, agency, instrumentality or commission
or
any court, tribunal, or judicial or arbitral body (a “Governmental
Authority”),
except (i) applicable requirements, if any, of the Securities Act of 1933,
as
amended (the “Securities
Act”),
the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
and
state securities or “blue sky” laws (“Blue
Sky Laws”),
(ii)
the pre-merger notification requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the “HSR
Act”),
and
the receipt, termination or expiration, as applicable, of approvals or waiting
periods required under the HSR Act or any other applicable competition, merger
control, antitrust or similar law or regulation, (iii) the filing and
recordation of appropriate merger documents as required by the MBCA and the
relevant authorities of other jurisdictions in which the Company is qualified
to
do business, and (iv) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, could
not
reasonably be expected, individually or in the aggregate, to prevent or
materially delay consummation of any of the Transactions or otherwise prevent
or
materially delay the Company from performing its obligations under this
Agreement and could not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect.
SECTION
3.06 Permits;
Compliance.
g) Each
of the Company and the Company Subsidiaries is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Authority
necessary for each of the Company or such Company Subsidiary to own, lease
and
operate its properties or to carry on its business as it is now being conducted
(the “Company
Permits”),
except where the failure to have, or the suspension or cancellation of, any
of
the Company Permits could not reasonably be expected, individually or in the
aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement and could not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect. All of the Company Permits are valid and subsisting, and are in full
force and effect, and the Company and the relevant Company Subsidiary is not
in
breach of any of the terms or conditions of any of the Company Permits, there
are no factors or circumstances that might result in any restrictions or special
conditions being placed on any of them or might in any way materially prejudice
the continuation or renewal or might lead to the suspension, cancellation,
refusal, modification or revocation of any of the Company Permits, except where
the failure to have, or the suspension or cancellation of, any of the Company
Permits could not reasonably be expected, individually or in the aggregate,
to
prevent or materially delay consummation of any of the Transactions or otherwise
prevent or materially delay the Company from performing its obligations under
this Agreement and could not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect. Neither the Company nor
any Company Subsidiary is in conflict with, or in default, breach or violation
of, (a) any Law applicable to the Company or any Company Subsidiary or by which
any property or asset of the Company or any Company Subsidiary is bound or
affected, or (b) any note, bond, mortgage, indenture, contract, agreement,
lease, license, Company Permit, franchise or other instrument or obligation
to
which the Company or any Company Subsidiary is a party or by which the Company
or any Company Subsidiary or any property or asset of the Company or any Company
Subsidiary is bound, except for any such conflicts, defaults, breaches or
violations that could not reasonably be expected, individually or in the
aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement and could not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect.
16
(b) The
Company is not, and upon the consummation of the Merger and the Transactions
as
herein contemplated will not be, required to register as an “investment company”
as such term is defined in the Investment Company Act of 1940 (the “Investment
Company Act”).
(c) There
is
no outstanding dispute with, or outstanding proceeding, notice, decree,
judgment, fine or penalty of or imposed by, any Governmental Authority in
relation to the Company or any Company Subsidiary or its operation which has
been notified or deemed to be notified to the Company or any Company Subsidiary
under applicable Laws which could reasonably be expected to have a Company
Material Adverse Effect. There is no outstanding investigation or inquiry by
any
Governmental Authority on the Company or any Company Subsidiary or its
operations nor is there any investigation, inquiry, proceeding, notice, decree,
judgment, fine or penalty anticipated against the Company or any Company
Subsidiary or persons for whose acts or defaults the Company or any Company
Subsidiary may be vicariously liable which has had or could reasonably be
expected to have a Company Material Adverse Effect. There
is
no outstanding notice or other communication, actual or potential violation,
failure to comply with any applicable Laws or constitutional documents or
failure to comply with the standards of regulatory compliance applied in the
conduct of each of the Company’s and Company Subsidiary’s operations, internal
organization, risk management disciplines or other relevant control functions
in
respect of each of the Company’s and Company Subsidiary’s operations which in
any case has had, or could reasonably be expected to have, a Company Material
Adverse Effect.
SECTION
3.07 SEC
Filings; Financial Statements.
h) The
Company has at
all
times complied with its obligations under the Securities Act and the Exchange
Act and has at all times complied with all Laws, rules and regulations governing
companies whose shares are quoted by market makers on the OTCBB, and the Company
has
filed,
announced, furnished, published or dispatched
all
forms, reports and documents required to be filed,
announced, furnished, published or dispatched
by it
with the Securities and Exchange Commission (the “SEC”)
since
January 1, 2004 (as such documents have been amended prior to the date hereof,
collectively, the “Company
SEC Reports”).
As of
their respective dates, the Company SEC Reports (i) complied in all material
respects in accordance with either the requirements of the Securities Act,
the
Exchange Act or
the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (“SOX”),
as
the case may be, and the rules and regulations promulgated thereunder, and
(ii)
did not, at the time they were filed, or, if amended, as of the date of such
amendment, 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 made therein, in the light of the circumstances under which they
were
made, not misleading. No Company Subsidiary is, or ever has been, required
to
file any form, report or other document with the SEC.
17
(b) The
Company has not received any notice from the SEC alleging any breach or failure
to comply, by it or any Company Subsidiary, of or with any aspect of the
Securities Act, SOX or the Exchange Act or any rules, regulations or laws
governing or applying to it, which remains subsisting and outstanding, and
there
are no circumstances or events based on which any such notice may be
given.
(c) Each
of
the consolidated financial statements (including, in each case, any notes
thereto) contained in the Company SEC Reports was prepared in accordance with
applicable United States generally accepted accounting principles (“US
GAAP”)
applied on a consistent basis throughout the periods indicated (except as may
be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by the SEC on Form 10-Q, Form 8-K or any similar or successor form)
and each fairly presents, in all material respects, the consolidated financial
position, results of operations and cash flows of the Company and its
consolidated subsidiaries as at the respective dates thereof and for the
respective periods indicated therein, except that the unaudited interim
financial statements may not contain footnotes and as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments).
(d) The
consolidated financial statements of the Company have disclosed and made full
provision or reserve for or notice all contingent, unquantified or disputed
liabilities, capital or burdensome commitments. Except as and to the extent
set
forth on the consolidated balance sheet of the Company and the consolidated
Company Subsidiaries as at December 31, 2006 , including the notes thereto,
neither the Company nor any Company Subsidiary has any liability, loan,
guarantee, undertaking, commitments on capital account, unusual liabilities
or
obligation of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on a balance sheet prepared in accordance
with US GAAP, except for liabilities and obligations (i) incurred in the
ordinary course of business and in a manner consistent with past practice since
December
31, 2006 and
(ii) which,
individually or in the aggregate, could not reasonably be expected to have
a
Company Material Adverse Effect.
(e) The
Company has made available to Parent or its counsel all comment letters received
by the Company from the SEC or the staff thereof since January 1, 2004 and
all
responses to such comment letters filed by or on behalf of the Company. As
of
the date hereof, there are no unresolved comments issued by the staff of the
SEC
with respect to any of the Company SEC Reports.
18
(f) Each
of
the principal executive officer of the Company and the principal financial
officer of the Company (or each former principal executive officer of the
Company and each former principal financial officer of the Company, as
applicable) has made all applicable certifications required by (x) Rule 13a-14
or Rule 15d-14 under the Exchange Act or (y) 15 U.S.C.. Section 7241 and 18
U.S.C. Section 1350 (Sections 302 and 906 of SOX) with respect to the Company
SEC Reports, and the statements contained in such certifications are complete
and accurate. The Company maintains disclosure controls and procedures required
by Rule 13a-15 or Rule 15d-15 under the Exchange Act; such controls and
procedures are designed to ensure that material information concerning the
Company and the Company Subsidiaries is made known on a timely basis to the
individuals responsible for the preparation of the Company’s SEC filings and
other public disclosure documents.
(g) The
Company maintains a system of accounting established and administered in
accordance with US GAAP. The Company and the Company Subsidiaries maintain
a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with US GAAP and
to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(h) Since
January 1, 2004, neither the Company nor any Company Subsidiary nor, to the
Company’s knowledge, any director, officer, employee, auditor, accountant or
representative of the Company or any Company Subsidiary, has received or
otherwise had or obtained knowledge of any written or formal complaint,
allegation or claim regarding the accounting or auditing practices, procedures,
methodologies or methods of the Company or any Company Subsidiary or their
respective internal accounting controls, including any complaint, allegation,
assertion or claim that the Company or any Company Subsidiary has engaged in
questionable accounting or auditing practices. No attorney representing the
Company or any Company Subsidiary, whether or not employed by the Company or
any
Company Subsidiary, has reported evidence of a material violation of securities
laws, breach of fiduciary duty or similar violation by the Company or any of
its
officers, directors, employees or agents to the Company Board or any committee
thereof or to any director or officer of the Company. Since January 1, 2004,
there have been no formal internal investigations regarding financial reporting
or accounting policies and practices discussed with, reviewed by or initiated
at
the direction of the chief executive officer, chief financial officer, general
counsel, the Company Board or any committee thereof, other than ordinary course
audits or reviews of accounting policies and practices or internal controls
required by SOX.
(i) To
the
knowledge of the Company, no employee of the Company or any Company Subsidiary
has provided or is providing information to any law enforcement agency regarding
the commission or possible commission of any crime or the violation or possible
violation of any applicable Law. Neither the Company nor any Company Subsidiary
nor any officer, employee, contractor, subcontractor or agent of the Company
or
any such Company Subsidiary has discharged, demoted, suspended, threatened,
harassed or in any other manner discriminated against an employee of the Company
or any Company Subsidiary in the terms and conditions of employment because
of
any act of such employee described in 18 U.S.C. § 1514A(a).
19
(j) There
are
no Liens, debentures, encumbrances or unusual liabilities given, made or
incurred by or on behalf of the Company or any Company Subsidiary (and, in
particular but without limiting to the foregoing, no loans have been made by
or
on behalf of the Company or such Company Subsidiary to any of its or directors
or shareholders of other Company Subsidiary) and no person has given any
overdraft, loan or loan facility granted to the Company or such Company
Subsidiary.
(k) Neither
the Company nor any Company Subsidiary is a party to, or has any commitment
to
become a party to, any joint venture, off balance sheet partnership or any
similar contract or arrangement (including any contract or arrangement relating
to any transaction or relationship between or among the Company and any of
the
Company Subsidiaries, on the one hand, and any unconsolidated affiliate,
including any structured finance, special purpose or limited purpose entity
or
person, on the other hand, or any “off balance sheet arrangements” (as defined
in Item 303(a) of Regulation S-K under the Exchange Act)), where the result,
purpose or intended effect of such contract or arrangement is to avoid
disclosure of any material transaction involving, or material liabilities of,
the Company or any Company Subsidiaries in the Company’s or such Company
Subsidiary’s published financial statements or other Company SEC
Reports.
SECTION
3.08 Absence
of Certain Changes or Events.
Since December
31, 2006, except as contemplated by this Agreement, (a) the Company and the
Company Subsidiaries have conducted their businesses only in the ordinary course
of business and in a manner consistent with past practice, (b) there has not
been any event, circumstance, change or effect that, individually or in the
aggregate, has had, constitutes or could reasonably be expected to have, a
Company Material Adverse Effect, and (c) none of the Company or any Company
Subsidiary has taken any action that, if taken after the date of this Agreement,
would constitute a material breach of any of the covenants set forth in
Section 5.01.
SECTION
3.09 Absence
of Litigation.
There is
no litigation, suit, claim, action, proceeding or investigation (an
“Action”)
pending or, to the knowledge of the Company, threatened in writing against
the
Company or any Company Subsidiary, or any property or asset of the Company
or
any Company Subsidiary, before any Governmental Authority that (a) individually
or in the aggregate, has had, or could reasonably be expected to have, a Company
Material Adverse Effect or (b) seeks to materially delay or prevent the
consummation of any of the Transactions. Neither the Company nor any Company
Subsidiary nor any material property or asset of the Company or any Company
Subsidiary is subject to any continuing order of, consent decree, settlement
agreement or other similar written agreement with, or, to the knowledge of
the
Company, continuing investigation by, any Governmental Authority, or any order,
writ, judgment, injunction, decree, determination or award of any Governmental
Authority, that could reasonably be expected, individually or in the aggregate,
to prevent or materially delay consummation of any of the Transactions or
otherwise prevent or materially delay the Company from performing its
obligations under this Agreement or could reasonably be expected, individually
or in the aggregate, to have a Company Material Adverse Effect.
20
SECTION
3.10 Employee
Benefit Plans.
i)
Section 3.10(a)
of the
Company Disclosure Schedule lists each of the following plans to which the
Company or any Company Subsidiary is a party, with respect to which the Company
or any Company Subsidiary has any material obligation or liability or that
are
maintained, contributed to or sponsored by the Company or any Company Subsidiary
for the benefit of any current or former employee, officer or director of the
Company or any Company Subsidiary:
(i) all
employee benefit plans (as defined in Section 3(3) of the United States Employee
Retirement Income Security Act of 1974, as amended (“ERISA”),
including all retirement benefits, pension, provident, superannuation and all
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance and other material benefit plans, programs or arrangements
(collectively, the “ERISA
Plans”);
(ii) each
other plan providing compensation (other than salaries or wages), benefits
or
perquisites that are not included in the preceding paragraph (i), including
without limitation any bonus, stock option, stock purchase, restricted stock,
incentive, vacation pay and sick pay plans; all employment, termination, and
other material similar contracts or agreements (including, without limitation,
any such contracts or agreements relating to a sale of the Company or any
Company Subsidiary or the consummation of any Transaction), any employee benefit
plan described in the preceding paragraph (i) that is not governed by any
provision of ERISA; and all other personnel policies, practices and procedures
(collectively, the “Compensation
Plans”);
and
(iii) any
“cafeteria plan” or transportation fringe plan governed by Code Section 125 or
Code Section 132(f) (a “Flexible
Benefit Plan”).
For
purposes of this Agreement, the ERISA Plans, the Compensation Plans and any
Flexible Benefit Plans are collectively referred to as the “Company
Plans.”
(b) With
respect to each Company Plan that is subject to United States Law (a
“U.S.
Company Plan”),
the
Company has provided Parent or its counsel with a true and complete copy of
(i)
each U.S. Company Plan document; (ii) the most recently filed Internal Revenue
Service (“IRS”)
Form
5500, if any, relating to such U.S. Company Plan that is an ERISA Plan; (iii)
the most recent summary plan description for each U.S. Company Plan for which
a
summary plan description is required by applicable Law; (iv) the most recently
received determination letter, if any, issued by the IRS with respect to any
U.S. Company Plan that is an ERISA Plan intended to qualify under Section 401(a)
of the Code; and (v) the most recently prepared actuarial report or financial
statement, if any, relating to a U.S. Company Plan that is an ERISA Plan. With
respect to each Company Plan that is not subject to United States Law (a
“Non-U.S.
Company Plan”),
the
Company has provided Parent or its counsel with a true and complete copy of
each
Non-U.S. Company Plan document and each material document, if any, prepared
in
connection with each Non-U.S. Company Plan, including, but not limited to,
a
copy of the deed of trust, rules and all booklets and announcements describing
the benefits (or any proposed changes to the benefits) of the relevant Non-U.S.
Company Plan and all other documents, records and materials relating to the
establishment and operation of the Non-U.S. Company Plan.
21
(c) None
of
the Company, any Company Subsidiary or any Company ERISA Affiliate maintains,
contributes to or has any liability with respect to a multiemployer plan (within
the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a “Multiemployer
Plan”),
a
single employer pension plan (within the meaning of Section 4001(a)(15) of
ERISA) for which liability under Section 4063 or 4064 of ERISA could be incurred
(a “Multiple
Employer Plan”),
an
ERISA Plan for which the Company or any Company Subsidiary could incur liability
under Section 4069 of ERISA in the event such plan has been or were to be
terminated, or an ERISA Plan in respect of which the Company or any Company
Subsidiary could incur liability under Section 4212(c) of ERISA. Except as
set
forth in Section 3.10(c)
of the
Company Disclosure Schedule, none of the U.S. Company Plans (i) provides for
the
payment of separation, severance, termination or similar-type benefits to any
person, (ii) obligates the Company or any Company Subsidiary to pay separation,
severance, termination or similar-type benefits solely or partially as a result
of any Transaction or (iii) obligates the Company or any Company Subsidiary
to
make any payment or provide any benefit as a result of a “change in control”,
within the meaning of such term under Section 280G of the Code. No payment
under
a U.S. Company Plan will result in an excess parachute payment to any employee
within the meaning of Section 280G of the Code as a result of any Transaction.
None of the U.S. Company Plans provides for or promises retiree medical,
disability or life insurance benefits to any current or former employee, officer
or director of the Company or any Company Subsidiary, except as required by
applicable Law. The Company, each Company Subsidiary and each Company ERISA
Affiliate have complied in all material respects with the requirements of Part
6
of Subtitle B of Title I of ERISA, Section 4980B of the Code and any similar
state Law (“COBRA”) and, to the extent applicable, with the privacy, security
and other provisions of the Health Insurance Portability and Accountability
Act
of 1996.
(d) Each
U.S.
Company Plan has been maintained, funded and administered in accordance with
its
terms and the requirements of all applicable Laws, including, without limitation
and where applicable, ERISA and the Code, except where such non-compliance
could
not reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect. The Company and the Company Subsidiaries have performed
all material obligations required to be performed by them under, are not in
any
material respect in default under or in violation of, and have no knowledge
of
any material default or violation by any party to, any U.S. Company Plan. No
Action is pending or, to the knowledge of the Company, threatened with respect
to any U.S. Company Plan (other than claims for benefits in the ordinary course)
that could reasonably be expected, individually or in the aggregate, to have
a
Company Material Adverse Effect and, to the knowledge of the Company, no fact
or
event exists that could reasonably be expected to give rise to any such
Action.
(e) Each
U.S.
Company Plan that is an ERISA Plan intended to be qualified under Section 401(a)
of the Code has timely applied for or received a favorable determination letter
from the IRS covering all of the provisions applicable to the U.S. Company
Plan
for which determination letters are currently available that the U.S. Company
Plan is so qualified or may rely on an opinion or advisory letter issued to
a
master or prototype or volume submitter provider with respect to the
tax-qualified status of such U.S. Company Plan. Each U.S. Company Plan which
is
a nonqualified deferred compensation plan, within the meaning of Section 409A
of
the Code, has been operated in good faith compliance with the requirements
of
Section 409A of the Code (or an available exemption therefrom) such that amounts
of compensation deferred thereunder will not be subject to the additional tax
under Section 409A(a)(1)(B)(ii) of the Code, if such plan is timely amended,
to
the extent required under the Treasury Regulations issued pursuant to Code
Section 409A.
22
(f) Except
for matters that, individually or in the aggregate, have not had and could
not
reasonably be expected to have a Company Material Adverse Effect, there has
not
been any prohibited transaction (within the meaning of Section 406 of ERISA
or
Section 4975 of the Code) with respect to any U.S. Company Plan. None of the
Company, any Company Subsidiary or any Company ERISA Affiliate has incurred
any
liability under, arising out of or by operation of Title IV of ERISA (other
than
liability for premiums to the Pension Benefit Guaranty Corporation arising
in
the ordinary course), including, without limitation, any liability in connection
with (i) the termination or reorganization of any ERISA Plan subject to Title
IV
of ERISA, or (ii) the withdrawal from any Multiemployer Plan or Multiple
Employer Plan, and no fact or event exists that would give rise to any such
liability.
(g) Other
than the Company Plans set out in Section 3.10(a),
the
Company has no obligation (whether legally binding or established by custom)
to
pay any pension, allowance or gratuity or make any other payment on termination
of service, death or retirement or to make any payment for the purpose of
providing any similar benefits to or in respect of any person who is now or
has
been an officer or employee of the Company or any spouse or dependant of any
such person and is not a party to any scheme or arrangement having as its
purpose or one of its purposes the making of such payments or the provision
of
such benefits.
(h) With
respect to each Non-U.S. Company Plan:
(i) each
Non-U.S. Company Plan has been maintained and administered in compliance with
all applicable Laws, except where such non-compliance could not reasonably
be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect;
(ii) the
Company and the trustee of the relevant Non-U.S. Company Plan have duly complied
with their respective obligations under the trust deeds and rules thereof and
under all relevant Laws and regulations;
(iii) all
recommendations in any reports, actuarial or otherwise, relating to the Non-U.S.
Company Plan which have been received by the Company or the trustees within
the
three years immediately preceding the date hereof have been complied with in
full;
(iv) all
employer and employee contributions to each Non-U.S. Company Plan required
by
Law or by the terms of such Non-U.S. Company Plan have been made, or, if
applicable, accrued in accordance with the standard accounting practices
applicable in the local jurisdiction, and a pro rata contribution for the period
prior to and including the date of this Agreement has been made or
accrued;
(v) the
fair
market value of the assets of each funded Non-U.S. Company Plan, the liability
of each insurer for any Non-U.S. Company Plan funded through insurance or the
book reserve established for any Non-U.S. Company Plan, together with any
accrued contributions, is sufficient to procure or provide for the benefits
determined on an ongoing basis (actual or contingent) accrued to the date of
this Agreement with respect to all current and former participants under such
Non-U.S. Company Plan according to the actuarial assumptions and valuations
most
recently used to determine employer contributions to such Non-U.S. Company
Plan,
and no Transaction shall cause such assets or insurance obligations to be less
than such benefit obligations; provided that a Non-U.S. Company Plan that is
maintained solely pursuant to applicable foreign Law and sponsored by a
Governmental Authority shall not be subject to this paragraph;
23
(vi) none
of
the grants, subsidies, concessions and/or allowances that have been received
by
the Company or any Company Subsidiary from any Governmental Authority, with
respect to employment of employees, are liable to be repaid or revoked in whole
or in part as a result of the entry into or the completion of this Agreement
or
the Transactions;
(vii) each
Non-U.S. Company Plan required to be registered has been registered and has
been
maintained in good standing with applicable regulatory authorities and, except
as could not reasonably be expected, individually or in the aggregate, to have
a
Company Material Adverse Effect, each Non-U.S. Company Plan is now and always
has been operated in compliance with all applicable non-United States
Laws;
(viii) all
deductions and payments required to be made by Parent or any Parent Subsidiary
in respect of Central Provident Scheme contributions (including employer’s and
employees’ contributions) in relation to the remuneration of its employees to
any relevant competent authority have been so made; and
(ix) except
as
set forth in Section 3.10(h)(ix)
of the
Company Disclosure Schedule, none of the Non-U.S. Company Plans (A) provides
for
the payment of material separation, severance, termination or similar-type
benefits to any person, (B) obligates the Company or any Company Subsidiary
to
pay material separation, severance, redundancy, termination, long service
payment or similar-type benefits solely or partially as a result of any
Transaction, or (C) obligates the Company or any Company Subsidiary to make
any
material payment or provide any material benefit as a result of a change in
control under applicable Law. None of the Non-U.S. Company Plans provides for
or
promises material retiree medical, disability or life insurance benefits to
any
current or former employee, officer or director of the Company or any Company
Subsidiary, except as required by applicable Law.
SECTION
3.11 Labor
and Employment Matters. i)
Except
as set forth in Section 3.11
of the
Company Disclosure Schedule or as could not reasonably be expected, individually
or in the aggregate, to prevent or materially delay consummation of any of
the
Transactions or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement and could not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect:
(i) there
are
no controversies, charges and proceedings pending or, to the knowledge of the
Company, threatened between the Company or any Company Subsidiary and any of
their respective employees;
24
(ii) neither
the Company nor any Company Subsidiary is a party to or is bound by any
collective bargaining agreement or other similar agreement with any labor
organization applicable to persons employed by the Company or any Company
Subsidiary, nor, to the knowledge of the Company, are there any activities
or
proceedings of any labor union to organize any such employees;
(iii) there
are
no unfair labor practice complaints pending against the Company or any Company
Subsidiary before the National Labor Relations Board or any current union
representation questions involving employees of the Company or any Company
Subsidiary; and
(iv) there
is
no strike, slowdown, work stoppage or lockout, or, to the knowledge of the
Company, threat thereof, by or with respect to any employees of the Company
or
any Company Subsidiary.
(b) Except
as
could not reasonably be expected, individually or in the aggregate, to prevent
or materially delay consummation of any of the Transactions or otherwise prevent
or materially delay the Company from performing its obligations under this
Agreement and could not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect:
(i) the
Company and the Company Subsidiaries are in compliance with all applicable
Laws
relating to the employment of labor, including those related to wages, hours,
collective bargaining, labor relations, immigration, employment and employment
practices, the terms and conditions of employment, employment standards, equal
employment opportunity, family and medical leave, occupational health and safety
and the payment and withholding of taxes and other sums as required by the
appropriate Governmental Authority and have withheld and paid to the appropriate
Governmental Authority or are holding for payment not yet due to such
Governmental Authority all amounts required to be withheld from employees of
the
Company or any Company Subsidiary and are not liable for any arrears of wages,
taxes, penalties or other sums for failure to comply with any of the
foregoing;
(ii) the
Company and the Company Subsidiaries have paid in full to all employees or
adequately accrued for in accordance with US GAAP consistently applied all
wages, salaries, commissions, bonuses, benefits and other compensation due
to or
on behalf of such employees and there is no claim with respect to payment of
wages, salary, overtime pay or damages for wrongful or unreasonable dismissal
that has been asserted or is now pending or threatened before any Governmental
Authority with respect to any persons currently or formerly employed by the
Company or any Company Subsidiary, and no circumstances have arisen under which
the Company and the Company Subsidiaries are likely to be required to make
any
statutory severance, redundancy, long service payment and any other payment
or
compensation under any employment protection legislation to any current or
former employees;
25
(iii) neither
the Company nor any Company Subsidiary is a party to, or otherwise bound by,
any
consent decree with, or citation by, any Governmental Authority relating to
employees or employment practices;
(iv) neither
the Company nor any Company Subsidiary has given notice of any redundancies
or
layoffs nor started consultations with any independent trade union or employees’
representatives regarding redundancies, layoffs or dismissals within the period
of one year prior to the date hereof;
(v) no
circumstances have arisen under which the Company or any Company Subsidiary
is
likely to be required to pay damages for wrongful dismissal, to make any
statutory severance, redundancy or long service payment or to make or pay any
compensation for unreasonable dismissal or to make any other payment under
any
employment protection Laws or to reinstate or re-engage any former
employee;
(vi) there
is
no charge or proceeding with respect to a violation of any occupational safety
or health standards that has been asserted or is now pending or threatened
with
respect to the Company or any Company Subsidiary; and during the six-month
period prior to the date hereof, neither the Company nor any Company Subsidiary
has effectuated a “plant closing” (as defined in the Worker Adjustment and
Retraining Notification Act of 1988 (the “WARN
Act”))
affecting any site of employment, facility or operating unit of the Company
or
any Company Subsidiary , or a “mass layoff” as defined in the WARN Act affecting
any site of employment, facility or operating unit of the Company or any Company
Subsidiary; nor has the Company or any Company Subsidiary been affected by
any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar Law;
(vii) there
is
no charge of discrimination in employment or employment practices, for any
reason, including, without limitation, age, gender, race, religion or other
legally protected category, which has been asserted or is now pending or
threatened before the United States Equal Employment Opportunity Commission,
or
any other Governmental Authority in any jurisdiction in which the Company or
any
Company Subsidiary has employed or employs any person, nor is there asserted
or
is now, to the Company’s knowledge, pending or threatened against the Company or
any Company Subsidiary, any action in relation to employment practices by the
United States National Labor Relations Board, the United States Equal Employment
Opportunity Commission, the United States Department of Labor, the Occupational
Safety and Health Administration, the United States Immigration and
Naturalization Service, or, with respect to each such Governmental Authority,
any state or local equivalent thereto; and
(viii) consummation
of the transactions contemplated by this Agreement will not entitle any person
employed by the Company or any Company Subsidiary to severance pay, the payment
of benefits or compensation upon a change-in-control.
26
SECTION
3.12 Real
Property; Title to Assets. j) Section 3.12(a)
of the
Company Disclosure Schedule lists each parcel of real property, if any,
currently owned by the Company or any Company Subsidiary or owned by the Company
and any Company Subsidiary after January 1, 2004. Each parcel of real property
owned by the Company or any Company Subsidiary (i) is owned free and clear
of
all mortgages, pledges, liens, security interests, conditional and installment
sale agreements, encumbrances, charges or other claims of third parties of
any
kind, including, without limitation, any easement, right of way or other
encumbrance to title, or any option, right of first refusal, or right of first
offer (collectively, “Liens”),
other
than Permitted Liens (as defined in Section 9.03(a))
and
Liens reflected on the Company’s balance sheet as of December 31, 2006 and (ii)
is neither subject to any governmental decree or order to be sold nor is being
condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor, to the knowledge of the Company,
has any such condemnation, expropriation or taking been proposed. Policies
of
title have been issued by national title insurance companies for the insurance
of the interest of the fee owner for each parcel of real property owned by
the
Company or any Company Subsidiary (the “Company
Title Policies”),
such
Company Title Policies are valid and in full force and effect and no claim
has
been made under any such policy. The Company has made available to Parent true
and complete copies of all Company Title Policies, if any, in the possession
of
the Company.
(b) Section 3.12(b)
of the
Company Disclosure Schedule lists each parcel of real property currently leased,
subleased or used on any other basis by the Company or any Company Subsidiary,
with the name of the lessor and the date of the lease, sublease, license,
assignment of the lease or other agreement granting use rights to the Company
or
any Company Subsidiary, any guaranty given or leasing commissions payable by
the
Company or any Company Subsidiary in connection therewith and each amendment
to
any of the foregoing (collectively, the “Company
Use Documents”).
True,
correct and complete copies of all Company Use Documents have been made
available to Parent or its counsel. All such Company Use Documents are in full
force and effect, are valid and effective in accordance with their respective
terms, and there is not, under any of such Company Use Documents, any existing
material default or event of default (or event which, with notice or lapse
of
time, or both, would constitute a default) by the Company or any Company
Subsidiary or, to the Company’s knowledge, by the other party to such Company
Use Document. The Company’s or the Company Subsidiary’s possession and quiet
enjoyment of such leased or subleased property have not been disturbed, and
to
the knowledge of the Company, there are no disputes with respect to the same.
All rent and other payments owing by the Company or any Company Subsidiary
under
such Company Use Documents have been paid in full through and including March
31, 2007. Other than as specified in Section 3.12(b),
neither
the Company, nor to the Company’s knowledge, any Company Subsidiary, has
received any written notice to the effect that any such current Company Use
Document will not be renewed or is not subject to renewal at the termination
of
the term thereof or that any such Company Use Document will be renewed at a
substantially higher rent or substantially higher cost. Neither the Company
nor
any Company Subsidiary has subleased, licensed or otherwise granted to any
entity or individual the right to use or occupy such premises or any portion
thereof.
(c) Except
as
could not reasonably be expected, individually or in the aggregate, to prevent
or materially delay consummation of any of the Transactions or otherwise prevent
or materially delay the Company from performing its obligations under this
Agreement and could not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect: (i) there are no
contractual or legal restrictions that preclude or restrict the ability to
use
any real property owned, leased or used on any other basis by the Company or
any
Company Subsidiary for the purposes for which it is currently being used; (ii)
there are no material latent defects or material adverse physical conditions
affecting the real property, and improvements thereon, owned, leased or used
on
any other basis by the Company or any Company Subsidiary; (iii) neither the
Company nor any Company Subsidiary has received written notice from any
Governmental Authority or other entity having jurisdiction over any property
owned, leased or used on any other basis by the Company or any Company
Subsidiary or any portion thereof describing the violation of any Laws relating
to permits or any property restrictions or other Liens affecting the same;
(iv)
the Company has obtained and maintained, or caused the Company Subsidiaries
to
obtain and maintain, all permits (including, without limitation, Company
Permits), consents, licenses, concessions, certificates of compliance,
approvals, authorizations and agreements from third parties (including, without
limitation, water rights) necessary for the operation (including, without
limitation, exploration and mining) of the real property owned, leased or used
on any other basis by the Company or any Company Subsidiary, all of which are
in
full force and effect, and neither the Company nor any Company Subsidiary has
received any written notice from any Governmental Authority or other entity
having jurisdiction over any property owned, leased or used on any other basis
by the Company or any Company Subsidiary or any portion thereof describing
a
violation of or threatening a suspension, revocation, modification or
cancellation of any such permit, consent, license, concession, certificate
of
compliance, approval, authorization or agreement; (v) with respect to any mining
operations performed on the real property owned, leased or used on any other
basis by the Company or any Company Subsidiary, the Company has filed, or caused
any Company Subsidiary to file, all reports and notifications required to be
filed under any Laws; (vi) there are no pending or, to the Company’s knowledge,
threatened fire, health, safety, building, zoning, land use, assessment, or
similar proceedings relating to the real property owned, leased or used on
any
other basis by the Company or any Company Subsidiary; (vii) except as set forth
in Schedule 3.12(c),
there
are no parties other than the Company or a Company Subsidiary in possession
of
the real property owned, leased or used on any other basis by the Company or
any
Company Subsidiary and there are no sublease, concession, occupancy, license
or
similar arrangements affecting any such property; (viii) no construction,
improvements, or alterations, the cost of which exceeds US$1,000,000, are in
process, under construction, planned or required at any real property owned,
leased or used on any other basis by the Company or any Company Subsidiary;
and
(ix) no portion of the real property owned, leased or used on any other basis
by
the Company or any Company Subsidiary or any improvements or buildings thereon
has suffered any damage by fire, earthquake, flood or other casualty which
has
not heretofore been repaired and restored to operational use and in accordance
with applicable Laws and the requirements of any lease.
27
(d) Each
of
the Company and the Company Subsidiaries has good and valid title to, or, in
the
case of leased properties and assets, valid leasehold or subleasehold interests
in, or in the case of real property and assets used on any other basis, valid
use rights to, all of its properties and assets, tangible and intangible, real,
personal and mixed, used or held for use in its business, free and clear of
any
Liens, except for Permitted Liens. All assets and inventory are in good
condition and of merchantable quality and capable of being sold by the Company
or any Company Subsidiary in the ordinary course of business to a purchaser
in
accordance with its list prices without rebate or allowance. All tangible assets
are in the possession or under the control of the Company or Company Subsidiary.
Neither the construction, positioning or use of any of the Company’s or Company
Subsidiary’s assets, nor the assets themselves, contravene any relevant
provision of any Laws. All such assets owned or used by the Company or Company
Subsidiary are in good repair and capable of being used for the purposes for
which they are designed, acquired or used by the Company or Company Subsidiary
and have throughout their period of ownership by the Company or Company
Subsidiary been maintained and serviced in accordance with their manufacturer’s
recommendations.
28
(e) Except
as
listed on Section 3.12(e)
of the
Company Disclosure Schedule, to the knowledge of the Company, the Company and
the Company Subsidiaries or its joint venture or contract parties have been
issued all licenses, permits, consents, concessions, orders, approvals and
authorizations (the “Mining
Permits”)
required to explore for and exploit or mine any natural resources situated
on
the surface or subsurface of any real property rights currently owned by the
Company or any Company Subsidiary or currently leased, subleased or used on
any
other basis in compliance with applicable law and/or any applicable agreement
(the “Mining
Rights”),
whether by the Company or any Company Subsidiary, including, but not limited
to,
those Mining Permits referenced in Section 3.12(e)
of this
Agreement. All of the terms and conditions attaching to such Mining Permits
to
explore for and/or exploit or mine any such natural resources on the surface
or
subsurface of any such real properties (and their expiration dates, if any)
have
been fully complied with.
(f) There
does not exist any material non-compliance by the Company or any Company
Subsidiary with the terms of any Mining Permits that could result in the
revocation or termination of any such Mining
Permits.
(g) Except
as
listed in Section 3.12(g)
of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary
has
knowledge of any third party rights or encumbrances over any Mining Rights
that
would materially affect the Company's exclusive rights or ability to use such
real property and/or to explore for and exploit and extract any natural
resources on the surface or subsurface of such real property.
(h) Except
as
listed on Section 3.12(h)
of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary
has
any obligation to maintain any exploitation or mining rights attaching to the
relevant exploration certificates for any designated period.
SECTION
3.13 Intellectual
Property.
k)
Except as could not reasonably be expected, individually or in the aggregate,
to
prevent or materially delay consummation of any of the Transactions or otherwise
prevent or materially delay the Company from performing its obligations under
this Agreement and could not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect:
(i) the
Company and the Company Subsidiaries own or are licensed to use all Intellectual
Property used in or necessary for the conduct of their respective businesses
as
currently conducted;
29
(ii) to
the
knowledge of the Company, the conduct of the business of the Company and the
Company Subsidiaries as currently conducted does not infringe upon or
misappropriate the Intellectual Property rights of any third party;
(iii) there
are
no claims or suits pending or, to the knowledge of the Company and except as
set
forth in Section 3.13(a)(iii)
of the
Company Disclosure Schedule, threatened against the Company or any Company
Subsidiary (A) alleging that the conduct of the business of the Company or
any
Company Subsidiary as currently conducted infringes upon or misappropriates
the
Intellectual Property rights of any third party or (B) challenging the
ownership, use, validity or enforceability of any item of Intellectual Property
owned by the Company or a Company Subsidiary (“Company
Owned Intellectual Property”);
(iv) with
respect to the Company Owned Intellectual Property, the Company or a Company
Subsidiary is the owner of the entire right, title and interest in and to such
Company Owned Intellectual Property, free and clear of all liens, encumbrances
and other restrictions, and is entitled to use such Company Owned Intellectual
Property in the continued operation of its respective business;
(v) each
of
the Company and Company Subsidiary has taken all steps open to it to preserve
the Company Owned Intellectual Property. Without limitation, all renewal fees
regarding the Company Owned Intellectual Property due on or before the Effective
Time have been paid in full;
(vi) neither
the Company nor any Company Subsidiary has entered into any agreement,
arrangement or understanding (whether legally enforceable or not) for the
licensing, or otherwise permitting the use or exploitation, of the Company
Owned
Intellectual Property or which prevents, restricts or otherwise inhibits the
Company’s or the relevant Company Subsidiary’s freedom to use and exploit the
Company Owned Intellectual Property;
(vii) there
are
no settlements, forbearances to ▇▇▇, consents, judgments, orders or similar
obligations which (A) restrict the business of the Company or any Company
Subsidiary in or under any Intellectual Property rights of any third party;
or
(B) permit any third party to use any Company Owned Intellectual
Property;
(viii) Section 3.13(a)(vi)
of the
Company Disclosure Schedule sets forth each item of material Intellectual
Property licensed to the Company or a Company Subsidiary (“Company
Licensed Intellectual Property”),
and
the Company or a Company Subsidiary has the right to use such Company Licensed
Intellectual Property in the continued operation of its respective business
in
accordance with the terms of the license agreement governing such Company
Licensed Intellectual Property and the Company and the Company Subsidiaries
have
used such Company Licensed Intellectual Property in accordance with the terms
of
such license agreement;
30
(ix) the
Company Owned Intellectual Property has not been adjudged invalid or
unenforceable in whole or in part, and, to the knowledge of the Company, is
valid and enforceable;
(x) to
the
knowledge of the Company, no person is engaging in any activity that infringes
upon or misappropriates the Company Owned Intellectual Property;
(xi) each
license of the Company Licensed Intellectual Property is valid and enforceable,
is binding on all parties to such license, and is in full force and
effect;
(xii) to
the
knowledge of the Company, no party to any license of the Company Licensed
Intellectual Property is in breach thereof or default thereunder;
and
(xiii) neither
the execution of this Agreement nor the consummation of any Transaction will
adversely affect any of the Company’s or Company Subsidiaries’ rights with
respect to the Company Owned Intellectual Property or the Company Licensed
Intellectual Property.
(b) Neither
the Company nor any Company Subsidiary has agreed to indemnify any third party
for or against any infringement or misappropriation with respect to any third
party Intellectual Property other than in the ordinary course of
business.
(c) The
consummation of the Transactions will not result in the Surviving Corporation,
the Company or any Company Subsidiary being bound by any non-compete or other
restriction on the operation of any business of the Surviving Corporation,
the
Company or any Company Subsidiary, or in the grant by the Surviving Corporation,
the Company or any Company Subsidiary of any rights or licenses to any Company
Owned Intellectual Property.
(d) The
Company or any Company Subsidiary has not licensed any Company Owned
Intellectual Property to any third party other than in the ordinary course
of
business.
SECTION
3.14 Taxes.
l) The
Company and the Company Subsidiaries have filed all material Tax Returns (as
defined in Section 9.03(a))
required to be filed by them and have paid and discharged all material Taxes
required to be paid or discharged, other than such payments as are being
contested in good faith by appropriate proceedings. All such Tax Returns are
true, accurate and complete in all material respects. Neither the IRS nor any
other United States or non-United States taxing authority or agency is now
asserting against the Company or any Company Subsidiary any material deficiency
or claim for any Taxes or interest thereon or penalties in connection therewith.
The accruals and reserves for Taxes reflected in the consolidated balance sheet
of the Company and the consolidated Company Subsidiaries as at December
31, 2006 have been prepared in accordance with US GAAP. There are no material
Tax liens upon any property or assets of the Company or any of the Company
Subsidiaries except liens for current Taxes not yet due.
(b) No
audit
or other proceeding by any taxing authority is pending with respect to any
material Taxes due from or with respect to the Company or any Company
Subsidiary. No taxing authority has given written notice of its intention to
assert any deficiency or claim for additional material Taxes against the Company
or any Company Subsidiary.
31
(c) Neither
the Company nor any Company Subsidiary has been a “distributing corporation” or
a “controlled corporation” in a distribution intended to qualify under
Section 355(e) of the Code within the past five years.
SECTION
3.15 Environmental
Matters.
Except
as could not reasonably be expected, individually or in the aggregate, to
prevent or materially delay consummation of any of the Transactions or otherwise
prevent or materially delay the Company from performing its obligations under
this Agreement and except as could not reasonably be expected, individually
or
in the aggregate, to have a Company Material Adverse Effect:
(a) neither
the Company nor any Company Subsidiary has violated or is in violation of any
Environmental Law (as defined in Section 9.03(a))
and
neither the Company nor any Company Subsidiary has received any written
communication from a Governmental Agency or person alleging any actual or
potential liability of, or any actual or potential violation by, the Company
or
any Company Subsidiary arising under any Environmental Law;
(b) none
of
the properties currently owned, leased or operated by the Company or any Company
Subsidiary or formerly owned, leased or operated by the Company or any Company
Subsidiary (including, without limitation, soils and surface and groundwaters)
is or has been contaminated with any Hazardous Substance (as defined in
Section 9.03(a)),
which
contamination requires investigation or remediation under any Environmental
Law,
or has given rise to or would reasonably be expected to give rise to liability
or obligations (including any investigatory, reporting or remedial obligation)
under any Environmental Law;
(c) neither
the Company nor any Company Subsidiary has stored, handled, treated, disposed
of, arranged for the disposal of, transported or released any Hazardous
Substance at any property or facility, including, without limitation, any
offsite location, and neither the Company nor any Company Subsidiary has or
has
allegedly exposed any person to any Hazardous Substance, so as to give rise
to a
requirement for investigation or remediation under any Environmental Law or
so
as to give rise to any current or reasonably expected future liability or
obligation (including any investigatory, reporting or remedial obligation)
under
any Environmental Law;
(d) the
Company and the Company Subsidiaries have all Environmental Permits required
under any Environmental Law and the Company and the Company Subsidiaries are
in
compliance with, and have no current or pending liability or obligation
associated with any past non-compliance with, such permits, licenses and
authorizations;
(e) neither
the execution of this Agreement nor the consummation of the Transactions will
require any investigation, remediation or other action with respect to Hazardous
Substances, or any notice to or consent of Governmental Authorities or third
parties, pursuant to any applicable Environmental Law;
(f) neither
the Company nor any Company Subsidiary has designed, manufactured, installed,
marketed, sold, handled or distributed asbestos or any asbestos-containing
product or asbestos-containing material, and no basis in fact or Law, or under
contract or lease agreement, exists upon which any claim of liability could
be
asserted against the Company or any Company Subsidiary relating to asbestos,
asbestos-containing products or asbestos-containing materials located at any
property or facility;
32
(g) neither
the Company nor any Company Subsidiary has received any notification pursuant
to
any Environmental Laws that (i) any work, repairs, corrective or remedial
action, construction or capital expenditures are required to be made as a
condition of continued compliance with any Environmental Laws or any license,
permit or approval issued pursuant thereto; (ii) any license, permit or approval
is about to be reviewed, made subject to limitations or conditions, revoked,
withdrawn or terminated; or (iii) any events, conditions, circumstances,
activities, practices, incidents, actions or omissions may interfere with or
prevent compliance or continued compliance with any Environmental Law;
and
(h) the
Company has made available to Parent or its counsel all environmental reports,
assessments, investigations, Environmental Permits, correspondence or other
material environmental documents relating to its business or to the Company
or
the Company Subsidiaries, or to their respective affiliates’ or predecessors’
properties, facilities or operations.
SECTION
3.16 Material
Contracts.
m)
Subsections (i)
through
(xiv)
of
Section 3.16(a)
of the
Company Disclosure Schedule list all contracts, arrangements, commitments and
agreements of the types listed in subsections (i)
through
(xiv)
to which
the Company or any Company Subsidiary is a party (such contracts, arrangements,
commitments and agreements as are required to be set forth in Section 3.16(a)
of the
Company Disclosure Schedule being the “Material
Company Contracts”):
(i) each
“material contract” (as such term is defined in Item 601(b)(10) of Regulation
S-K and Item 601(b)(10) of Regulation S-B of the SEC) with respect to the
Company and the Company Subsidiaries;
(ii) each
contract and agreement that is likely to involve consideration of more than
US$100,000, in the aggregate, over the remaining term of such contract or
agreement, than purchase orders entered into in the ordinary course of business
and in a manner consistent with past practice;
(iii) each
contract and agreement evidencing outstanding indebtedness in a principal amount
of US$100,000 or more;
(iv) all
leases of real property leased for the use or benefit of the Company or any
Company Subsidiary;
(v) all
material contracts and agreements with any Governmental Authority to which
the
Company or any Company Subsidiary is a party;
(vi) all
contracts and agreements that limit, or purport to limit, the ability of the
Company or any Company Subsidiary to compete in any line of business or with
any
person or entity or in any geographic area or during any period of
time;
33
(vii) all
contracts and agreements providing for benefits under any Company
Plan;
(viii) all
contracts for employment required to be listed in Section 3.10
of the
Company Disclosure Schedule;
(ix) each
joint venture, partnership, strategic alliance and similar agreement to which
the Company or any Company Subsidiary is a party, which is material to the
Company or any Company Subsidiary or which provides for the ownership of any
equity interest in any person or entity;
(x) all
material broker, distributor, dealer, manufacturer’s representative, franchise,
agency, sales promotion, market research, marketing consulting and advertising
contracts, and agreements to which the Company or any Company Subsidiary is
a
party;
(xi) all
management contracts (excluding contracts for employment) and contracts with
other consultants, including any contracts involving the payment of royalties
or
other amounts calculated based upon the revenues or income of the Company or
any
Company Subsidiary or income or revenues related to any product or service
of
the Company or any Company Subsidiary to which the Company or any Company
Subsidiary is a party;
(xii) all
licenses or sublicenses of Intellectual Property to which the Company or any
Company Subsidiary is a party and that are material to the business of the
Company or any Company Subsidiary;
(xiii) all
contracts for the development, exploration or exploitation of mines to which
the
Company or any Company Subsidiary is a party and that are material to the
business of the Company or any Company Subsidiary; and
(xiv) all
other
contracts and agreements that are material to the Company and the Company
Subsidiaries, taken as a whole, or the absence of which could reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect.
(b) Except
as
could not reasonably be expected, individually or in the aggregate, to prevent
or materially delay consummation of any of the Transactions or otherwise prevent
or materially delay the Company from performing its obligations under this
Agreement and could not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect:
(i) each
Material Company Contract is a legal, valid and binding agreement, subject
to
the effect of any applicable bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting creditors’ rights generally and subject to
the effect of general principles of equity (regardless of whether considered
in
a proceeding at law or in equity);
34
(ii) the
Company or Company Subsidiary has duly performed and complied in all material
respects with each of its obligations thereunder;
(iii) neither
the Company nor any Company Subsidiary has received any claim of default under
any Material Company Contract and neither the Company nor any Company Subsidiary
is in breach or violation of, or default under, any Material Company
Contract;
(iv) there
are
no grounds for rescission, avoidance, repudiation or termination of any Material
Company Contract;
(v) to
the
Company’s knowledge, no other party is in breach or violation of, or default
under, any Material Company Contract; and
(vi) neither
the execution of this Agreement nor the consummation of any Transaction shall
constitute a default under, give rise to cancellation rights under or otherwise
adversely affect any of the material rights of the Company or any Company
Subsidiary under any Material Company Contract.
(c) There
are
no contracts or obligations, agreements, arrangements or concerted practices
to
which the Company or any Company Subsidiary is a party or by which the Company
or such Company Subsidiary is bound, and there are no practices in which the
Company or any Company Subsidiary is engaged, which are void, illegal,
unenforceable, registrable or notifiable under or which contravene any
applicable Laws. The Company has made available to Parent or its counsel true
and complete copies of all Material Company Contracts, including any amendments
thereto.
SECTION
3.17 Insurance.
The
Company and the Company Subsidiaries maintain insurance coverage with reputable
insurers in such amounts and covering such risks as are in accordance with
normal industry practice for companies engaged in businesses similar to that
of
the Company and the Company Subsidiaries (taking into account the cost and
availability of such insurance). Nothing has been done or omitted to be done
by
or on behalf of the Company or any Company Subsidiary which would make any
policy of insurance void or voidable or enable the insurers to avoid the same
and there is no claim outstanding under any such policy and the Company is
not
aware of any circumstances likely to give rise to such a claim or result in
an
increased rate of premium.
SECTION
3.18 Board
Approval; Vote Required.
n) The
Company Board, by resolutions duly adopted by unanimous vote of those members
of
the Company Board voting at a meeting duly called and held and not subsequently
rescinded or modified in any way, has duly (i) determined that this Agreement,
the Merger and the other Transactions and related agreements contemplated
thereby are fair to and in the best interests of the Company and its
stockholders, (ii) approved this Agreement, the Merger and the other
Transactions and related agreements contemplated thereby and declared their
advisability and (iii) recommended that the stockholders of the Company approve
and adopt this Agreement and approve the Merger and the other Transactions
and
directed that this Agreement and the Merger and the other Transactions be
submitted for consideration by the holders of Company Common Stock at the
Company Stockholders’ Meeting (as defined in Section 6.01(a)).
Pursuant to Article 8 of the Company’s Articles of Incorporation, the
limitations on business combinations contained in Sections 302A.671 and 302A.673
of the MBCA do not apply to the Company.
35
(b) The
only
vote of the holders of any class or series of capital stock or other securities
of the Company necessary to approve this Agreement, the Merger and the other
Transactions is the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock in favor of the approval and adoption
of this Agreement, the Merger and the other Transactions (the
“Company
Stockholders’ Approval”)
at a
duly called Company Stockholders’ Meeting consisting of a quorum of stockholders
of the Company (or any adjournment or postponement thereof).
SECTION
3.19 Certain
Business Practices.
None of
the Company, any Company Subsidiary or, to the Company’s knowledge, any
directors or officers, agents or employees of the Company or any Company
Subsidiary, has (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity or for
the purpose of securing any contract for the Company or any Company Subsidiary;
(b) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended (the
“Foreign
Corrupt Practices Act”);
or
(c) made any payment in the nature of criminal bribery.
SECTION
3.20 Interested
Party Transactions.
Except
for any agreement or arrangement that has involved or will involve consideration
of less than US$50,000 during any calendar year, no director, officer or other
affiliate of the Company or any Company Subsidiary (a) has purchased, purchases
or will purchase from, or has sold, sells or will sell or has furnished,
furnishes or will furnish to, the Company or any Company Subsidiary, any goods
or services, (b) is or has been a party to any contract or agreement disclosed
in Section 3.16
of the
Company Disclosure Schedule, or (c) had or has any contractual or other
arrangement with the Company or any Company Subsidiary. The Company and the
Company Subsidiaries have not, since January 1, 2004, (i) extended or maintained
credit, arranged for the extension of credit or renewed an extension of credit
in the form of a personal loan to or for any director or executive officer
(or
equivalent thereof) of the Company, or (ii) materially modified any term of
any
such extension or maintenance of credit.
SECTION
3.21 Ownership
of Parent Ordinary Shares.
As of
the date of this Agreement, neither the Company nor any Company Subsidiary
is
the beneficial owner of any shares of capital stock of Parent.
SECTION
3.22 Brokers.
No
broker, finder or investment banker (other than ▇▇▇▇ Capital Limited and SSC
Mandarin Group) is entitled to any brokerage, finder’s or other fee or
commission in connection with the Transactions based upon arrangements made
by
or on behalf of the Company.
36
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF PARENT
Except
as
set forth in the Parent Disclosure Schedule that has been prepared by Parent
and
delivered by Parent to the Company in connection with the execution and delivery
of this Agreement (the “Parent
Disclosure Schedule”)
(which
Parent Disclosure Schedule shall be arranged in sections corresponding to the
sections of this Article IV,
and any
information disclosed in any such section of the Parent Disclosure Schedule
shall be deemed to be disclosed only for purposes of the corresponding section
of this Article IV,
unless
it is reasonably apparent that the disclosure contained in such section of
the
Parent Disclosure Schedule applies to other representations and warranties
contained in this Article IV),
Parent
hereby represents and warrants to the Company that:
SECTION
4.01 Corporate
Organization.
o) Each
of Parent and each subsidiary of Parent (each a “Parent
Subsidiary”)
is a
corporation or other organization duly organized, validly existing and, where
applicable, in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite corporate power and
authority and all necessary governmental approvals to own, lease and operate
its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals could not reasonably be
expected, individually or in the aggregate, to prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially
delay
Parent or Merger Sub from performing its obligations under this Agreement and
could not reasonably be expected, individually or in the aggregate, to have
a
Parent Material Adverse Effect (as defined in Section 9.03(a)).
Parent
and each Parent Subsidiary is duly qualified or licensed to do business, and,
where applicable, is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except where the failure to
be
so qualified or licensed and in good standing could not reasonably be expected,
individually or in the aggregate, to prevent or materially delay consummation
of
any of the Transactions or otherwise prevent or materially delay Parent or
Merger Sub from performing its obligations under this Agreement and could not
reasonably be expected, individually or in the aggregate, to have a Parent
Material Adverse Effect. Where appropriate in the context, a “Parent Subsidiary”
includes any of the Parent PRC Companies.
(b) A
true
and complete list of all the Parent Subsidiaries, together with the jurisdiction
of incorporation or organization of each Parent Subsidiary and the percentage
of
the outstanding capital stock or entire registered capital of each Parent
Subsidiary owned by Parent and each other Parent Subsidiary, is set forth in
Section 4.01(b)
of the
Parent Disclosure Schedule. Except as set forth in Section 4.01(b)
of the
Parent Disclosure Schedule, Parent does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity. For the
avoidance of doubt, each of the Parent PRC Companies is a wholly-owned
subsidiary of Parent and has been duly incorporated and is validly existing
in
accordance with the Laws of the PRC and is duly qualified to do business in
the
PRC and has obtained all governmental approvals and registrations necessary
for
its existence, which approvals and registrations are continuing and effective
and each of the Parent PRC Companies has sufficient authority to conduct its
business in accordance with its business license, approval certificate, articles
of association or similar corporate documents, except where the failure to
be so
qualified or licensed or to have such approvals and registrations could not
reasonably be expected, individually or in the aggregate, to prevent or
materially delay consummation of any of the Transactions or otherwise prevent
or
materially delay Parent from performing its obligations under this Agreement
and
could not reasonably be expected, individually or in the aggregate, to have
a
Parent Material Adverse Effect. Except for the Parent PRC Companies, Parent
does
not have any equity interests or shares in any company, branch or office in
the
PRC.
37
(c) No
order
(including administrative order) has been made or petition presented that
remains outstanding or resolution passed for the winding up, liquidation,
dissolution of Parent and each Parent Subsidiary or the appointment of a
provisional liquidator to, or a liquidation committee of Parent or any Parent
Subsidiary. No receiver or receiver and manager has been appointed of the whole
or part of Parent’s and each Parent Subsidiary’s business or assets. No
distress, execution or other process has been levied on any of Parent’s or any
Parent Subsidiary’s assets. Neither Parent nor any Parent Subsidiary has applied
for conciliation in order to settle its debts. No liquidation committee has
been
appointed by Parent or any Parent Subsidiary, any court or any other authority
or person for the purpose of liquidating the business or assets of Parent or
any
Parent Subsidiary or any part thereof. No meeting of the creditors of Parent
or
any Parent Subsidiary has been held or is in prospect, no voluntary arrangement
or compromise or arrangement has been proposed with the creditors of Parent
or
any Parent Subsidiary; no ruling declaring the bankruptcy of Parent or any
Parent Subsidiary has been made and no public announcement in respect of the
same has been pronounced by any court of competent jurisdiction; and there
is no
unfulfilled or unsatisfied judgment or order of any court of competent
jurisdiction outstanding against Parent or any Parent Subsidiary; and there
has
been no delay by Parent or any Parent Subsidiary in the payment of any
obligation due for payment except in the ordinary course of
business.
(d) Neither
Parent nor any Parent Subsidiary is insolvent or unable to pay its debts, no
receiver or receiver and manager has been appointed by any person of its
business or assets or any part thereof, no power to make any such appointment
has arisen, neither Parent nor any Parent Subsidiary has taken any steps to
enter liquidation and there are no grounds on which a petition or application
could be based for the winding up or appointment of a receiver of Parent or
any
Parent Subsidiary.
SECTION
4.02 Memorandum
of Association and Bye-Laws.
p)
Parent has made available to the Company or its counsel a complete and correct
copy of the Memorandum of Association and Bye-laws or equivalent organizational
documents, each as amended to date, of Parent and each Parent Subsidiary. Such
Memorandum of Association and Bye-laws or equivalent organizational documents
are in full force and effect. Neither Parent nor any Parent Subsidiary is in
violation of any of the provisions of its Memorandum of Association and Bye-laws
or equivalent organizational documents and none of the activities, agreements,
commitments or rights of Parent or any Parent Subsidiary is ultra ▇▇▇▇▇ or
unauthorized, except where such violations could not reasonably be expected,
individually or in the aggregate, to prevent or materially delay consummation
of
any of the Transactions or otherwise prevent or materially delay Parent or
Merger Sub from performing its obligations under this Agreement and could not
reasonably be expected, individually or in the aggregate, to have a Parent
Material Adverse Effect. For the avoidance of doubt, in respect of each of
the
Parent PRC Companies, its organizational documents include its latest business
license, approval certificate, the articles of association and all amendments
thereof, and all post-establishment registration certificates necessary to
carry
on its business under the Laws of the PRC which are valid and in full
force.
38
(b) Parent
and each Parent Subsidiary has, at all times, carried on its operations and
conducted its affairs in all material respects in accordance with its Memorandum
of Association and By-laws or equivalent organizational documents.
SECTION
4.03 Capitalization.
q) The
authorized share capital of Parent consists of 20,000,000,000 Parent Ordinary
Shares. As of March 31, 2007, (i) 3,927,075,240 Parent Ordinary Shares were
issued and outstanding, all of which were validly issued, fully paid and
non-assessable, (ii) no Parent Ordinary Shares were held by subsidiaries of
Parent, and (iii) no Parent Ordinary Shares were reserved for future issuance
pursuant to outstanding employee stock options (“Parent
Stock Options”)
granted pursuant to a share option scheme of Parent which was approved by Parent
on May 22, 2001 and was terminated by an ordinary resolution of its shareholders
at the annual general meeting held on June 6, 2002 (the “Parent
Stock Option Plan”).
Except as set forth in this Section 4.03,
there
are no options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock
of, or equity interests in, Parent or any Parent Subsidiary or obligating Parent
or any Parent Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, Parent or any Parent Subsidiary and, to the extent
that any such rights, agreements, arrangements or commitments previously
existed, Parent has no continuing or existing liability or obligation with
respect thereto. Parent has not adopted approved or entered into, or proposed
to
adopt, approve or enter into any stockholder “rights plan”, “poison pill” plan
or comparable plan or arrangement. There are no bonds, debentures, notes or
other indebtedness of Parent having the right (or convertible into, or
exchangeable for, securities having the right) to vote on any matter on which
holders of Parent Ordinary Shares may vote. Section 4.03(a)
of the
Parent Disclosure Schedule sets forth the following information with respect
to
each Parent Stock Option outstanding as of the date of this Agreement: (i)
the
name of the Parent Stock Option recipient; (ii) the particular plan pursuant
to
which such Parent Stock Option was granted; (iii) the number of Parent Ordinary
Shares subject to such Parent Stock Option; (iv) the exercise or purchase price
of such Parent Stock Option; (v) the date on which such Parent Stock Option
was
granted; (vi) the applicable vesting schedule; (vii) the date on which such
Parent Stock Option expires; and (viii) whether the exercisability of or right
of repurchase of such Parent Stock Option will be accelerated in any way by
the
Transactions, and indicates the extent of acceleration. Parent has made
available to the Company or its counsel accurate and complete copies of all
Parent Stock Option Plans pursuant to which Parent has granted the Parent Stock
Option that are currently outstanding. All Parent Ordinary Shares subject to
issuance as aforesaid, upon issuance on the terms and conditions specified
in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and non-assessable. There are no outstanding
contractual obligations of Parent or any Parent Subsidiary to repurchase, redeem
or otherwise acquire any Parent Ordinary Shares, any capital stock of or any
equity interest in Parent Subsidiary or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Parent Subsidiary or any other person. There are no Parent Ordinary Shares
or
Parent ADSs outstanding that are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under the Parent Stock Plan or any
applicable restricted stock purchase agreement or other agreement with Parent.
There are no commitments or agreements of any character to which Parent is
bound
obligating Parent to accelerate the vesting of any Parent Stock Option as a
result of the Merger. All outstanding Parent Ordinary Shares, all outstanding
Parent Stock Options, and all outstanding shares of capital stock of or all
registered capital in each Parent Subsidiary have been issued and granted in
compliance with (i) all applicable securities laws and other applicable Laws,
rules and regulations (including, without limitation, any applicable PRC and
Hong Kong Laws, rules and regulations and where appropriate, at the national,
provincial and local levels) and (ii) all requirements set forth in applicable
contracts.
With
respect to the Parent Stock Options, (A) each grant of a Parent Stock Option
was
duly authorized no later than the date on which the grant of such Parent Stock
Option was by its terms to be effective (the “Parent
Grant Date”)
by all
necessary corporate action, including, as applicable, approval by the Parent
Board (or a duly constituted and authorized committee thereof) and any required
shareholder approval by the necessary number of votes or written consents,
and
the award agreement governing such grant was (in any) was duly executed and
delivered by each party thereto, (B) each such grant was made in accordance
with
the terms of the applicable Parent Stock Option Plan and all other applicable
Laws, (C) the per share exercise price of each Parent Stock Option was equal
to
the fair market value of a Parent Ordinary Share on the applicable Grant Date
and (D) each such grant was properly accounted for in accordance with HKFRS
in
the audited financial statements included in the Parent HKSE Reports (as defined
in Section 4.07(a))
and
disclosed in the Parent HKSE Reports in accordance with the HKSE Listing Rules
and all other applicable Laws.
39
(b) Except
as
reflected in Section 4.03(a)
or in
Section 4.03(a)
of the
Parent Disclosure Schedule, each outstanding share of capital stock of or entire
registered capital in each Parent Subsidiary is duly authorized, validly issued,
fully paid and nonassessable, and each such share or equity interest is owned
by
Parent or another Parent Subsidiary free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Parent’s or any Parent Subsidiary’s voting rights, charges and
other encumbrances of any nature whatsoever.
(c) The
total
amount of investment and registered capital of Dongguan ▇▇▇▇ ▇▇▇ Bleaching
and
Dyeing Company Limited (東籢永耀漂染有榰公司)
are
both HK$11,260,000 and the registered capital of which has been fully paid.
The
total amount of investment and registered capital of ▇▇▇▇ ▇▇ Knitting (Heyuen)
Company Limited (永義紡織(河源)有榰公司)
are
US$1,250,000 and US$1,000,000 respectively and the registered capital of which
has been fully paid. The total amount of investment and registered capital
of
▇▇▇▇ ▇▇ Garment (Huzhou) Company Limited (永義眃瞝(湖州)有榰公司)
are
US$29,800,000 and US$26,000,000 respectively and US$7,004,237 of the registered
capital has been paid in accordance with applicable Laws of the PRC. The total
amount of investment and registered capital of ▇▇▇▇ ▇▇ Garment (Huzhou) Company
Limited (永義眃瞝(湖州)有榰公司)
are
US$29,800,000 and US$18,000,000 respectively and US$2,711,921 of the registered
capital has been paid in accordance with applicable Laws of the PRC. The total
amount of investment and registered capital of ▇▇▇▇ ▇▇ Bleaching and Dyeing
Company Limited (永義漂染(湖州)有榰公司)
are
US$29,900,000 and US$2,000,000 respectively and US$3,009,110 of the registered
capital has been paid in accordance with applicable Laws of the PRC. Parent
is
the sole legal, beneficial and record owner of all equity interests in each
of
the Parent PRC Companies free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations
on
Parent’s or any Parent Subsidiary’s voting rights, charges and other
encumbrances of any nature whatsoever. Parent has made available to the Company
or its counsel a complete and correct copy of the latest capital verification
report of each of the Parent PRC Companies issued by a PRC registered
accountant.
40
(d) The
Parent Ordinary Shares underlying the Parent ADSs to be issued pursuant to
the
Merger in accordance with Section 2.01,
(i)
will be duly authorized, validly issued, fully paid and non-assessable and
not
subject to preemptive rights created by statute, the Parent’s Memorandum of
Association and By-laws or any agreement to which the Parent is a party or
is
bound and (ii) will, when issued, be registered under the Securities Act and
the
Exchange Act and registered or exempt from registration under applicable Blue
Sky Laws.
SECTION
4.04 Authority
Relative to This Agreement.
Each of
Parent and Merger Sub has all legal right and all necessary corporate power
and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the Merger and the other Transactions subject to
the
Parent Shareholders’ Approval and, in the case of the Merger, the approval of
the Merger Sub’s sole shareholder. The execution and delivery of this Agreement
by Parent and Merger Sub and the consummation by Parent and Merger Sub of the
Merger and other Transactions have been duly and validly authorized by all
necessary corporate action on the part of Parent and Merger Sub, and the person
or persons who will execute this Agreement and any ancillary agreements on
behalf of Parent and Merger Sub have the power or authority to do so on behalf
of Parent and Merger Sub. No other corporate proceedings on the part of Parent
or Merger Sub are necessary to authorize this Agreement or to consummate the
Merger and other Transactions (other than, with respect to Parent, receipt
of
the Parent Shareholders’ Approval (as defined in Section 4.18(b)),
and
with respect to Merger Sub, the approval of Merger Sub’s sole shareholder and
the filing and recordation of the appropriate merger documents as required
by
the MBCA). This Agreement has been duly and validly executed and delivered
by
Parent and Merger Sub and, assuming due authorization, execution and delivery
by
the other parties hereto, constitutes a legal, valid and binding obligation
of
each of Parent and Merger Sub, enforceable against each of Parent and Merger
Sub
in accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
creditors’ rights generally and subject to the effect of general principles of
equity (regardless of whether considered in a proceeding at law or in
equity).
As of
the date hereof, no Hong Kong or Bermuda takeover statute is applicable to
the
Merger or the other Transactions.
SECTION
4.05 No
Conflict; Required Filings and Consents.
r) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance of this Agreement by Parent and Merger Sub will not, (i)
conflict with or violate the Memorandum of Association and By-laws or other
organizational documents of Parent or any Parent Subsidiary, (ii) assuming
that
all consents, approvals, authorizations and other actions described in
Sections 4.04
and
4.05(b)
have
been obtained and all filings and obligations described in Section 4.05(b)
have
been made, conflict with or violate any Law applicable to Parent or any Parent
Subsidiary or by which any property or asset of Parent or any Parent Subsidiary
(including any of the Parent PRC Real Properties) is bound or affected, or
(iii)
result in any breach of, or constitute a default (or an event which, with notice
or lapse of time or both, would become a default) under, or give to others
any
rights of termination, amendment, acceleration or cancellation of, or result
in
the creation of a lien or other encumbrance on any property or asset of Parent
or any Parent Subsidiary (including any of the Parent PRC Real Properties)
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent
or
any Parent Subsidiary is a party or by which Parent or any Parent Subsidiary
or
any of their properties or assets (including any of the Parent PRC Real
Properties) is bound or affected, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences which could not reasonably be expected, individually or in the
aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay Parent or Merger Sub
from
performing its obligations under this Agreement and could not reasonably be
expected, individually or in the aggregate, to have a Parent Material Adverse
Effect.
41
(b) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance of this Agreement by Parent and Merger Sub will not, require
Parent or Merger Sub to obtain any consent, approval, authorization or permit
of, or to file with or to notify any Governmental Authority, except (i)
applicable requirements, if any, of the Securities Act, Exchange Act and Blue
Sky Laws, (ii) the pre-merger notification requirements of the HSR Act and
the
receipt, termination or expiration, as applicable, of approvals or waiting
periods required under the HSR Act or any other applicable competition, merger
control, antitrust or similar law or regulation, (iii) the filing and
recordation of appropriate merger documents as required by the MBCA and the
relevant authorities of other jurisdictions in which Parent is qualified to
do
business, (iv) the applicable requirements, if any, of the HKSE Listing Rules;
(v) appropriate applications, filings and notices to, and approval of, the
AMEX
and the Hong Kong Stock Exchange as may be required in connection with the
quotation or listing of the Parent ADSs to be issued in connection with the
Merger or pursuant to the Substitute Options, Company Additional Share and
Warrant Obligations, Company Convertible Notes or Substitute Warrants and (vi)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, could not reasonably be expected,
individually or in the aggregate, to prevent or materially delay consummation
of
any of the Transactions or otherwise prevent or materially delay Parent or
Merger Sub from performing its obligations under this Agreement and could not
reasonably be expected, individually or in the aggregate, to have a Parent
Material Adverse Effect.
SECTION
4.06 Permits;
Compliance.
s) Each
of Parent and the Parent Subsidiaries is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Authority
necessary for each of Parent or such Parent Subsidiary to own, lease and operate
its properties or to carry on its business as it is now being conducted (the
“Parent
Permits”),
except where the failure to have, or the suspension or cancellation of, any
of
the Parent Permits could not reasonably be expected, individually or in the
aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay Parent or Merger Sub
from
performing its obligations under this Agreement and could not reasonably be
expected, individually or in the aggregate, to have a Parent Material Adverse
Effect. All of the Parent Permits are valid and subsisting, and are in full
force and effect, and Parent and the relevant Parent Subsidiary is not in breach
of any of the terms or conditions of any of the Parent Permits, there are no
factors or circumstances that might result in any restrictions or special
conditions being placed on any of them or might in any way materially prejudice
the continuation or renewal or might lead to the suspension, cancellation,
refusal, modification or revocation of any of the Parent Permits, except where
the failure to have, or the suspension or cancellation of, any of the Parent
Permits could not reasonably be expected, individually or in the aggregate,
to
prevent or materially delay consummation of any of the Transactions or otherwise
prevent or materially delay Parent or Merger Sub from performing its obligations
under this Agreement and could not reasonably be expected, individually or
in
the aggregate, to have a Parent Material Adverse Effect. Neither Parent nor
any
Parent Subsidiary is in conflict with, or in default, breach or violation of,
(a) any Law applicable to Parent or any Parent Subsidiary or by which any
property or asset of Parent or any Parent Subsidiary (including any of the
Parent PRC Real Properties) is bound or affected, or (b) any note, bond,
mortgage, indenture, contract, agreement, lease, license, Parent Permit,
franchise or other instrument or obligation to which Parent or any Parent
Subsidiary is a party or by which Parent or any Parent Subsidiary or any
property or asset of Parent or any Parent Subsidiary (including any of the
Parent PRC Real Properties) is bound, except for any such conflicts, defaults,
breaches or violations that could not reasonably be expected, individually
or in
the aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay Parent or Merger Sub
from
performing its obligations under this Agreement and could not reasonably be
expected, individually or in the aggregate, to have a Parent Material Adverse
Effect.
42
(b) Parent
is
not, and upon the consummation of the Merger and the Transactions as herein
contemplated will not be, required to register as an “investment company” as
such term is defined in the Investment Company Act.
(c) There
is
no outstanding dispute with, or outstanding proceeding, notice, decree,
judgment, fine or penalty of or imposed by, any Governmental Authority in
relation to Parent or any Parent Subsidiary or its operation which has been
notified or deemed to be notified to Parent or any Parent Subsidiary under
applicable Laws which could reasonably be expected to have a Parent Material
Adverse Effect. There is no outstanding investigation or inquiry by any
Governmental Authority on Parent or any Parent Subsidiary or its operations
nor
is there any investigation, inquiry, proceeding, notice, decree, judgment,
fine
or penalty anticipated against Parent or any Parent Subsidiary or persons for
whose acts or defaults Parent or any Parent Subsidiary may be vicariously liable
which has had or could reasonably be expected to have a Parent Material Adverse
Effect. There is no outstanding notice or other communication, actual or
potential violation, failure to comply with any applicable Laws or
constitutional documents or failure to comply with the standards of regulatory
compliance applied in the conduct of each of Parent’s and Parent Subsidiary’s
operations, internal organization, risk management disciplines or other relevant
control functions in respect of each of Parent’s and Parent Subsidiary’s
operations which in any case has had or could reasonably be expected to have
a
Parent Material Adverse Effect.
SECTION
4.07 Hong
Kong and Bermuda Filings; Financial Statements. t)
Parent
has at all times complied with its obligations under the HKSE Listing Rules
and
has at times complied with all Laws, rules and regulations governing companies
whose shares are listed on the Hong Kong Stock Exchange, and Parent has filed,
announced, furnished, published or dispatched all forms, reports and documents,
required to be filed, furnished, announced, published or dispatched by it with
the Hong Kong Stock Exchange since January 1, 2004 (as such documents have
been
amended prior to the date hereof, collectively, the “Parent
HKSE Reports”).
As of
their respective dates, the Parent HKSE Reports (i) complied in all material
respects in accordance with the HKSE Listing Rules and (ii) did not, at the
time
they were filed, or, if amended, as of the date of such amendment, 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 made therein,
in
the light of the circumstances under which they were made, not misleading.
No
Parent Subsidiary is, or ever has been, required to file any form, report or
other document with the Hong Kong Stock Exchange.
43
(b) Parent
has not received any notice from the Hong Kong Securities and Futures Commission
(the “SFC”)
or the
Hong Kong Stock Exchange alleging any breach or failure to comply, by it or
any
Parent Subsidiary, of or with any aspect of the HKSE Listing Rules or any rules,
regulations or laws governing or applying to listed companies or companies
which
are members of a group of companies of which a member company has shares listed
on the Hong Kong Stock Exchange, which remains subsisting and outstanding,
and
there are no circumstances or events based on which any such notice may be
given.
(c) Parent
has filed all forms, reports and documents required to be filed by it with
the
Registry of Companies of Hong Kong since January 1, 2004 (collectively, the
“Parent
Hong Kong Filings”).
The
Parent Hong Kong Filings complied in all material respects in accordance with
the requirements of the Companies Ordinance (Chapter 32) of Hong Kong, as
amended from time to time (the “Hong
Kong Companies Ordinance”),
and,
if applicable, the Securities and Futures Ordinance (Chapter 571) of Hong Kong,
as amended from time to time (the “Hong
Kong Securities Ordinance”).
Parent has complied in all material respects with and is not in material breach
of any conditions, requirements or other obligations imposed under the Hong
Kong
Companies Ordinance or the Hong Kong Securities Ordinance. Parent has filed
all
forms, reports and documents required to be filed by it with the Registrar
of
Companies in Bermuda or the Bermuda Monetary Authority since January 1, 2004
(collectively, the “Parent
Bermuda Filings”).
The
Parent Bermuda Filings complied in all material respects in accordance with
the
requirements of the Companies ▇▇▇ ▇▇▇▇ of Bermuda, as amended from time to
time
(the “Bermuda
Companies Act”).
Parent has complied in all material respects with and is not in material breach
of any conditions, requirements or other obligations imposed under the Bermuda
Companies Act or other requirements of Bermuda law.
(d) Each
of
the consolidated financial statements (including, in each case, any notes
thereto) contained in the Parent HKSE Reports was prepared in accordance with
the Hong Kong Financial Reporting Standards (“HKFRS(s)”),
Hong
Kong Accounting Standards (“HKAS(s)”)
and
Interpretations (hereinafter collectively referred to as “HKFRS”)
issued
by the Hong Kong Institute of Certified Public Accounts applied on a consistent
basis throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted under the HKSE
Listing Rules and each truly and fairly presents, in all material respects,
the
consolidated financial position, results of operations and cash flows of Parent
and its consolidated subsidiaries as at the respective dates thereof and for
the
respective periods indicated therein, except that the unaudited interim
financial statements may not contain footnotes and as otherwise noted therein
(subject, in the case of unaudited statements, to normal and year-end
adjustments)).
44
(e) The
consolidated financial statements of Parent have disclosed and made full
provision or reserve for or notice all contingent, unquantified or disputed
liabilities, capital or burdensome commitments. Except as and to the extent
set
forth on the consolidated balance sheet of Parent and the consolidated Parent
Subsidiaries as at September 30, 2006,
including the notes thereto, neither Parent nor any Parent Subsidiary has any
liability, loan, guarantee, undertaking, commitments on capital account, unusual
liabilities or obligation of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet prepared
in accordance with HKFRS, except for liabilities and obligations, incurred
in
the ordinary course of business and in a manner consistent with past practice
since September 30, 2006, which, individually or in the aggregate, could not
reasonably be expected to have a Parent Material Adverse Effect.
(f) Parent
has made available to the Company or its counsel all letters received by Parent
from the Hong Kong Stock Exchange or the staff thereof since January 1, 2004
and
all responses to such letters filed by or on behalf of Parent.
(g) Parent
maintains a system of accounting established and administered in accordance
with
HKFRS. Parent and the Parent Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with HKFRS and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(h) Since
January 1, 2004, neither Parent nor any Parent Subsidiary nor, to Parent’s
knowledge, any director, officer, employee, auditor, accountant or
representative of Parent or any Parent Subsidiary, has received or otherwise
had
or obtained knowledge of any written or formal complaint, allegation or claim
regarding the accounting or auditing practices, procedures, methodologies or
methods of Parent or any Parent Subsidiary or their respective internal
accounting controls, including any complaint, allegation, assertion or claim
that Parent or any Parent Subsidiary has engaged in questionable accounting
or
auditing practices. No attorney representing Parent or any Parent Subsidiary,
whether or not employed by Parent or any Parent Subsidiary, has reported
evidence of a material violation of securities laws, breach of fiduciary duty
or
similar violation by Parent or any of its officers, directors, employees or
agents to the Parent Board or any committee thereof or to any director or
officer of Parent. Since January 1, 2004, there have been no formal internal
investigations regarding financial reporting or accounting policies and
practices discussed with, reviewed by or initiated at the direction of the
chief
executive officer, chief financial officer, general counsel, the Parent Board
or
any committee thereof, other than ordinary course audits or reviews of
accounting policies and practices or internal controls required by the HKSE
Listing Rules.
(i) To
the
knowledge of Parent, no employee of Parent or any Parent Subsidiary has provided
or is providing information to any law enforcement agency regarding the
commission or possible commission of any crime or the violation or possible
violation of any applicable Law. Neither Parent nor any Parent Subsidiary nor
any officer, employee, contractor, subcontractor or agent of Parent or any
such
Parent Subsidiary has discharged, demoted, suspended, threatened, harassed
or in
any other manner discriminated against an employee of Parent or any Parent
Subsidiary in the terms and conditions of employment in violation of applicable
PRC or Hong Kong law.
45
(j) There
are
no Liens, debentures, encumbrances or unusual liabilities given, made or
incurred by or on behalf of Parent or any Parent Subsidiary (and, in particular
but without limiting to the foregoing, no loans have been made by or on behalf
of Parent or such Parent Subsidiary to any of its or directors or shareholders
of other Parent Subsidiary) and no person has given any overdraft, loan or
loan
facility granted to Parent or such Parent Subsidiary.
SECTION
4.08 Absence
of Certain Changes or Events.
Since
September 30, 2006, except as contemplated by this Agreement, (a) Parent and
the
Parent Subsidiaries have conducted their businesses only in the ordinary course
of business and in a manner consistent with past practice, (b) there has not
been any event, circumstance, change or effect that, individually or in the
aggregate, has had, constitutes or could reasonably be expected to have, a
Parent Material Adverse Effect, and (c) none of Parent or any Parent Subsidiary
has taken any action that, if taken after the date of this Agreement, would
constitute a material breach of any of the covenants set forth in Section 5.02.
SECTION
4.09 Absence
of Litigation.
There is
no Action pending or, to the knowledge of Parent, threatened in writing against
Parent or any Parent Subsidiary, or any property or asset of Parent or any
Parent Subsidiary (including any of the Parent PRC Real Properties), before
any
Governmental Authority that (a) individually or in the aggregate, has had,
or
could reasonably be expected to have, a Parent Material Adverse Effect or (b)
seeks to materially delay or prevent the consummation of any of the
Transactions. Neither Parent nor any Parent Subsidiary nor any material property
or asset of Parent or any Parent Subsidiary (including any of the Parent PRC
Real Properties) is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, to the
knowledge of Parent, continuing investigation by, any Governmental Authority,
or
any order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority, that could reasonably be expected, individually or
in
the aggregate, to prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay Parent from performing
its
obligations under this Agreement or could reasonably be expected, individually
or in the aggregate, to have a Parent Material Adverse Effect.
SECTION
4.10 Employee
Benefit Plans.
u)
With
respect to employee benefit plans that are subject to U.S. Law:
(i) neither
Parent, any Parent Subsidiary nor any Parent ERISA Affiliate maintains,
contributes to, nor has any material obligation or liability with respect to,
any employee benefit plan (as defined in Section 3(3) of ERISA, and whether
or
not subject to the requirements of ERISA), bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance, or other material benefit plan
(a
“Parent
Plan”)
which
covers employees of operations within the United States that is subject to
U.S.
Law;
46
(ii) none
of
Parent, any Parent Subsidiary or any Parent ERISA Affiliate maintains,
contributes or has any liability under or with respect to a Multiemployer Plan
or a Multiple Employer Plan; and
(iii) other
than the employee benefit plans set out in this Section 4.10(a),
Parent
has no obligation (whether legally binding or established by custom) to pay
any
pension, allowance or gratuity or make any other payment on termination of
service, death or retirement or to make any payment for the purpose of providing
any similar benefits to or in respect of any person who is now or has been
an
officer or employee of Parent or any spouse or dependant of any such person
and
is not a party to any scheme or arrangement having as its purpose or one of
its
purposes the making of such payments or the provision of such
benefits
(b) With
respect to each Plan that is not subject to U.S. Law (a “Non-U.S.
Parent Plan”),
Parent
has made available to the Company or its counsel a true and complete copy of
each Non-U.S. Parent Plan document and each material document, if any, prepared
in connection with each Non-U.S. Parent Plan, including, but not limited to,
a
copy of the deed of trust, rules and all booklets and announcements describing
the benefits (or any proposed changes to the benefits) of the relevant Non-U.S.
Parent Plan and all other documents, records and materials relating to the
establishment and operation of the Non-U.S. Parent Plan. With respect to each
Non-U.S. Parent Plan:
(i) each
Non-U.S. Parent Plan has been maintained, funded and administered in compliance
with all applicable Laws, except where such non-compliance could not reasonably
be expected, individually or in the aggregate, to have a Parent Material Adverse
Effect;
(ii) Parent
and the trustee of the relevant Non-U.S. Parent Plan have duly complied with
their respective obligations under the trust deeds and rules thereof and under
all relevant Laws and regulations;
(iii) all
recommendations in any reports, actuarial or otherwise, relating to the Non-U.S.
Parent Plan which have been received by Parent or the trustees within the three
years immediately preceding the date hereof have been complied with in
full;
(iv) all
employer and employee contributions (including all mandatory social security
contributions and statutory housing funds contribution) to each Non-U.S. Parent
Plan required by Law or by the terms of such Non-U.S. Parent Plan have been
made, or, if applicable, accrued in accordance with the standard accounting
practices applicable in the local jurisdiction, and a pro rata contribution
for
the period prior to and including the date of this Agreement has been made
or
accrued;
(v) the
fair
market value of the assets of each funded Non-U.S. Parent Plan, the liability
of
each insurer for any Non-U.S. Parent Plan funded through insurance or the book
reserve established for any Non-U.S. Parent Plan, together with any accrued
contributions, is sufficient to procure or provide for the benefits determined
on an ongoing basis (actual or contingent) accrued to the date of this Agreement
with respect to all current and former participants under such Non-U.S. Parent
Plan according to the actuarial assumptions and valuations most recently used
to
determine employer contributions to such Non-U.S. Parent Plan, and no
Transaction shall cause such assets or insurance obligations to be less than
such benefit obligations; provided that a Non-U.S. Parent Plan that is
maintained solely pursuant to applicable foreign Law and sponsored by a
Governmental Authority shall not be subject to this paragraph;
47
(vi) none
of
the grants, subsidies, concessions and/or allowances that have been received
by
Parent or any Parent Subsidiary from any Governmental Authority are liable
to be
repaid or revoked in whole or in part as a result of the entry into or the
completion of this Agreement or the Transactions;
(vii) each
Non-U.S. Parent Plan required to be registered has been registered and has
been
maintained in good standing with applicable regulatory authorities, and except
as could not reasonably be expected, individually or in the aggregate, to have
a
Parent Material Adverse Effect, each Non-U.S. Parent Plan is now and always
has
been operated in compliance with all applicable non-United States
Laws;
(viii) all
deductions and payments required to be made by Parent or any Parent Subsidiary
in respect of Mandatory Provident Fund, Central Provident Scheme contributions,
mandatory social security contributions or statutory housing fund contributions
(including employer’s and employees’ contributions) in relation to the
remuneration of its employees to any relevant competent authority have been
so
made; and
(ix) except
as
set forth in Section 4.10(b)(vii)
of the
Parent Disclosure Schedule, none of the Non-U.S. Parent Plans (A) provides
for
the payment of material separation, severance, termination or similar-type
benefits to any person, (B) obligates Parent or any Parent Subsidiary to pay
material separation, severance, redundancy, termination, long service payment
or
similar-type benefits solely or partially as a result of any Transaction, or
(C)
obligates Parent or any Parent Subsidiary to make any material payment or
provide any material benefit as a result of a change in control under applicable
Law. None of the Non-U.S. Parent Plans provides for or promises material retiree
medical, disability or life insurance benefits to any current or former
employee, officer or director of Parent or any Parent Subsidiary, except as
required by applicable Law.
SECTION
4.11 Labor
and Employment Matters.
v)
Except as set forth in Section 4.11
of the
Parent Disclosure Schedule or as could not reasonably be expected, individually
or in the aggregate, to prevent or materially delay consummation of any of
the
Transactions or otherwise prevent or materially delay Parent or Merger Sub
from
performing its obligations under this Agreement and could not reasonably be
expected, individually or in the aggregate, to have a Parent Material Adverse
Effect:
(i) there
are
no controversies, charges and proceedings pending or, to the knowledge of
Parent, threatened between Parent or any Parent Subsidiary and any of their
respective employees;
48
(ii) neither
Parent nor any Parent Subsidiary is a party to or is bound by any collective
bargaining agreement or other similar agreement with any labor organization
applicable to persons employed by Parent or any Parent Subsidiary, nor, to
the
knowledge of Parent, are there any activities or proceedings of any labor union
to organize any such employees;
(iii) there
are
no unfair labor practice complaints pending against Parent or any Parent
Subsidiary before the National Labor Relations Board or similar Government
Authority or any current union representation questions involving employees
of
Parent or any Parent Subsidiary; and
(iv) there
is
no strike, slowdown, work stoppage or lockout, or, to the knowledge of Parent,
threat thereof, by or with respect to any employees of Parent or any Parent
Subsidiary.
(b) Except
as
could not reasonably be expected, individually or in the aggregate, to prevent
or materially delay consummation of any of the Transactions or otherwise prevent
or materially delay Parent or Merger Sub from performing its obligations under
this Agreement and could not reasonably be expected, individually or in the
aggregate, to have a Parent Material Adverse Effect:
(i) Parent
and the Parent Subsidiaries are in compliance with all applicable laws relating
to the employment of labor, including those related to wages, hours, collective
bargaining, labor relations, immigration, employment and employment practices,
the terms and condition of employment, employment standards, equal employment
opportunity, family and medical leave, occupational health and safety and the
payment and withholding of taxes and other sums as required by the appropriate
Governmental Authority and have withheld and paid to the appropriate
Governmental Authority or are holding for payment not yet due to such
Governmental Authority all amounts required to be withheld from employees of
Parent or any Parent Subsidiary and are not liable for any arrears of wages,
taxes, penalties or other sums for failure to comply with any of the
foregoing;
(ii) Parent
and the Parent Subsidiaries have paid in full to all employees or adequately
accrued for in accordance with HKFRS consistently applied and, in respect of
the
Parent PRC Subsidiaries, the applicable Laws of the PRC, all wages, salaries,
commissions, bonuses, benefits and other compensation due to or on behalf of
such employees and there is no claim with respect to payment of wages, salary,
overtime pay or damages for wrongful or unreasonable dismissal that has been
asserted or is now pending or threatened before any Governmental Authority
with
respect to any persons currently or formerly employed by Parent or any Parent
Subsidiary, and no circumstances have arisen under which Parent and the Parent
Subsidiaries are likely to be required to make any statutory severance,
redundancy, long service payment and any other payment or compensation under
any
employment protection legislation to any current or former
employees;
49
(iii) neither
Parent nor any Parent Subsidiary is a party to, or otherwise bound by, any
consent decree with, or citation by, any Governmental Authority relating to
employees or employment practices;
(iv) neither
Parent nor any Parent Subsidiary has given notice of any redundancies or layoffs
nor started consultations with any independent trade union or employees’
representatives regarding redundancies, layoffs or dismissals within the period
of one year prior to the date hereof;
(v) no
circumstances have arisen under which Parent or any Parent Subsidiary is likely
to be required to pay damages for wrongful dismissal, to make any statutory
severance, redundancy or long service payment or to make or pay any compensation
for unreasonable dismissal or to make any other payment under any employment
protection Laws or to reinstate or re-engage any former employee;
(vi) there
is
no charge or proceeding with respect to a violation of any occupational safety
or health standards that has been asserted or is now pending or threatened
with
respect to Parent or any Parent Subsidiary; and during the six-month period
prior to the date hereof, neither Parent nor any Parent Subsidiary has
effectuated a “plant closing” (as defined in the WARN Act) affecting any site of
employment, facility or operating unit of Parent or any Parent Subsidiary;
nor
has Parent or any Parent Subsidiary been affected by any transaction or engaged
in layoffs or employment terminations sufficient in number to trigger
applications of any similar Law;
(vii) there
is
no charge of discrimination in employment or employment practices, for any
reason, including, without limitation, age, gender, race, religion or other
legally protected category, which has been asserted or is now pending or
threatened before any Governmental Authority in any jurisdiction in which Parent
or any Parent Subsidiary has employed or employs any person or in Hong Kong
under the Sex Discrimination Ordinance, the Disability Discrimination Ordinance,
the Family Status Discrimination Ordinance or any other Laws conferring
protection against discrimination, harassment, victimisation or vilification
by
reason of age, gender, family circumstances, race, religion or
disability.
SECTION
4.12 Real
Property; Title to Assets. i)
Section 4.12(a)
of the
Parent Disclosure Schedule lists each parcel of real property (including any
of
the Parent PRC Real Properties) currently owned by Parent or any Parent
Subsidiary or owned by Parent or any Parent Subsidiary after January 1, 2004.
Each parcel of real property owned by Parent or any Parent Subsidiary (i) is
owned free and clear of all Liens, other than Permitted Liens and Liens
reflected on the Parent’s balance sheet as of September 30, 2006, and (ii) is
neither subject to any governmental decree or order to be sold nor is being
condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor, to the knowledge of Parent,
has
any such condemnation, expropriation or taking been proposed. Parent has made
available to the Company or its counsel copies of each deed or similar title
documents including land use right certificate and building ownership
certificate for each parcel of real property (including any of the Parent PRC
Real Properties) and all relevant approval, permits and certificates (including
without limitation construction land use planning permit, construction land
use
approval, commencement of construction work permit, construction safety and
quality inspection certificate and construction completion examination and
acceptance certificate). Policies of title have been issued by title insurance
companies for the insurance of the interest of the fee owner for each parcel
of
real property owned by Parent or any Parent Subsidiary (the “Parent
Title Policies”),
such
Parent Title Policies are valid and in full force and effect and no claim has
been made under any such policy. Parent has made available to the Company true
and complete copies of all Parent Title Policies, if any, in the possession
of
Parent.
50
(b) Section 4.12(b)
of the
Parent Disclosure Schedule lists each parcel of real property currently leased,
subleased or used on any other basis by Parent or any Parent Subsidiary, with
the name of the lessor and the date of the lease, sublease, license, assignment
of the lease or any other agreement by the Parent or any Parent Subsidiary,
any
guaranty given or leasing commissions payable by Parent or any Parent Subsidiary
in connection therewith and each amendment to any of the foregoing and, in
respect of each parcel of real property leased or subleased by Parent or any
Parent Subsidiary, any relevant land use right certificates, building ownership
certificates and/or other permits (collectively, the “Parent
Use Documents”).
True,
correct and complete copies of all Parent Use Documents have been made available
to the Company or its counsel. All such current Parent Use Documents are in
full
force and effect, are valid and effective in accordance with their respective
terms, and there is not, under any of such Parent Use Documents, any existing
material default or event of default (or event which, with notice or lapse
of
time, or both, would constitute a default) by Parent or any Parent Subsidiary
or, to Parent’s knowledge, by the other party to such Parent Use
Documents.
Parent’s
or a Parent’s Subsidiary’s possession and quiet enjoyment of such leased or
subleased property have not been disturbed, and to the knowledge of Parent,
there are no disputes with respect to the same. All rent and other payments
owing by Parent or any Parent Subsidiary under such Parent Use Documents has
been paid in full through up to and including March 31, 2007. Other than
specified in Section 4.12(b),
neither
Parent, nor to Parent’s knowledge, any Parent Subsidiary, has received any
written notice to the effect that any such current Parent Use Documents will
not
be renewed or is not subject to renewal at the termination of the term thereof
or that any such Parent Use Documents will be renewed at a substantially higher
rent or substantially higher cost. Neither Parent nor any Parent Subsidiary
has
subleased, licensed or otherwise granted to any entity or individual the right
to use or occupy such leased or subleased premises, or any portion
thereof.
(c) Except
as
could not reasonably be expected, individually or in the aggregate, to prevent
or materially delay consummation of any of the Transactions or otherwise prevent
or materially delay Parent from performing its obligations under this Agreement
and could not reasonably be expected, individually or in the aggregate, to
have
a Parent Material Adverse Effect: (i) there are no contractual or legal
restrictions that preclude or restrict the ability to use any real property
owned or leased by Parent or any Parent Subsidiary for the purposes for which
it
is currently being used; (ii) there are no material latent defects or material
adverse physical conditions affecting the real property, and improvements
thereon, owned, leased or used on any other basis by Parent or any Parent
Subsidiary; (iii) neither Parent nor any Parent Subsidiary has received written
notice from any Governmental Authority or other entity having jurisdiction
over
any property owned, leased or used on any other basis by Parent or any Parent
Subsidiary or any portion thereof describing the violation of any Laws relating
to permits or any property restrictions or other Liens affecting the same;
(iv)
Parent has obtained and maintained, or caused the Parent Subsidiaries to obtain
and maintain, all permits (including, without limitation, Parent Permits),
consents, licenses, concessions, certificates of compliance, approvals,
authorizations and agreements from third parties (including, without limitation,
water rights) necessary for the operation of the real property owned or leased
by Parent or any Parent Subsidiary, all of which are in full force and effect,
and neither Parent nor any Parent Subsidiary has received any written notice
from any Governmental Authority or other entity having jurisdiction over any
property owned, leased or used on any other basis by Parent or any Parent
Subsidiary or any portion thereof describing a violation of or threatening
a
suspension, revocation, modification or cancellation of any such permit,
consent, license, concession, certificate of compliance, approval, authorization
or agreement; (v) there are no pending or, to Parent’s knowledge, threatened
fire, health, safety, building, zoning, land use, assessment, or similar
proceedings relating to the real property owned, leased or used on any other
basis by Parent or any Parent Subsidiary; (vi) except as set forth in
Section 4.12(c)
of the
Parent Disclosure Schedule, there are no parties other than Parent or a Parent
Subsidiary in possession of the real property owned, leased or used on any
other
basis by Parent or any Parent Subsidiary and there are no sublease, concession,
occupancy, license or similar arrangements affecting any such property; (vii)
no
construction, improvements, or alterations, the cost of which exceeds
US$1,000,000, are in process, under construction, planned or required at any
real property owned or leased by Parent or any Parent Subsidiary; and (viii)
no
portion of the real property owned or leased by Parent or any Parent Subsidiary
or any improvements or buildings thereon has suffered any damage by fire,
earthquake, flood or other casualty which has not heretofore been repaired
and
restored to operational use and in accordance with applicable Laws and the
requirements of any lease.
51
(d) Each
of
Parent and the Parent Subsidiaries has good and valid title to, or, in the
case
of leased properties and assets, valid leasehold or subleasehold interests
in,
or in the case of real property and assets used on any other basis, valid use
rights to, all of its properties and assets, tangible and intangible, real,
personal and mixed, used or held for use in its business (including any of
the
Parent PRC Real Properties), free and clear of any Liens, except for Permitted
Liens. All assets and inventory are in good condition and of merchantable
quality and capable of being sold by Parent or any Parent Subsidiary in the
ordinary course of business to a purchaser in accordance with its list prices
without rebate or allowance. All tangible assets are in the possession or under
the control of Parent or Parent Subsidiary. Neither the construction,
positioning or use of any of Parent’s or Parent Subsidiary’s assets, nor the
assets themselves, contravene any relevant provision of any Laws. All such
assets owned or used by Parent or Parent Subsidiary are in good repair and
capable of being used for the purposes for which they are designed, acquired
or
used by Parent or Parent Subsidiary and have throughout their period of
ownership by Parent or Parent Subsidiary been properly maintained and
serviced.
SECTION
4.13 Intellectual
Property.
w)
Except as could not reasonably be expected, individually or in the aggregate,
to
prevent or materially delay consummation of any of the Transactions or otherwise
prevent or materially delay Parent from performing its obligations under this
Agreement and could not reasonably be expected, individually or in the
aggregate, to have a Parent Material Adverse Effect:
(i) Parent
and the Parent Subsidiaries own or are licensed to use all Intellectual Property
used in or necessary for the conduct of their respective businesses as currently
conducted;
52
(ii) to
the
knowledge of Parent, the conduct of the business of Parent and the Parent
Subsidiaries as currently conducted does not infringe upon or misappropriate
the
Intellectual Property rights of any third party;
(iii) there
are
no claims or suits pending or, to the knowledge of the Parent and except as
set
forth in Section 4.13(a)(iii)
of the
Parent Disclosure Schedule, threatened against Parent or any Parent Subsidiary
(A) alleging that the conduct of the business of Parent or any Parent Subsidiary
as currently conducted infringes upon or misappropriates the Intellectual
Property rights of any third party or (B) challenging the ownership, use,
validity or enforceability of any item of Intellectual Property owned by Parent
or a Parent Subsidiary (“Parent
Owned Intellectual Property”);
(iv) with
respect to Parent Owned Intellectual Property, Parent or a Parent Subsidiary
is
the owner of the entire right, title and interest in and to such Parent Owned
Intellectual Property, free and clear of all liens, encumbrances and other
restrictions, and is entitled to use such Parent Owned Intellectual Property
in
the continued operation of its respective business;
(v) each
of
Parent and Parent Subsidiary has taken all steps open to it to preserve the
Parent Owned Intellectual Property. Without limitation, all renewal fees
regarding the Parent Owned Intellectual Property due on or before the Effective
Time have been paid in full;
(vi) neither
Parent nor any Parent Subsidiary has entered into any agreement, arrangement
or
understanding (whether legally enforceable or not) for the licensing, or
otherwise permitting the use or exploitation, of the Parent Owned Intellectual
Property or which prevents, restricts or otherwise inhibits Parent’s or the
relevant Parent Subsidiary’s freedom to use and exploit the Parent Owned
Intellectual Property;
(vii) there
are
no settlements, forbearances to ▇▇▇, consents, judgments, orders or similar
obligations which (A) restrict the business of Parent or any Parent Subsidiary
in or under any Intellectual Property rights of any third party; or (B) permit
any third party to use any Parent Owned Intellectual Property;
(viii) Section 4.13(a)(viii)
of the
Parent Disclosure Schedule sets forth each item of material Intellectual
Property licensed to Parent or a Parent Subsidiary (“Parent
Licensed Intellectual Property”),
and
Parent or a Parent Subsidiary has the right to use such Parent Licensed
Intellectual Property in the continued operation of its respective business
in
accordance with the terms of the license agreement governing such Parent
Licensed Intellectual Property and Parent and the Parent Subsidiaries have
used
such Parent Licensed Intellectual Property in accordance with the terms of
such
license agreement;
(ix) to
the
knowledge of Parent, the Parent Owned Intellectual Property has not been
adjudged invalid or unenforceable in whole or in part, and to the knowledge
of
Parent, is valid and enforceable;
53
(x) to
the
knowledge of Parent, no person is engaging in any activity that infringes upon
or misappropriates the Parent Owned Intellectual Property;
(xi) each
license of the Parent Licensed Intellectual Property is valid and enforceable,
is binding on all parties to such license, and is in full force and
effect;
(xii) to
the
knowledge of Parent, no party to any license of the Parent Licensed Intellectual
Property is in breach thereof or default thereunder; and
(xiii) to
the
knowledge of Parent, neither the execution of this Agreement nor the
consummation of any Transaction will adversely affect any of Parent’s or Parent
Subsidiaries’ rights with respect to the Parent Owned Intellectual Property or
the Parent Licensed Intellectual Property.
(b) Neither
Parent nor any Parent Subsidiary has agreed to indemnify any third party for
or
against any infringement or misappropriation with respect to any third party
Intellectual Property other than in the ordinary course of
business.
(c) The
consummation of the Transactions will not result in Parent or any Parent
Subsidiary being bound by any non-compete or other restriction on the operation
of any business of Parent or any Parent Subsidiary, or in the grant by Parent
or
any Parent Subsidiary of any rights or licenses to any Parent Owned Intellectual
Property.
(d) Parent
or
any Parent Subsidiary has not licensed any Parent Owned Intellectual Property
to
any third party other than in the ordinary course of business.
SECTION
4.14 Taxes. x)
Parent
and the Parent Subsidiaries have filed all material Tax Returns required to
be
filed by them and have paid and discharged all material Taxes required to be
paid or discharged, other than such payments as are being contested in good
faith by appropriate proceedings. All such Tax Returns are true, accurate and
complete in all material respects. No taxing authority or agency is now
asserting against Parent or any Parent Subsidiary any material deficiency or
claim for any Taxes or interest thereon or penalties in connection therewith.
The accruals and reserves for Taxes reflected in the consolidated balance sheet
of Parent and the consolidated Parent Subsidiaries as at September 30, 2006
have
been prepared in accordance with HKFRS. There are no material Tax liens upon
any
property or assets of Parent or any of the Parent Subsidiaries (including any
of
the Parent PRC Real Properties) except liens for current Taxes not yet
due.
(b) No
audit
or other proceeding by any taxing authority is pending with respect to any
material Taxes due from or with respect to Parent or any Parent Subsidiary.
No
taxing authority has given written notice of its intention to assert any
deficiency or claim for additional material Taxes against Parent or any Parent
Subsidiary.
SECTION
4.15 Environmental
Matters.
Except
as could not reasonably be expected, individually or in the aggregate, to
prevent or materially delay consummation of any of the Transactions or otherwise
prevent or materially delay Parent from performing its obligations under this
Agreement and except as could not reasonably be expected, individually or in
the
aggregate, to have a Parent Material Adverse Effect:
54
(a) neither
Parent nor any Parent Subsidiary has violated or is in violation of any
Environmental Law and neither Parent nor any Parent Subsidiary has received
any
written communication from a Governmental Agency or person alleging any actual
or potential liability of, or any actual or potential violation by, Parent
or
any Parent Subsidiary arising under any Environmental Law;
(b) none
of
the properties currently owned (including any of the Parent PRC Real
Properties), leased or operated by Parent or any Parent Subsidiary or formerly
owned, leased or operated by Parent or any Parent Subsidiary (including, without
limitation, soils and surface and groundwaters) are or have been contaminated
with any Hazardous Substance, which contamination requires investigation or
remediation under any Environmental Law, or has given rise to or would
reasonably be expected to give rise to liability or obligations (including
any
investigatory, reporting or remedial obligation) under any Environmental
Law;
(c) neither
Parent nor any Parent Subsidiary has stored, handled, treated, disposed of,
arranged for the disposal of, transported or released any Hazardous Substance
at
any property or facility, including, without limitation, any offsite location,
and neither Parent nor any Company Subsidiary has or has allegedly exposed
any
person to any Hazardous Substance, so as to give rise to a requirement for
investigation or remediation under any Environmental Law or so as to give rise
to any current or reasonably expected future liability or obligation (including
any investigatory, reporting or remedial obligation) under any Environmental
Law;
(d) Parent
and the Parent Subsidiaries have all Environmental Permits required under any
Environmental Law and Parent and the Parent Subsidiaries are in compliance
with,
and have no current or pending liability or obligation associated with any
past
non-compliance with, such permits, licenses and other
authorizations;
(e) neither
the execution of this Agreement nor the consummation of the Transactions will
require any investigation, remediation or other action with respect to Hazardous
Substances, or any notice to or consent of Governmental Authorities or third
parties, pursuant to any applicable Environmental Law;
(f) neither
Parent nor any Parent Subsidiary has designed, manufactured, installed,
marketed, sold, handled or distributed asbestos or any asbestos-containing
product or asbestos-containing material, and no basis in fact or Law, or under
contract or lease agreement, exists upon which any claim of liability could
be
asserted against Parent or any Parent Subsidiary relating to asbestos,
asbestos-containing products or asbestos-containing materials located at any
property or facility;
(g) neither
Parent nor any Parent Subsidiary has received any notification pursuant to
any
Environmental Laws that (i) any work, repairs, corrective or remedial action,
construction or capital expenditures are required to be made as a condition
of
continued compliance with any Environmental Laws or any license, permit or
approval issued pursuant thereto; (ii) any license, permit or approval is about
to be reviewed, made subject to limitations or conditions, revoked, withdrawn
or
terminated; or (iii) any events, conditions, circumstances, activities,
practices, incidents, actions or omissions may interfere with or prevent
compliance or continued compliance with any Environmental Law; and
55
(h) Parent
has made available to the Company or its counsel all environmental reports,
assessments, investigations, Environmental Permits, correspondence or other
material environmental documents relating to its business or to Parent or the
Parent Subsidiaries, or to their respective affiliates’ or predecessors’
properties, facilities or operations.
SECTION
4.16 Material
Contracts.
y)
Subsections (i)
through
(xiv)
of
Section 4.16(a)
of the
Parent Disclosure Schedule list all contracts, arrangements, commitments and
agreements of the types listed in subsections (i)
through
(xiv)
to which
Parent or any Parent Subsidiary is a party (such contracts, arrangements,
commitments and agreements as are required to be set forth in Section 4.16(a)
of the
Parent Disclosure Schedule being the “Material
Parent Contracts”):
(i) each
“material contract” (as such term is defined in Item 601(b)(10) of Regulation
S-K and Item 601(b)(10) of Regulation S-B of the SEC) with respect to Parent
and
the Parent Subsidiaries;
(ii) each
contract and agreement that is likely to involve consideration of more than
US$100,000 (including sale and supply contracts between the Parent PRC
Subsidiaries and their customers), in the aggregate, over the remaining term
of
such contract or agreement, other than purchase orders entered into in the
ordinary course of business and in a manner consistent with past
practice;
(iii) each
contract and agreement evidencing outstanding indebtedness in a principal amount
of US$100,000 or more;
(iv) all
leases of real property leased for the use or benefit of Parent or any Parent
Subsidiary;
(v) all
land
grant contracts, land transfer contracts or other relevant contracts pursuant
to
which the Parent PRC Subsidiaries are entitled to use and occupy the Parent
PRC
Real Properties;
(vi) all
material contracts and agreements with any Governmental Authority to which
Parent or any Parent Subsidiary is a party;
(vii) all
contracts and agreements that limit, or purport to limit, the ability of Parent
or any Parent Subsidiary to compete in any line of business or with any person
or entity or in any geographic area or during any period of time;
(viii) all
contracts and agreements providing for benefits under any Parent
Plan;
(ix) all
contracts for employment required to be listed in Section 4.10
of the
Parent Disclosure Schedule;
(x) each
joint venture, partnership, strategic alliance and similar agreement to which
Parent or any Parent Subsidiary is a party, which is material to Parent or
any
Parent Subsidiary or which provides for the ownership of any equity interest
in
any person or entity;
56
(xi) all
material broker, distributor, dealer, manufacturer’s representative, franchise,
agency, sales promotion, market research, marketing consulting and advertising
contracts and agreements to which Parent or any Parent Subsidiary is a
party;
(xii) all
management contracts (excluding contracts for employment) and contracts with
other consultants, including any contracts involving the payment of royalties
or
other amounts calculated based upon the revenues or income of Parent or any
Parent Subsidiary or income or revenues related to any product or service of
Parent or any Parent Subsidiary to which Parent or any Parent Subsidiary is
a
party;
(xiii) all
licenses or sublicenses of Intellectual Property to which Parent or any Parent
Subsidiary is a party and that are material to the business of Parent or any
Parent Subsidiary; and
(xiv) all
other
contracts and agreements that are material to Parent and the Parent
Subsidiaries, taken as a whole, or the absence of which could reasonably be
expected, individually or in the aggregate, to have a Parent Material Adverse
Effect.
(b) Except
as
could not reasonably be expected, individually or in the aggregate, to prevent
or materially delay consummation of any of the Transactions or otherwise prevent
or materially delay Parent or Merger Sub from performing its obligations under
this Agreement and could not reasonably be expected, individually or in the
aggregate, to have a Parent Material Adverse Effect:
(i) each
Material Parent Contract is a legal, valid and binding agreement, subject to
the
effect of any applicable bankruptcy, insolvency (including, without limitation,
all laws relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting creditors’ rights generally and subject to the effect of
general principles of equity (regardless of whether considered in a proceeding
at law or in equity);
(ii) Parent
or
Parent Subsidiary has duly performed and complied in all material respects
with
each of its obligations thereunder;
(iii) neither
Parent nor any Parent Subsidiary has received any claim of default under any
Material Parent Contract and neither Parent nor any Parent Subsidiary is in
breach or violation of, or default under, any Material Parent
Contract;
(iv) there
are
no grounds for rescission, avoidance, repudiation or termination of any Material
Parent Contract;
(v) to
Parent’s knowledge, no other party is in breach or violation of, or default
under, any Material Parent Contract; and
57
(vi) neither
the execution of this Agreement nor the consummation of any Transaction shall
constitute a default under, give rise to cancellation rights under or otherwise
adversely affect any of the material rights of Parent or any Parent Subsidiary
under any Material Parent Contract.
(c) There
are
no contracts or obligations, agreements, arrangements or concerted practices
to
which Parent or any Parent Subsidiary is a party or by which Parent or such
Parent Subsidiary is bound, and there are no practices in which Parent or any
Parent Subsidiary is engaged, which are void, illegal, unenforceable,
registrable or notifiable under or which contravene any applicable Laws. Parent
has made available to the Company or its counsel true and complete copies of
all
Material Parent Contracts, including any amendments thereto.
SECTION
4.17 Insurance.
Parent
and the Parent Subsidiaries maintain insurance coverage with reputable insurers
in such amounts and covering such risks as are in accordance with normal
industry practice for companies engaged in businesses similar to that of Parent
and the Parent Subsidiaries (taking into account the cost and availability
of
such insurance). Nothing has been done or omitted to be done by or on behalf
of
Parent or any Parent Subsidiary which would make any policy of insurance void
or
voidable or enable the insurers to avoid the same and there is no claim
outstanding under any such policy and Parent is not aware of any circumstances
likely to give rise to such a claim or result in an increased rate of
premium.
SECTION
4.18 Board
Approval; Vote Required.
z) The
Parent Board, by resolutions duly adopted by unanimous vote of those members
of
the Parent Board voting at a meeting duly called and held and not subsequently
rescinded or modified in any way, has duly (i) determined that this Agreement,
the Merger and other Transactions, the Share Issuance, the New Stock Option
Plans Adoption, the Parent Board Appointments and the other transactions and
related agreements contemplated thereby are fair to and in the best interests
of
Parent and its shareholders, (ii) approved this Agreement, the Merger and other
Transactions, the Share Issuance, the New Stock Option Plans Adoption, the
Parent Board Appointments and the other Transactions and related agreements
contemplated thereby and (iii) recommended that the shareholders of Parent
Ordinary Shares approve this Agreement, the Merger and other Transactions,
the
Share Issuance, the New Stock Option Plans Adoption and the Parent Board
Appointments and directed that this Agreement, the Merger and other
Transactions, the Share Issuance, the New Stock Option Plans Adoption and the
Parent Board Appointments be submitted for consideration by the holders of
Parent Ordinary Shares at the Parent Shareholders’ Meeting (as defined in
Section 6.01(b)).
(b) The
only
vote of the holders of any class or series of shares or other securities of
Parent necessary to approve this Agreement, the Merger and other Transactions,
the Share Issuance, the New Stock Option Plans Adoption and the Parent Board
Appointments is the affirmative vote of a majority of the votes cast with
respect to the approval of this Agreement, the Merger and other Transactions,
the Share Issuance, the New Stock Option Plans Adoption and the Parent Board
Appointments (the “Parent
Shareholders’ Approval”)
at a
duly called Parent Shareholders’ Meeting consisting of a quorum of shareholders
of Parent (or any adjournment or postponement thereof).
58
SECTION
4.19 Certain
Business Practices.
None of
Parent, any Parent Subsidiary or, to Parent’s knowledge, any directors or
officers, agents or employees of Parent or any Parent Subsidiary has (a) used
any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to political activity or for the purpose of securing any
contract for Parent or any Parent Subsidiary; (b) made any unlawful payment
to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or established or maintained any unlawful or
unrecorded fund of group moneys or other assets or made any false or fictitious
entries on the books or records of Parent or any Parent Subsidiary); or (c)
made
any payment in the nature of criminal bribery.
SECTION
4.20 Interested
Party Transactions.
Except
for any agreement or arrangement that has involved or will involve consideration
of less than US$50,000 during any calendar year, no director, officer or other
affiliate of Parent or any Parent Subsidiary (a) has purchased, purchases or
will purchase from, or has sold, sells or will sell or has furnished, furnishes
or will furnish to, Parent or any Parent Subsidiary, any goods or services,
(b)
is or has been a party to any contract or agreement disclosed in Section 4.16
of the
Parent Disclosure Schedule, or (c) had or has any contractual or other
arrangement with Parent or any Parent Subsidiary. Parent and the Parent
Subsidiaries have not, since January 1, 2004, (i) extended or maintained credit,
arranged for the extension of credit or renewed an extension of credit in the
form of a personal loan to or for any director or executive officer (or
equivalent thereof) of Parent, or (ii) materially modified any term of any
such
extension or maintenance of credit.
SECTION
4.21 Operations
of Merger Sub.
Merger
Sub is a wholly owned subsidiary of Parent, was formed solely for the purpose
of
engaging in the Transactions, has engaged in no other business activities and
has conducted its operations only as contemplated by this
Agreement.
SECTION
4.22 Ownership
of Company Capital Stock.
As of
the date of this Agreement, neither Parent nor any Parent Subsidiary is the
beneficial owner of any shares of capital stock of the Company.
SECTION
4.23 Brokers.
No
broker, finder or investment banker (other than Altus Capital Limited) is
entitled to any brokerage, finder’s or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of Parent
or
Merger Sub.
ARTICLE
V
CONDUCT
OF BUSINESS PENDING THE MERGER
SECTION
5.01 Conduct
of Business by the Company Pending the Merger.
aa) The
Company agrees that, between the date of this Agreement and the earlier of
the
Effective Time and the termination of this Agreement pursuant to Article VIII,
except
as set forth in Section 5.01
of the
Company Disclosure Schedule or as expressly contemplated by any other provision
of this Agreement, unless Parent shall otherwise consent in writing (which
consent shall not be unreasonably withheld or delayed):
59
(i) the
Company shall, and shall cause each Company Subsidiary to, conduct the business
of the Company and the Company Subsidiaries, in all respects material to the
Company and the Company Subsidiaries, taken as a whole, in the ordinary course
of business and in a manner consistent with past practice; and
(ii) the
Company shall, and shall cause each Company Subsidiary to, use its reasonable
efforts to preserve substantially intact the business organization of the
Company and the Company Subsidiaries, to keep available the services of the
current officers, employees and consultants of the Company and the Company
Subsidiaries and to preserve the current relationships of the Company and the
Company Subsidiaries with customers, suppliers and other persons with which
the
Company or any Company Subsidiary has significant business
relations.
(b) By
way of
amplification and not limitation of Section 5.01(a),
except
as contemplated by any other provision of this Agreement or as set forth in
Section 5.01
of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary
shall, between the date of this Agreement and the earlier of the Effective
Time
and the termination of this Agreement pursuant to Article VIII,
directly or indirectly, do, or propose to do, any of the following without
the
prior written consent of Parent (which consent shall not be unreasonably
withheld or delayed):
(i) amend
or
otherwise change its Articles of Incorporation or By-laws or equivalent
organizational documents;
(ii) issue,
sell, pledge, dispose of, grant or encumber, or authorize the issuance, sale,
pledge, disposition, grant or encumbrance of, (A) any shares of any class of
capital stock of the Company or any Company Subsidiary, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Company or any Company
Subsidiary (except for the issuance of shares of Company Common Stock issuable
pursuant to currently outstanding employee stock options or shares of Company
Common Stock issuable pursuant to the terms of the Company Additional Share
and
Warrant Obligations, Company Convertible Notes or Company Warrants outstanding
on the date hereof, in the ordinary course of business and in a manner
consistent with past practice in accordance with the terms of the Company Stock
Option Plans, Company Additional Share and Warrant Obligations, Company
Convertible Notes or Company Warrants as in effect as of the date hereof or
the
issuance of shares of Company Common Stock to holders of Company Stock Options
in consideration for the termination or amendment of outstanding Company Stock
Options) or (B) any assets of the Company or any Company Subsidiary, except
in
the ordinary course of business and in a manner consistent with past practice;
(iii) declare,
set aside, make or pay any dividend or other distribution, payable in cash,
stock, property or otherwise, with respect to any of its capital stock, except
for dividends by any direct or indirect wholly owned Company Subsidiary to
the
Company or any other Company Subsidiary;
60
(iv) reclassify,
combine, split, subdivide or redeem, or purchase or otherwise acquire, directly
or indirectly, any of its capital stock;
(v) (A)
acquire (including, without limitation, by merger, consolidation, or acquisition
of stock or assets or any other business combination) any corporation,
partnership, other business organization or any division thereof or any material
amount of assets; (B) except for borrowings under existing credit facilities
in
the ordinary course of business and in a manner consistent with past practice,
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise become responsible for, the
obligations of any person, or make any loans or advances, or grant any security
interest in any of its assets; (C) enter into any contract or agreement other
than in the ordinary course of business and in a manner consistent with past
practice that, if in effect on the date hereof, would qualify as a Company
Material Contract; (D) make, authorize or make any commitment with respect
to
any capital expenditure or purchases of fixed assets which are, in the
aggregate, in excess of US$1 million individually or US$5 million in the
aggregate; or (E) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter set forth in this Section 5.01(b)(v);
(vi) make
any
investment in any entity (other than a Company Subsidiary) in excess of US$5
million;
(vii) increase
the compensation payable or to become payable or the benefits provided to its
directors, officers or employees, except for increases in the ordinary course
of
business and in a manner consistent with past practice or as required by
applicable Law in salaries or wages of employees of the Company or any Company
Subsidiary who are not directors or officers of the Company, or grant any
severance or termination pay to (other than pursuant to existing contractual
obligations disclosed in Section 3.10(a)
of the
Company Disclosure Schedule or in the ordinary course of business and in a
manner consistent with past practice), or enter into any employment or severance
agreement with any director, officer or other employee of the Company or of
any
Company Subsidiary, or, except as required by Law, establish, adopt, enter
into
or amend any collective bargaining, bonus, profit-sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any director, officer or
employee;
(viii) exercise
its discretion with respect to or otherwise voluntarily (A) accelerate the
vesting of any Company Stock Award as a result of the Merger, any other change
of control of the Company (as defined in the Company Stock Option Plans) or
otherwise; or (B) amend, modify or supplement any Company Stock Option
Plan;
(ix) make
any
change in any material method of accounting, method of accounting principles
or
practice, except as may be appropriate to conform to a change in Tax law or
change required by reason of a concurrent change in US GAAP or compliance with
the applicable requirements of the rules and regulations promulgated by the
SEC;
61
(x) make
or
change any material tax election, or take any other action with respect to
a
material tax item, in each case inconsistent with prior practice of the Company
or any Company Subsidiary, without providing prior notice thereof to
Parent;
(xi) pay,
discharge or satisfy any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction, in the ordinary course of business and in a manner
consistent with past practice, of liabilities reflected or reserved against
in
the consolidated balance sheet of the Company and the consolidated Company
Subsidiaries as at December 31, 2006 or subsequently incurred in the ordinary
course of business and in a manner consistent with past practice;
(xii) amend,
modify or consent to the termination of any Material Company Contract (except
for extensions of closing on completion dates), or amend, waive, modify or
consent to the termination of the Company’s or any Company Subsidiary’s material
rights thereunder;
(xiii) commence
any Action (except in the ordinary course of business against third parties)
or
settle any Action (except in the ordinary course of business, it being
understood that any settlement involving the payment by the Company or any
Company Subsidiary of more than US$100,000 is not in the ordinary course of
business);
(xiv) permit
any item of Company Owned Intellectual Property to lapse or to be abandoned,
dedicated or disclaimed, by failing to perform or make any applicable filings,
recordings or other similar actions or filings, or by failing to pay all
required fees and taxes required or advisable to maintain and protect its
interest in each and every item of Company Owned Intellectual Property, except
where the failure to make such filings and payments results from the exercise
of
reasonable business judgment;
(xv) sell,
assign or license any of the Company Owned Intellectual Property, except for
licensing of Company Owned Intellectual Property in the ordinary course of
business consistent with past practice;
(xvi) fail
to
make in a timely manner any filings with the SEC required under the Securities
Act or the Exchange Act or the rules and regulations promulgated thereunder;
or
(xvii) announce
an intention, enter into any formal or informal agreement or otherwise make
a
commitment to do any of the foregoing.
(c) Prior
to
the Company entering into any definitive agreement in connection with any
acquisition (whether of stock or assets), merger or any other business
combination in connection with (i) Xiaonanshan Iron Ore Mine in Anhui Province,
PRC, the mining rights of which are held by Maanshan Xiaonanshan Mining Company
Limited, (ii) Ma Tang Iron Ore Mine in Anhui Province, PRC, the mining rights
of
which are held by Maanshan Zhao Yuan Mining Company Limited, (iii) a processing
plant in Anhui Province, PRC, owned by Nanjing Sudan Mining Company Limited,
(iv) Laowan Iron Ore Mine in Hubei Province, the exploration rights of which
are
held by Hubei Yunxian Changjiang Mining Company Limited, (v) Taizhou Gold Mine
(as disclosed in the Company’s press release of April 2, 2007), or (vi) ▇▇▇▇
▇▇▇▇ Nickel Mine (as disclosed in the Company’s press release of April 2, 2007)
(the PRC mining properties in items (i) - (vi) of this Section 5.01(c)
are
collectively referred to as the “PRC
Mines”),
all
as further set forth in Section 5.01(c)
of the
Company’s Disclosure Schedule), the Company shall first obtain the prior written
consent of Parent.
62
SECTION
5.02 Conduct
of Business by Parent Pending the Merger.
bb)
Parent agrees that, between the date of this Agreement and the earlier of the
Effective Time and the termination of this Agreement pursuant to Article VIII,
except
as set forth in Section 5.02
of the
Parent Disclosure Schedule or as expressly contemplated by any other provision
of this Agreement, unless the Company shall otherwise consent in writing (which
consent shall not be unreasonably withheld or delayed):
(i) Parent
shall, and shall cause each Parent Subsidiary to, conduct the business of Parent
and the Parent Subsidiaries, in all respects material to Parent and the Parent
Subsidiaries, taken as a whole, in the ordinary course of business and in a
manner consistent with past practice; and
(ii) Parent
shall, and shall cause each Parent Subsidiary to, use its reasonable best
efforts to preserve substantially intact the business organization of Parent
and
the Parent Subsidiaries, to keep available the services of the current officers,
employees and consultants of Parent and the Parent Subsidiaries and to preserve
the current relationships of Parent and the Parent Subsidiaries with customers,
suppliers and other persons with which Parent or any Subsidiary has significant
business relations.
(b) By
way of
amplification and not limitation of Section 5.01(a),
except
as contemplated by any other provision of this Agreement or as set forth in
Section 5.02
of the
Parent Disclosure Schedule, neither Parent nor any Parent Subsidiary shall,
between the date of this Agreement and the earlier of the Effective Time and
the
termination of the Agreement pursuant to Article VIII,
directly or indirectly, do, or propose to do, any of the following without
the
prior written consent of the Company (which consent shall not be unreasonably
withheld or delayed):
(i) amend
or
otherwise change its Memorandum of Association and By-laws or equivalent
organizational documents;
(ii) issue,
sell, pledge, dispose of, grant or encumber, or authorize the issuance, sale,
pledge, disposition, grant or encumbrance of, (A) any shares of any class of
capital stock of Parent or any Parent Subsidiary, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), of Parent or any Parent Subsidiary (except for the
issuance of Parent Ordinary Shares (whether in the form of Parent Ordinary
Shares or Parent ADSs) issuable pursuant to employee stock options outstanding
on the date hereof, in the ordinary course of business and in a manner
consistent with past practice in accordance with the terms of the Parent Stock
Option Plans or such notes as in effect as of the date hereof) or (B) any assets
of Parent or any Parent Subsidiary, except in the ordinary course of business
and in a manner consistent with past practice;
63
(iii) declare,
set aside, make or pay any dividend or other distribution, payable in cash,
stock, property or otherwise, with respect to any of its capital stock, except
for dividends by any direct or indirect wholly owned Parent Subsidiary to Parent
or any other Parent Subsidiary;
(iv) reclassify,
combine, split, subdivide or redeem, or purchase or otherwise acquire, directly
or indirectly, any of its capital stock;
(v) (A)
acquire (including, without limitation, by merger, consolidation, or acquisition
of stock or assets or any other business combination) any corporation,
partnership, other business organization or any division thereof or any material
amount of assets; (B) except for borrowings under existing credit facilities
in
the ordinary course of business and in a manner consistent with past practice,
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise become responsible for, the
obligations of any person, or make any loans or advances, or grant any security
interest in any of its assets; (C) enter into any contract or agreement other
than in the ordinary course of business and in a manner consistent with past
practice that, if in effect on the date hereof, would qualify as a Parent
Material Contract; (D) make, authorize or make any commitment with respect
to
any capital expenditure or purchases of fixed assets which are, in the
aggregate, in excess of US$1 million individually or US$5 million in the
aggregate; or (E) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter set forth in this Section 5.02(b)(v);
(vi) make
any
investment in any entity (other than a Parent Subsidiary) in excess of US$5
million;
(vii) increase
the compensation payable or to become payable or the benefits provided to its
directors, officers or employees, except for increases in the ordinary course
of
business and in a manner consistent with past practice in salaries or wages
of
employees of Parent or any Parent Subsidiary who are not directors or officers
of Parent, or grant any severance or termination pay to (other than pursuant
to
existing contractual obligations disclosed in Section 4.10(a)
of the
Parent Disclosure Schedule or in the ordinary course of business and in a manner
consistent with past practice), or enter into any employment or severance
agreement with any director, officer or other employee of Parent or of any
Parent Subsidiary, or, except as required by Law, establish, adopt, enter into
or amend any collective bargaining, bonus, profit-sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any director, officer or
employee;
(viii) exercise
its discretion with respect to or otherwise voluntarily accelerate the vesting
of any Parent Stock Award as a result of the Merger, any other change of control
of Parent (as defined in the Parent Stock Option Plans) or
otherwise;
64
(ix) make
any
change in any material method of accounting, method of accounting principles
or
practice, except as may be appropriate to conform to a change in Tax law or
for
such change required by reason of a concurrent change in HKFRS or compliance
with the applicable requirements of the Hong Kong Stock Exchange, the HKSE
Listing Rules, the Hong Kong Companies Ordinance, the Hong Kong Securities
Ordinance, the Bermuda Companies Act, the Registrar of Companies of Bermuda
or
the Bermuda Monetary Authority, as the case may be, or the rules and regulations
promulgated thereunder or, in contemplation of the consummation of the Merger
and the Transactions, compliance with the applicable requirements of US GAAP,
the Securities Act, the Exchange Act, SOX or AMEX, as the case may be, or the
rules and regulations promulgated thereunder;
(x) make
or
change any material tax election, or take any other action with respect to
a
material tax item, in each case inconsistent with prior practice of the Parent
or any Parent Subsidiary, without providing prior notice thereof to the
Company;
(xi) pay,
discharge or satisfy any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction, in the ordinary course of business and in a manner
consistent with past practice, of liabilities reflected or reserved against
in
the consolidated balance sheet of Parent and the consolidated Parent
Subsidiaries as at September 30, 2006 or subsequently incurred in the ordinary
course of business and in a manner consistent with past practice;
(xii) amend,
modify or consent to the termination of any Material Parent Contract (except
for
extensions of closing or completion dates), or amend, waive, modify or consent
to the termination of Parent’s or any Parent Subsidiary’s material rights
thereunder;
(xiii) commence
any Action (except in the ordinary course of business against third parties)
or
settle any Action (except in the ordinary course of business, it being
understood that any settlement involving the payment by Parent or any Parent
Subsidiary of more than US$100,000 is not in the ordinary course of
business);
(xiv) permit
any item of Parent Owned Intellectual Property to lapse or to be abandoned,
dedicated or disclaimed, by failing to perform or make any applicable filings,
recordings or other similar actions or filings, or by failing to pay all
required fees and taxes required or advisable to maintain and protect its
interest in each and every item of Parent Owned Intellectual Property, except
where the failure to make such filings and payments results from the exercise
of
reasonable business judgment;
(xv) sell,
assign or license any of the Parent Owned Intellectual Property, except for
licensing of Parent Owned Intellectual Property in the ordinary course of
business consistent with past practice;
65
(xvi) fail
to
make in a timely manner any filings with the Hong Kong Stock Exchange, the
Registry of Companies of Hong Kong, the Registrar of Companies in Bermuda,
the
Bermuda Monetary Authority or with any other authorities or regulatory bodies
in
Hong Kong or Bermuda required under applicable Hong Kong or Bermuda laws, rules
and regulations; or
(xvii) announce
an intention, enter into any formal or informal agreement or otherwise make
a
commitment, to do any of the foregoing.
SECTION
5.03 Control
of Other Party’s Business.
Nothing
contained in this Agreement shall give the Company, directly or indirectly,
the
right to control or direct Parent’s operations prior to the Effective Time.
Nothing contained in this Agreement shall give Parent, directly or indirectly,
the right to control or direct the Company’s operations prior to the Effective
Time. Prior to the Effective Time, each of Parent and the Company shall
exercise, consistent with the terms and conditions of this Agreement, control
and supervision over their respective operations.
ARTICLE
VI
ADDITIONAL
AGREEMENTS
SECTION
6.01 Disclosure
Documents.
cc)
U.S.
Filings.
As
promptly as practicable after the execution of this Agreement, (i) Parent and
the Company shall prepare and file the proxy statement to be sent to the
stockholders of the Company relating to the meeting of the Company’s
stockholders (the “Company
Stockholders’ Meeting”)
to be
held to consider approval and adoption of this Agreement, or any information
statement to be sent to such stockholders, as appropriate (such proxy statement
or information statement, as amended or supplemented, being referred to herein
as the “Proxy
Statement”),
(ii)
Parent shall prepare and file with the SEC a registration statement on Form
F-4
(together with all amendments thereto, the “Registration
Statement”),
in
which the Proxy Statement shall be included as a prospectus, in connection
with
the registration under the Securities Act of the Parent ADSs to be issued to
the
stockholders of the Company pursuant to the Merger and the underlying Parent
Ordinary Shares thereof, and (iii) Parent shall use all reasonable best efforts
to cause the Depositary to file with the SEC a registration statement on Form
F-6 (the “Form
F-6 Registration Statement”)
in
connection with the registration under the Securities Act of the Parent ADSs
to
be issued in connection with the Merger. Each of Parent and the Company shall
furnish to the other party all information concerning it and its business as
the
other party may reasonably request in connection with such actions and the
preparation of the Registration Statement, the Proxy Statement and the Form
F-6
Registration Statement. Each of Parent and the Company shall use its reasonable
best efforts to respond as promptly as practicable to any comments of the SEC
with respect to such documents and to cause the Registration Statement and
the
Form F-6 Registration Statement to be declared effective by the SEC as promptly
as practicable and to keep the Registration Statement effective as long as
necessary to consummate the Transactions. As promptly as practicable after
the
Registration Statement shall have been declared effective by the SEC, the
Company shall mail the Proxy Statement to its stockholders and, if necessary,
after the Proxy Statement shall have been so mailed, promptly circulate amended,
supplemental or supplemented proxy materials, and, if required in connection
therewith, resolicit proxies.
66
(b) Hong
Kong and Bermuda Filings.
As
promptly as practicable after the execution of this Agreement, Parent shall
publish an announcement in newspapers in Hong Kong in compliance with the
requirements under the HKSE Listing Rules (the “Hong
Kong Announcement”)
and
shall prepare the shareholders circular to be sent to the shareholders of Parent
relating to the general meeting of Parent’s shareholders (the “Parent
Shareholders’ Meeting”
and,
together with the Company Stockholders’ Meeting, the “Stockholders’
Meetings”)
to be
held to consider the approval of this Agreement, the Merger and other
Transactions, the Share Issuance, the New Stock Option Plans Adoption and the
Parent Board Appointments (the “Parent
Shareholders Circular”).
The
Company shall furnish to Parent all information concerning it and its business
as Parent may reasonably request in connection with such actions and the
preparation of the Parent Shareholders Circular. Each of Parent and the Company
shall use its reasonable best efforts to respond as promptly as practicable
to
any comments of the Hong Kong Stock Exchange with respect to the Hong Kong
Announcement and the Parent Shareholders Circular and to receive the clearance
of the Hong Kong Stock Exchange on the Hong Kong Announcement and the Parent
Shareholders Circular as promptly as practicable. As promptly as practicable
after the Parent Shareholders Circular shall have been cleared with the Hong
Kong Stock Exchange, Parent shall dispatch the Parent Shareholders Circular
to
its shareholders and, if necessary, after the Parent Shareholders Circular
shall
have been so dispatched, promptly circulate amended, supplemental or
supplemented circular materials.
(c) Except
as
provided in Section 6.04(c),
the
Company covenants that none of the Company Board or any committee thereof shall
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent or Merger Sub, the approval or recommendation by the Company Board or
any
committee thereof of this Agreement, the Merger or any other Transaction (the
“Company
Board Recommendation”)
and
that the Proxy Statement shall include the recommendation of the Company Board
to the stockholders of the Company in favor of approval and adoption of this
Agreement and approval of the Merger.
(d) Except
as
provided in Section 6.04(d),
Parent
covenants that none of the Parent Board or any committee thereof shall withdraw
or modify, or propose to withdraw or modify, in a manner adverse to the Company,
the approval or recommendation by the Parent Board or any committee thereof
of
this Agreement, the Merger and other Transactions, the Share Issuance, the
New
Stock Option Plans Adoption and the Parent Board Appointments (the “Parent
Board Recommendation”)
and
that the Parent Shareholders Circular shall include the recommendation of the
Parent Board to the shareholders of Parent in favor of this Agreement, the
Merger and other Transactions, the Share Issuance, the New Stock Option Plans
Adoption and the Parent Board Appointments.
(e) No
amendment or supplement to the Proxy Statement, the Registration Statement,
the
Form F-6 Registration Statement or the Parent Shareholders Circular will be
made
by Parent or the Company without the approval of the other party (such approval
not to be unreasonably withheld or delayed) and after having provided the other
party with the opportunity to review and comment thereon (such review not to
be
unreasonably delayed). Parent and the Company each will advise the other,
promptly after they receive notice thereof, of the time when the Registration
Statement or Form F-6 Registration Statement has been declared effective or
any
supplement or amendment has been filed, of the issuance of any stop order,
of
the suspension of the qualification of the Parent ADSs or Parent Ordinary Shares
issuable in connection with the Merger for offering or sale in any jurisdiction,
or of any request by the SEC or Hong Kong Stock Exchange for amendment of the
Proxy Statement, the Registration Statement, the Form F-6 Registration Statement
or the Parent Shareholders Circular or comments thereon and responses thereto
or
requests by the SEC or Hong Kong Stock Exchange for additional
information.
67
(f) Parent
represents and warrants to the Company that the information supplied by Parent
for inclusion in the Registration Statement, the Form F-6 Registration
Statement, the Proxy Statement or the Parent Shareholders Circular shall not,
at
(i) the time the Parent Shareholders Circular is cleared with the Hong Kong
Stock Exchange, (ii) the time the Registration Statement or Form F-6
Registration Statement is declared effective, (iii) the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
stockholders of the Company, (iv) the time the Parent Shareholders Circular
(or
any amendment thereof or supplement thereto) is first dispatched to the
shareholders of Parent, (v) the time of each of the Stockholders’ Meetings and
(vi) the Effective Time, contain any untrue statement of a material fact or
fail
to state any 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. If, at any time prior to the Effective Time, any
event or circumstance relating to Parent, any Parent Subsidiary or any of their
respective officers or directors should be discovered by Parent which should
be
set forth in an amendment or a supplement to the Registration Statement, Form
F-6 Registration Statement, Proxy Statement or Parent Shareholders Circular,
Parent shall promptly inform the Company and an appropriate amendment or
supplement describing such event or circumstance shall be promptly filed with
the SEC or the Hong Kong Stock Exchange, as appropriate, and, to the extent
required by law, disseminated to the shareholders of Parent. Parent represents
and warrants to the Company that all documents that Parent is responsible for
filing with the SEC, the Hong Kong Stock Exchange or the AMEX or published
pursuant to the HKSE Listing Rules, or the Company Guide and the Constitution
and Rules of the AMEX (the “AMEX
Listing Rules”)
as the
case may be, in connection with the Merger or the other Transactions will comply
as to form and substance in all material respects with the applicable
requirements of the Securities Act, the Exchange Act, the Hong Kong Stock
Exchange, the HKSE Listing Rules, the AMEX, the AMEX Listing Rules, the Hong
Kong Companies Ordinance, the Hong Kong Securities Ordinance, the Bermuda
Companies Act, the Registrar of Companies of Bermuda and the Bermuda Monetary
Authority, as the case may be, and the rules and regulations
thereunder.
(g) The
Company represents and warrants to Parent that the information supplied by
the
Company for inclusion in the Registration Statement, the Form F-6 Registration
Statement, the Proxy Statement or the Parent Shareholders Circular shall not,
at
(i) the time the Parent Shareholders Circular is filed with the Hong Kong Stock
Exchange, (ii) the time the Registration Statement or Form F-6 Registration
Statement is declared effective, (iii) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders
of
the Company, (iv) the time the Parent Shareholders Circular (or any amendment
thereof or supplement thereto) is first mailed to the shareholders of Parent,
(v) the time of each of the Stockholders’ Meetings and (vi) the Effective Time,
contain any untrue statement of a material fact or fail to state any 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. If, at any time prior to the Effective Time, any event or
circumstance relating to the Company or any Company Subsidiary, or their
respective officers or directors, should be discovered by the Company which
should be set forth in an amendment or a supplement to the Registration
Statement, Form F-6 Registration Statement, Proxy Statement or Parent
Shareholders Circular, the Company shall promptly inform Parent and an
appropriate amendment or supplement describing such event or circumstance shall
be promptly filed with the SEC and, to the extent required by law, disseminated
to the stockholders of the Company. The Company represents and warrants to
Parent that all documents that the Company is responsible for filing with the
SEC in connection with the Merger or the other Transactions will comply as
to
form and substance in all material respects with the applicable requirements
of
the Securities Act and the rules and regulations thereunder and the Exchange
Act
and the rules and regulations thereunder.
68
SECTION
6.02 Stockholders’
Meetings.
dd) The
Company shall duly call, give notice of, convene and hold the Company
Stockholders’ Meeting as promptly as practicable for the purpose of voting upon
the approval and adoption of this Agreement and obtaining the Company
Stockholders’ Approval.
(b) Parent
shall dully call, give notice of, convene and hold the Parent’s Shareholders’
Meeting as promptly as practicable for the purpose of voting upon the approval
of this Agreement, the Merger and other Transactions, the Share Issuance, the
New Stock Option Plans Adoption and the Parent Board Appointments and obtaining
the Parent Shareholders’ Approval.
(c) Each
of
the Company and Parent shall use its reasonable best efforts to hold the
Stockholders’ Meetings on the same day as soon as practicable after the date on
which the Registration Statement becomes effective. Each of the Company and
Parent shall use its reasonable best efforts to solicit from its shareholders
proxies in favor of the approval and adoption of this Agreement, the Merger
and
other Transactions, the Share Issuance, the New Stock Option Plans Adoption
and
the Parent Board Appointments, as the case may be, and shall take all other
action necessary or advisable to secure the required vote or consent of its
shareholders, except in the event and to the extent that the Company Board
or
the Parent Board, as the case may be, in accordance with Section 6.04(c)
or
Section 6.04(d),
withdraws or modifies its recommendation to its shareholders in favor of the
approval and adoption of this Agreement, the Merger and other Transactions,
the
Share Issuance, New Stock Option Plans Adoption and the Parent Board
Appointments, as the case may be.
SECTION
6.03 Access
to Information; Confidentiality.
ee) Upon
reasonable prior notice and except as required pursuant to any confidentiality
agreement or similar agreement or arrangement to which the Company or Parent
or
any of their respective subsidiaries is a party or pursuant to applicable Law,
from the date of this Agreement until the Effective Time, the Company and Parent
shall (and shall cause their respective subsidiaries to): (i) provide to the
other party (and the other party’s officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives, collectively,
“Representatives”)
reasonable access during normal business hours to the officers, employees,
agents, properties, offices and other facilities of such party and its
subsidiaries and to the books and records thereof, including access to enter
any
real property owned, leased, subleased or occupied by such party or such party’s
subsidiary in order to conduct an environmental assessment of such property
(provided that no subsurface investigation work of the sort commonly referred
to
as “Phase II” investigatory work shall be conducted absent the prior written
consent of the other party, which consent shall not be unreasonably withheld);
and (ii) furnish promptly to the other party such information concerning the
business, properties, contracts, assets, liabilities, personnel and other
aspects of such party and its subsidiaries as the other party or its
Representatives may reasonably request; provided,
however,
that
(A) no pricing or other competitively sensitive information retrieved from
the
Company will be made available to persons who are involved in any pricing or
sales activity at Parent or any Parent Subsidiary, (B) no pricing or other
competitively sensitive information retrieved from Parent will be made available
to persons who are involved in any pricing or sales activity at the Company
or
any Company Subsidiary and (C) neither Parent nor the Company shall use any
information obtained from the other party for any purpose other than evaluation
of such other party in connection with this Agreement.
69
(b) All
information obtained by the parties pursuant to this Section 6.03
shall be
kept confidential in accordance with the letter of intent, dated November 29,
2006, and the heads of agreement, dated February 2, 2007 (together, the
“Confidentiality
Arrangements”)
between Parent and the Company.
(c) No
investigation pursuant to this Section 6.03
shall
affect any representation or warranty in this Agreement of any party hereto
or
any condition to the obligations of the parties hereto.
SECTION
6.04 No
Solicitation of Transactions.
ff)
Subject to Section 6.04(b),
each
party to this Agreement agrees that, from and after the date hereof until the
earlier of the Effective Time and the termination of this Agreement pursuant
to
Article VIII,
it
shall not, and shall not permit any of its subsidiaries or any of its or its
subsidiaries’ directors, officers or employees to, and shall use its best
efforts to cause its investment bankers, attorneys, accountants and other
representatives retained by it or any of its subsidiaries not to, directly
or
indirectly: (i) solicit, initiate or knowingly encourage (including by way
of
furnishing nonpublic information), or take any other action knowingly to
facilitate, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) that constitutes
a Competing Transaction (as defined below); (ii) enter into or maintain or
continue discussions or negotiations with any person in furtherance of such
inquiries or to obtain a Competing Transaction; (iii) agree to, approve, endorse
or recommend any Competing Transaction or enter into any letter of intent or
other contract, agreement or commitment contemplating or otherwise relating
to
any Competing Transaction; or (iv) authorize or permit any of the officers,
directors or employees of such party or any of its subsidiaries, or any
investment banker, financial advisor, attorney, accountant or other
representative retained by such party, to take any such action. Each party
to
this Agreement shall notify the other party as promptly as practicable (and
in
any event within one day after such party attains knowledge thereof) if any
proposal or offer, or any inquiry or contact with any person with respect
thereto, regarding a Competing Transaction is made, specifying the material
terms and conditions thereof and the identity of the party making such proposal
or offer or inquiry or contact (including material amendments or proposed
material amendments). Each party to this Agreement immediately shall cease
and
cause to be terminated all existing discussions or negotiations with any parties
conducted heretofore with respect to a Competing Transaction. Each party to
this
Agreement shall not release any third party from, or waive any provision of,
any
confidentiality or standstill agreement to which it is a party.
70
(b) Notwithstanding
anything to the contrary in this Section 6.04,
the
Board of Directors of Parent or the Company, as the case may be, may furnish,
prior to approval of this Agreement, the Merger and other Transactions, the
Share Issuance, the New Stock Option Plans Adoption and the Parent Board
Appointments, as applicable, at the Parent Shareholders’ Meeting or at the
Company Stockholders’ Meeting, as the case may be, information to, and enter
into discussions with, a person who, after the date hereof, has made an
unsolicited, written, bona fide proposal or offer regarding a Competing
Transaction or otherwise facilitate any effort or attempt to make or implement
a
proposal or offer for a Competing Transaction, if such Board of Directors has
(i) determined, in its good faith judgment (after having consulted with a
financial advisor of nationally recognized reputation in the United States
or
Hong Kong) that such proposal or offer is reasonably likely to lead to a
Superior Proposal (as defined below), (ii) determined, in its good faith
judgment after consultation with independent legal counsel (who may be such
party’s regularly engaged independent legal counsel), that, in light of such
proposal or offer regarding a Competing Transaction, the furnishing of such
information or entering into discussions is consistent with its fiduciary
obligations to Parent and its shareholders or the Company and its stockholders,
respectively, under applicable Law, (iii) provided written notice to the other
party of its intent to furnish information or enter into discussions with such
person at least 24 hours prior to taking any such action, and (iv) obtained
from
such person an executed confidentiality agreement on terms no less favorable
to
the other party than those contained in the Confidentiality Arrangements (it
being understood that such confidentiality agreement and any related agreements
shall not include any provision calling for any exclusive right to negotiate
with such party or having the effect of prohibiting such party from satisfying
its obligations under this Agreement).
(c) Except
as
set forth in this Section 6.04(c),
the
Company Board shall not make a change in the Company Board Recommendation (a
“Change
in the Company Board Recommendation”)
in a
manner adverse to Parent or Merger Sub or approve or recommend, or cause or
permit the Company to enter into any letter of intent, agreement or obligation
with respect to, any Competing Transaction. Notwithstanding the foregoing,
if,
prior to the approval of this Agreement and the Merger at the Company
Stockholders’ Meeting, the Company Board determines, in its good faith judgment
prior to the Effective Time and after consultation with independent legal
counsel (who may be the Company’s regularly engaged independent legal counsel),
that to make a Change in the Company Board Recommendation is consistent with
its
fiduciary obligations to the Company and its stockholders under applicable
Law,
the Company Board may recommend a Superior Proposal, but only (i) after
providing written notice to Parent (a “Notice
of Company Superior Proposal”)
advising Parent that the Company Board has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal and indicating that the
Company Board intends to effect a Change in the Company Board Recommendation
and
the manner in which it intends (or may intend) to do so, and (ii) if Parent
does
not, within three business days of Parent’s receipt of the Notice of Company
Superior Proposal, deliver to the Company a binding, written offer that the
Company Board determines, in its good faith judgment (after having consulted
with independent legal counsel and a financial advisor of nationally recognized
reputation in the United States or Hong Kong) to be at least as favorable to
the
Company’s stockholders as such Superior Proposal. Any disclosure that the
Company Board may be compelled to make with respect to the receipt of a proposal
or offer for a Competing Transaction under applicable Law or Rule 14d-9 or
14e-2
or that the Company Board determines to comply with its fiduciary duties to
the
Company and its stockholders will not constitute a violation of this Agreement,
provided that such disclosure states that no action will be taken by the Company
Board in violation of this Section 6.04(c).
The
obligation of the Company to call, give notice of, convene and hold the Company
Stockholders’ Meeting shall not be limited or otherwise affected by the
commencement, disclosure, announcement or submission to it of any Competing
Transaction, or by any Change in the Company Board Recommendation, except in
the
event that this Agreement is terminated in accordance with Section 8.01(j).
The
Company shall not submit to the vote of its stockholders any Competing
Transaction, or propose to do so, except in the event that this Agreement is
terminated in accordance with Section 8.01(j).
71
(d) Except
as
set forth in this Section 6.04(d),
the
Parent Board shall not make a change in the Parent Board Recommendation (a
“Change
in the Parent Board Recommendation”)
in a
manner adverse to the Company or approve or recommend, or cause or permit Parent
to enter into any letter of intent, agreement or obligation with respect to,
any
Competing Transaction. Notwithstanding the foregoing, if, prior to the approval
of this Agreement, the Merger and other Transactions, the Share Issuance, the
New Stock Option Plans Adoption and the Parent Board Appointments at the Parent
Shareholders’ Meeting, the Parent Board determines, in its good faith judgment
prior to the Effective Time and after consultation with independent legal
counsel (who may be Parent’s regularly engaged independent legal counsel), that
to make a Change in the Parent Board Recommendation is consistent with its
fiduciary obligations to Parent and its shareholders under applicable Law,
the
Parent Board may recommend a Superior Proposal, but only (i) after providing
written notice to the Company (a “Notice
of Parent Superior Proposal”)
advising the Company that the Parent Board has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal and indicating that the
Parent Board intends to effect a Change in the Parent Board Recommendation
and
the manner in which it intends (or may intend) to do so, and (ii) if the Company
does not, within three business days of the Company’s receipt of the Notice of
Parent Superior Proposal, deliver to Parent a binding written offer that the
Parent Board determines, in its good faith judgment (after having consulted
with
independent legal counsel and a financial advisor of nationally recognized
reputation in the United States or Hong Kong) to be at least as favorable to
Parent’s shareholders as such Superior Proposal. Any disclosure that the Parent
Board may be compelled to make with respect to the receipt of a proposal or
offer for a Competing Transaction under applicable Law (including, without
limitation, the Hong Kong Code on Take-overs and Mergers) or Rule 14d-9 or
14e-2
under the Exchange Act or that the Parent Board determines to comply with its
fiduciary duties to Parent and its shareholders will not constitute a violation
of this Agreement, provided that such disclosure states that no action will
be
taken by the Parent Board in violation of this Section 6.04(d).
The
obligation of Parent to call, give notice of, convene and hold the Parent
Shareholders’ Meeting shall not be limited or otherwise affected by the
commencement, disclosure, announcement or submission to it of any Competing
Transaction, or by any Change in the Parent Board Recommendation, except in
the
event that this Agreement is terminated in accordance with Section 8.01(k).
Parent
shall not submit to the vote of its shareholders any Competing Transaction,
or
propose to do so, except in the event that this Agreement is terminated in
accordance with Section 8.01(k).
(e) A
“Competing
Transaction”
means
with respect to the Company or Parent, as the case may be, any of the following
(other than the Transactions): (i) a transaction, whether a merger, purchase
of
assets, tender offer or otherwise, which, if consummated, would result in a
third party acquiring (A) more than 20% of the equity securities of the Company
or of Parent, as the case may be, (B) more than 20% of the assets of the Company
and the Company Subsidiaries, taken as a whole, or of Parent and the Parent
Subsidiaries, taken as a whole; (ii) in the case of the Company, any
solicitation in opposition to approval and adoption of this Agreement or the
Merger by the Company’s stockholders; and (iii) in the case of Parent, any
solicitation in opposition to approval of this Agreement, the Merger and other
Transactions, the Share Issuance, the New Stock Option Plans Adoption or the
Parent Board Appointments by Parent’s shareholders.
For the
avoidance of doubt, acquisitions or agreements to acquire the Mines, the PRC
Mining Companies or the other mines identified in Section 6.04(e)
of the
Company Disclosure Schedule shall not be, individually or in the aggregate,
a
Competing Transaction.
72
(f) A
“Superior
Proposal”
means
with respect to the Company or Parent, as the case may be, an unsolicited bona
fide offer made by a third party which (i) is for a transaction, whether a
merger, purchase of assets, tender offer or otherwise, other than the
Transactions, which, if consummated, would result in (A) the stockholders of
such party immediately preceding such transaction holding less than 50% of
the
equity interest in the surviving or resulting entity of such transaction or
(B)
a third party’s acquiring more than 50% of the assets of the Company and the
Company Subsidiaries, taken as a whole, or Parent and the Parent Subsidiaries,
taken as a whole, as the case may be, and (ii) is on terms that the Board of
Directors of such party determines, in its good faith judgment (after having
consulted with independent legal counsel and a financial advisor of nationally
recognized reputation in the United States or Hong Kong), taking into account,
among other things, all legal, financial, regulatory and other aspects of the
proposal and the person making the proposal, (A) if consummated pursuant to
its
terms, is reasonably likely to result in a transaction that is more favorable
to
the stockholders of such party (in their capacities as stockholders), from
a
financial point of view, than the Merger and (B) is reasonably capable of being
completed on the terms proposed.
SECTION
6.05 Employee
Benefits Matters. gg)
Following the Effective Time, Parent shall, or shall cause the Surviving
Corporation to, provide (or cause to be provided) to employees of the Surviving
Corporation or any other affiliate of Parent who were employees of the Company
or any Company Subsidiary immediately prior to the Effective Time and, in each
case, to the extent an employee continues employment with the Surviving
Corporation or any other affiliate of Parent (the “Continuing
Employees”)
compensation and employee benefit plans, programs and policies and fringe
benefits (other than equity based compensation arrangements) that, in the
aggregate, are substantially similar to those that were provided to the
Continuing Employees by the Company or any Company Subsidiary immediately prior
to the execution of this Agreement.
(b) Following
the Effective Time, Parent shall, or shall cause the Surviving Corporation
to,
recognize (or cause to be recognized) the service of each Continuing Employee
with the Company or any Company Subsidiary determined as of the Effective Time
for purposes of eligibility and vesting under any employee benefit plans,
programs or arrangements maintained by Parent, the Surviving Corporation, or
any
of their affiliates that employs any Continuing Employee; provided,
however,
that
such crediting of service shall not operate to duplicate any benefit or the
funding of any such benefit. Each such employee benefit plan, program or
arrangement that provides health benefits to Continuing Employees shall waive
pre-existing condition limitations with respect to the Continuing Employees
to
the same extent waived under the applicable group health plan of the Company
or
any Company Subsidiary maintained prior to the Effective Time, and each
Continuing Employee shall be given credit for amounts paid under the
corresponding group health plan of the Company or any Company Subsidiary during
the plan year in which the Effective Time occurs for purposes of applying
deductibles, co-payments and out-of-pocket maximums for such plan
year.
73
(c) As
of the
Effective Time, Parent shall cause the Surviving Corporation to honor all
employment and severance agreements existing as of the date hereof and set
forth
in Section 3.10(a)
of the
Company Disclosure Schedule between the Company or any Company Subsidiary and
any current or former director, officer or employee of the Company or any
Company Subsidiary.
(d) Except
as
provided in Sections 6.05(b)
and
(c),
no
provision of this Agreement shall restrict Parent or the Surviving Corporation
from amending or terminating any employee benefit plan or modifying the material
terms and conditions of employment for Continuing Employees following the
Effective Time.
(e) Parent
shall use its reasonable best efforts to procure consents from non-U.S.
Continuing Employees that are required by applicable Law or collective
bargaining agreement as a result of Parent’s modifications of any material terms
and conditions of employment for such employees in such employees’ respective
jurisdictions.
SECTION
6.06 Directors’
and Officers’ Indemnification and Insurance. hh) Parent
shall cause all rights to indemnification and exculpation from liabilities
for
acts or omissions occurring at or prior to the Effective Time now existing
in
favor of any current and former officers and directors of the Company or any
Company Subsidiary, and any person prior to the Effective Time serving at the
request of any such party as a director, officer, employee fiduciary or agent
of
another corporation, partnership, trust or other enterprise, as provided in
the
respective certificates or articles of incorporation or by-laws (or comparable
organizational documents) of the Company or any of the Company Subsidiaries,
to
survive the Merger and shall continue in full force and effect in accordance
with their terms for a period of six years after the Effective
Time.
(b) The
Surviving Corporation shall use its reasonable best efforts to maintain in
effect, for six years from the Effective Time, the current directors’ and
officers’ liability insurance policies maintained by the Company (provided
that the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions that are no less advantageous) with
respect to matters occurring prior to the Effective Time; provided,
however,
that in
no event shall the Surviving Corporation be required to expend pursuant to
this
Section 6.06(b)
more
than an amount per year equal to 150% of current annual premiums paid by the
Company for such insurance, it being understood that, if the premium required
to
be paid by Parent for such policy would exceed such 150% of such amount, then
the coverage of such policy shall be reduced to the maximum amount that may
be
obtained for a per annum premium in such 150% amount. In lieu of Parent causing
the Surviving Corporation to maintain the policies as described above, Parent
may elect to cause the Company to purchase immediately prior to the Effective
Time a six-year “tail” pre-paid policy on terms and conditions not materially
less favorable than the current directors’ and officers’ liability insurance
policies, such policy to be effective as of the Effective Time.
74
(c) In
the
event the Company or the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other person
and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Company or
the
Surviving Corporation, as the case may be, or at Parent’s option, Parent, shall
assume the obligations set forth in this Section 6.06.
SECTION
6.07 Notification
of Certain Matters.
The
Company shall give prompt notice to Parent, and Parent shall give prompt notice
to the Company, of (a) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which could reasonably be expected to cause
any representation or warranty of such party contained in this Agreement to
be
untrue or inaccurate in any material respect and (b) any failure of the Company,
Parent or Merger Sub, as the case may be, to comply with or satisfy any covenant
or agreement to be complied with or satisfied by it hereunder, in the case
of
(a) or (b), such that the conditions under Section 7.02(a)
or
Section 7.02(b),
in the
case of the Company, or under Section 7.03(a)
or
Section 7.03(b),
in the
case of Parent, would not be satisfied; provided,
however,
that
the delivery of any notice pursuant to this Section 6.07
shall
not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
SECTION
6.08 Affiliate
Agreements.
ii) The
Company shall use its reasonable best efforts to cause each of its directors
and
executive officers and each of its “affiliates” (within the meaning of Rule 145
under the Securities Act) to execute and deliver to Parent or cause to be
delivered to Parent, prior to the Effective Time, an affiliate letter
substantially in the form attached hereto as Exhibit 6.08(a).
(b) As
an
inducement to the Company affiliates to execute the affiliate letters, Parent
shall enter into a written registration rights agreement with such Company
affiliates prior to the Effective Time.
(c) The
Company shall use its reasonable best efforts to cause ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇ to execute and deliver, prior to
the
Effective Time, employment agreements relating to the terms and conditions
of
employment with the Surviving Corporation or Parent.
SECTION
6.09 Further
Action; Reasonable Best Efforts.
Upon the
terms and subject to the conditions of this Agreement, each of the parties
hereto shall (a) make promptly its respective filings, and thereafter make
any
other required submissions, under the HSR Act or other applicable foreign,
federal or state antitrust, competition or fair trade Laws with respect to
the
Transactions (if required) and (b) use its reasonable best efforts to take,
or
cause to be taken, all appropriate action, and to do, or cause to be done,
all
things necessary, proper or advisable under applicable Laws or otherwise to
consummate and make effective the Transactions, including, without limitation,
using its reasonable best efforts to obtain all permits, consents, approvals,
authorizations, qualifications and orders of Governmental Authorities and
parties to contracts with the Company or Parent or their subsidiaries as are
necessary for the consummation of the Transactions and to fulfill the conditions
to the Merger; provided
that
nothing contained in this Section 6.09
shall
require Parent or the Company to divest any asset or assets or license in any
manner. In case, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall use their
reasonable best efforts to take all such action.
75
SECTION
6.10 Plan
of Reorganization. From
and
after the date of this Agreement and until the Effective Time, each party (i)
shall use its reasonable best efforts to cause the Merger to qualify, and shall
not, without the prior written consent of the parties, knowingly take any
actions or cause any actions to be taken which could prevent the Merger from
qualifying, as a reorganization under the provisions of Section 368(a) of the
Code. Following the Effective Time, and consistent with any such consent,
neither Parent nor Parent Subsidiary, nor any affiliate, shall knowingly take
any action or cause any action to be taken which would cause the Merger to
fail
to so qualify as a reorganization under Section 368(a) of the Code.
SECTION
6.11 Obligations
of Merger Sub.
Parent
shall take all action necessary to cause Merger Sub to perform its obligations
under this Agreement and to consummate the Merger on the terms and subject
to
the conditions set forth in this Agreement.
SECTION
6.12 Stock
Exchange Listing/Quotation.
jj)
Parent shall promptly prepare and submit to the Hong Kong Stock Exchange a
listing application covering the Parent Ordinary Shares underlying the Parent
ADSs to be issued in the Merger and shall use its reasonable best efforts to
obtain, prior to the Effective Time, approval for such listing on the Hong
Kong
Stock Exchange, subject to official notice of issuance to the Hong Kong Stock
Exchange and customary conditions, and the Company shall cooperate with Parent
with respect to such listing.
(b) Parent
shall promptly prepare and submit to the AMEX a listing application and a
listing agreement covering the Parent ADSs to be issued in the Merger and shall
use its reasonable best efforts to obtain, prior to the Effective Time, approval
for the listing of such Parent ADSs, subject to official notice of issuance
to
the AMEX, and the Company shall cooperate with Parent with respect to such
listing.
SECTION
6.13 Public
Announcements.
Each of
Parent and the Company shall issue a separate press release relating to this
Agreement following its execution by each of Parent, Merger Sub and the Company,
the text of which has been agreed to by each of Parent and the Company and
the
substance of which shall comply with the Securities Act, the Exchange Act,
the
Hong Kong Securities Ordinance, the HKSE Listing Rules, as the case may be,
the
rules and regulations thereunder and all applicable Laws. Thereafter, unless
otherwise required by applicable Law or the requirements of the Hong Kong Stock
Exchange, the SEC or the AMEX, no statement or other disclosure regarding the
Transactions will be made by any party to this Agreement without the prior
approval of the Company and Parent, which approval shall not be unreasonably
withheld or delayed, provided,
however,
that
nothing in this Section 6.13
shall be
deemed to limit the rights of the Company or Parent under Section 6.04.
76
SECTION
6.14 Board
of Directors; Corporate Headquarters; Corporate Name.
kk)
Parent shall use its reasonable best efforts to, subject to the fiduciary duties
of the Parent Board, (i) cause the number of directors comprising the Parent
Board as of immediately after the Effective Time to be increased by two, such
that the number of executive members of the Board shall be three instead of
two;
(ii) cause ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (the “Company
Designated Directors”),
assuming that each such person is willing to serve as a director, to be
nominated for election as a director of Parent, effective as of the Effective
Time, at the Parent Shareholders’ Meeting, so that the directors and officers of
Parent after the Merger shall be: (A) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Executive Director,
(B)
Tse Wing ▇▇▇▇, ▇▇▇▇▇, Executive Director, (C) Lui ▇▇▇ ▇▇▇, Executive Director,
(D) ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, Executive Director, (E) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Non-Executive Director, (F) Kan Ka Hon, Independent Non-Executive Director
and
(G) ▇▇▇ Sin Ming, Independent Non-Executive Director and (iii) cause the
composition, conduct and the committees of the Parent Board to be in compliance
with all requirements of the Securities Act, the Exchange Act and SOX, and
all
rules and regulations thereto. If any Company Designated Director or any
director and officer of the Company as at the date of this Agreement shall,
prior to the Effective Time, die or determine not to serve as a director or
officer of Parent or the Surviving Corporation, as the case may be, the Company
shall have the right to appoint another person as a director or officer of
Parent or Surviving Corporation, as the case may be.
(b) The
corporate headquarters of Parent following completion of the Merger will remain
in Hong Kong.
(c) Immediately
after the Effective Time, Parent shall take such action as may be necessary
to
give one designee of Parent and one designee of the Company signing powers
on
all banks accounts of Parent and each Parent Subsidiary (the “Parent
Signing Power Authorization”).
SECTION
6.15 Accounting
Matters.
Each of
Parent and the Company agree to each use reasonable best efforts to cause to
be
delivered to each other consents and comfort letters from their respective
independent auditors, in form reasonably satisfactory to the recipient and
customary in scope and substance for consents and comfort letters delivered
by
independent public accountants in connection with registration statements on
Form F-4 under the Securities Act.
SECTION
6.16 Stock
Transfer Taxes.
All
stock transfer, real estate transfer, documentary, stamp, recording and other
similar Taxes (including interest, penalties and additions to any such Taxes)
incurred in connection with this Agreement and the Transactions shall be paid
by
the Surviving Corporation, and the Company shall cooperate with Parent and
Merger Sub in preparing, executing and filing any Tax Returns with respect
to
such Taxes.
SECTION
6.17 Deposit
Agreement.
As
promptly
as practicable after the execution of this Agreement, and in any event prior
to
the Effective Time, Parent shall enter into the Parent Deposit Agreement with
the Depositary for the issuance of the ADSs.
SECTION
6.18 Parent
Assumption of Obligations.
Parent
agrees to take any and all action (subject to the agreement in relation to
the
amount of the total Merger Consideration to be paid as set forth in Section 2.01)
necessary to assume the Company’s obligations under the Company Stock Option
Plans, the Company Warrants, the Company Convertible Notes and the Company
Additional Share and Warrant Obligations.
77
SECTION
6.19 Title
to Properties.
Parent
agrees to use its commercially reasonable efforts (a) to ensure that ▇▇▇▇ ▇▇
Garment (Huzhou) Company Limited shall not be required to pay the land price
differences between the Investment Agreement and the Land Grant Contracts;
and
(b) for ▇▇▇▇ ▇▇ Knitting (Huzhou) Company Limited and ▇▇▇▇ ▇▇ Bleaching and
Dyeing (Huzhou) Company Limited to be granted with land use rights to Lot 2
and
Lot 3 as soon as reasonably practicable by entering into the respective land
grant contract with the competent land authority with a unit land grant fee
of
RMB15,000 per mu.
SECTION
6.20 Labor
Practices.
Parent
agrees to diligently act to remedy any alleged violations of labor and
employment laws in connection with the matters disclosed on Section
4.11
of the
Parent Disclosure Schedule.
ARTICLE
VII
CONDITIONS
TO THE MERGER
SECTION
7.01 Conditions
to the Obligations of Each Party.
The
obligations of the Company, Parent and Merger Sub to consummate the Merger
and
the other Transactions are subject to the satisfaction or waiver (where
permissible) of the following conditions:
(a) Registration
Statements.
The
Registration Statement and Form F-6 Registration Statement shall have been
declared effective by the SEC under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement or Form F-6
Registration Statement shall have been issued by the SEC and no proceeding
for
that purpose shall have been initiated by the SEC.
(b) Hong
Kong, Stock Exchange Filings.
The
Parent Shareholders Circular shall have been cleared with the Hong Kong Stock
Exchange and Parent shall have received all approvals and confirmations from
the
Hong Kong Stock Exchange necessary to dispatch the Parent Shareholders Circular
to the shareholders of Parent in connection with the Parent Shareholders’
Meeting.
(c) Company
Stockholder Approval.
The
Company Stockholders’ Approval shall have been obtained in accordance with the
MBCA and the Company’s Articles of Incorporation, and such Company Stockholders’
Approval shall not have been rescinded, revoked or otherwise
withdrawn.
(d) Parent
Shareholder Approval.
The
Parent Shareholders’ Approval shall have been obtained in accordance with the
HKSE Listing Rules, the AMEX Listing Rules, the Hong Kong Companies Ordinance,
the Hong Kong Securities Ordinance, the Bermuda Companies Act, the rules and
regulations of the Bermuda Monetary Authority and the Parent’s Memorandum of
Association and By-laws, and such approval shall not have been rescinded,
revoked or otherwise withdrawn.
78
(e) Easyknit
International Shareholder Approval.
The
Merger shall have been approved by the requisite affirmative vote of the
shareholders of Easyknit International in accordance with the HKSE Listing
Rules, the Hong Kong Companies Ordinance, the Hong Kong Securities Ordinance,
the Bermuda Companies Act, the rules and regulations of the Bermuda Monetary
Authority and Easyknit International’s Memorandum of Association and By-laws,
and such approval shall not have been rescinded, revoked or otherwise
withdrawn.
(f) No
Order.
No
Governmental Authority shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, judgment, decree, executive order or award
which is then in effect and has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(g) No
Governmental Litigation.
There
shall not be pending any action or proceeding by any Governmental Authority
of
any competent jurisdiction challenging or seeking to make illegal or to restrain
or prohibit the consummation of the Merger.
(h) U.S.
Antitrust Approvals and Waiting Periods.
Any
waiting period (and any extension thereof) applicable to the consummation of
the
Merger under the HSR Act (if any) shall have expired or been
terminated.
(i) Stock
Exchange Listing/Quotation.
The
Parent ADSs to be issued in the Merger shall have been authorized for listing
on
the AMEX and the Listing Committee of the Hong Kong Stock Exchange granting
listing of, and permission to deal in the Parent Ordinary Shares underlying
such
Parent ADSs, in each case, subject to official notice of issuance and other
customary conditions.
(j) No
Reverse Takeover.
The
Merger and the Transactions will not have been deemed to constitute or have
been
deemed to be a reverse take-over transaction under Rule 14.06 of the HKSE
Listing Rules and the Parent will not be required to comply with the procedures
and requirements for new listing applications as set out in Chapter 9 of the
HKSE Listing Rules.
(k) No
Take-Over.
The SFC
shall have issued an advance ruling that the Merger and the Transactions do
not
require the holder of record of Company Shares to make a mandatory general
offer
for Parent Ordinary Shares as a result of the Merger under the Hong Kong Code
on
Takeovers and Mergers and Share Repurchases.
SECTION
7.02 Conditions
to the Obligations of Parent and Merger Sub.
The
obligations of Parent and Merger Sub to consummate the Merger and the other
Transactions are subject to the satisfaction or waiver, where permissible,
by
Parent or Merger Sub, as the case may be, of the following additional
conditions:
(a) Representations
and Warranties.
(i) The
representations and warranties of the Company contained in Section 3.03(a)
of this
Agreement shall have been true and correct in all material respects as of the
date of this Agreement and shall be true and correct in all material respects
as
of the Effective Time, as though made on and as of the Effective Time (except
to
the extent expressly made as of an earlier date, in which case as of such
earlier date), and (ii) the representations and warranties of the Company
otherwise contained in this Agreement shall have been true and correct as of
the
date of this Agreement (without giving effect to any qualification or limitation
as to materiality or Company Material Adverse Effect set forth therein) and
shall be true and correct as of the Effective Time (without giving effect to
any
qualification or limitation as to materiality or Company Material Adverse Effect
set forth therein), as though made on and as of the Effective Time (except
to
the extent expressly made as of an earlier date, in which case of as such
earlier date), except in this clause (ii) where the failure of such other
representations of the Company to be so true and correct (without giving effect
to any qualification or limitation as to materiality or Company Material Adverse
Effect set forth therein) would not reasonably be expected, individually or
in
the aggregate, to have a Company Material Adverse Effect.
79
(b) Agreements
and Covenants.
The
Company shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or complied
with by it on or prior to the Effective Time.
(c) Officer’s
Certificate.
The
Company shall have delivered to Parent a certificate, dated the date of the
Closing, signed by the chief executive officer or other authorized officer
of
the Company, certifying as to the satisfaction of the conditions specified
in
Sections 7.02(a)
and
7.02(b).
(d) Consents.
The
consents, approvals or authorizations listed on Section 7.02(d)
of the
Company Disclosure Schedule shall have been obtained.
(e) Material
Adverse Effect.
No
Company Material Adverse Effect shall have occurred since the date of this
Agreement.
(f) Tax
Opinion.
Parent
shall have received the opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP to the effect that
the
Merger will qualify as a reorganization within the meaning of Section 368(a)
of
the Code, that each of Parent, Merger Sub and the Company will be a party to
the
reorganization within the meaning of Section 368(b) of the Code, which opinion
may be based upon reasonable representations of fact provided by officers of
Parent and the Company.
(g) Affiliate
Agreements.
Parent
shall
have received the executed affiliate letters contemplated pursuant to
Section 6.08(a),
which
agreements and any supplements thereto required thereby shall be in full force
and effect.
(h) Parent
Due Diligence.
The
result of Parent’s due diligence with respect to the Company and the Company’s
assets, businesses and operations being satisfactory to Parent, in its sole
and
absolute discretion.
(i) Employment
Agreements.
Parent
shall
have received the employment agreements contemplated pursuant to Section 6.08(c),
duly
executed by the employees who are parties thereto, in form and substance
satisfactory to Parent.
(j) Appraisal
Rights.
Holders
of no more than 2% of the issued and outstanding shares of Company Common Stock
as of the Effective Time shall have demanded and perfected appraisal or
dissenters rights pursuant to the MBCA.
(k) Valuation
of Mines.
Parent
shall have received a certified copy of each technical valuation or reserves
report of each mining property prepared by qualified mining experts in which
the
Company or a Company Subsidiary has an interest and the form and substance
of
each such report shall be satisfactory to Parent in its sole
discretion.
80
SECTION
7.03 Conditions
to the Obligations of the Company.
The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver, where permissible, by the Company of the following
additional conditions:
(a) Representations
and Warranties.
(i) The
representations and warranties of Parent contained in Section 4.03(a)
of this
Agreement shall have been true and correct in all material respects as of the
date of this Agreement and shall be true and correct in all material respects
as
of the Effective Time, as though made on and as of the Effective Time (except
to
the extent expressly made as of an earlier date, in which case as of such
earlier date), and (ii) the representations and warranties of Parent otherwise
contained in this Agreement shall have been true and correct as of the date
of
this Agreement (without giving effect to any qualification or limitation as
to
materiality or Parent Material Adverse Effect set forth therein) and shall
be
true and correct as of the Effective Time (without giving effect to any
qualification or limitation as to materiality or Parent Material Adverse Effect
set forth therein), as though made on and as of the Effective Time (except
to
the extent expressly made as of an earlier date, in which case of as such
earlier date), except in this clause (ii) where the failure of such other
representations of Parent to be so true and correct (without giving effect
to
any qualification or limitation as to materiality or Parent Material Adverse
Effect set forth therein) would not reasonably be expected, individually or
in
the aggregate, to have a Parent Material Adverse Effect.
(b) Agreements
and Covenants.
Parent
and Merger Sub shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time.
(c) Officer’s
Certificate.
Parent
shall have delivered to the Company a certificate, dated the date of the
Closing, signed by the chief executive officer or other authorized officer
of
Parent, certifying as to the satisfaction of the conditions specified in
Sections 7.03(a)
and
7.03(b).
(d) Consents.
The
consents, approvals or authorizations listed on Section 7.03(d)
of the
Parent Disclosure Schedule shall have been obtained.
(e) Material
Adverse Effect.
No
Parent Material Adverse Effect shall have occurred since the date of this
Agreement.
(f) Tax
Opinion. The
Company shall have received the opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the
Company to the effect that the Merger will qualify as a reorganization within
the meaning of Section 368(a) of the Code and that each of Parent, Merger Sub
and the Company will be a party to the reorganization within the meaning of
Section 368(b) of the Code, which opinion may be based upon reasonable
representations of fact provided by officers of Parent and the
Company.
(g) Company
Due Diligence.
The
result of the Company’s due diligence with respect to Parent and Parent’s
assets, businesses and operations being satisfactory to the Company, in its
sole
and absolute discretion.
81
(h) Registration
Rights Agreement.
The
Company shall have received the executed registration rights agreement
contemplated pursuant to Section 6.08(b),
which
agreement and any supplement thereto required thereby shall be in full force
and
effect.
(i) Parent
Board Appointments.
Parent
shall have made, and received any required shareholder approval for, the Parent
Board Appointments.
ARTICLE
VIII
TERMINATION,
AMENDMENT AND WAIVER
SECTION
8.01 Termination.
This
Agreement may be terminated and the Merger and the other Transactions may be
abandoned at any time prior to the Effective Time, notwithstanding any requisite
approval and adoption of this Agreement and the Transactions by the stockholders
of the Company or Parent, by action taken or authorized by the respective
party’s Board of Directors, as follows:
(a) by
mutual
written consent of Parent, Merger Sub and the Company; or
(b) by
either
Parent or the Company if the Effective Time shall not have occurred on or before
December 31, 2007 (the “End
Date”);
provided,
however,
that
the right to terminate this Agreement under this Section 8.01(b)
or to
extend the End Date shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted in,
the
failure of the Effective Time to occur on or before such date; or
(c) by
either
Parent or the Company if any Governmental Authority in the United States, Hong
Kong or Bermuda shall have enacted, issued, promulgated, enforced or entered
any
injunction, order, decree or ruling which has become final and nonappealable
and
has the effect of making consummation of the Merger illegal or otherwise
preventing or prohibiting consummation of the Merger; or
(d) by
Parent
(at any time prior to the Company obtaining the Company Stockholders’ Approval)
if a Triggering Event (as defined below) with respect to the Company shall
have
occurred; or
(e) by
the
Company (at any time prior to Parent obtaining the Parent Shareholders’
Approval) if a Triggering Event with respect to Parent shall have occurred;
or
(f) by
either
Parent or the Company if the Company Stockholders’ Approval is not obtained at
the Company Stockholders’ Meeting; or
(g) by
either
Parent or the Company if the Parent Shareholders’ Approval is not obtained at
the Parent Shareholders’ Meeting; or
(h) by
Parent
upon a material breach of any representation, warranty, covenant or agreement
on
the part of the Company set forth in this Agreement, or if any representation
or
warranty of the Company shall have become untrue, in either case such that
the
conditions set forth in Section 7.02(a)
or
Section 7.02(b)
would
not be satisfied (“Terminating
Company Breach”);
provided,
however,
that,
if such Terminating Company Breach is curable by the Company, Parent may not
terminate this Agreement under this Section 8.01(h)
for so
long as the Company continues to exercise its reasonable best efforts to cure
such breach, unless such breach is not cured within 30 days after notice of
such
breach is provided by Parent to the Company; provided further
that
Parent shall not itself be in breach such that the conditions set forth in
Section
7.03(a)
or
(b)
would
not be satisfied; or
82
(i) by
the
Company upon a breach of any representation, warranty, covenant or agreement
on
the part of Parent and Merger Sub set forth in this Agreement, or if any
representation or warranty of Parent and Merger Sub shall have become untrue,
in
either case such that the conditions set forth in Section
7.03(a)
or
Section 7.03(b)
would
not be satisfied (“Terminating
Parent Breach”);
provided,
however,
that if
such Terminating Parent Breach is curable by Parent, the Company may not
terminate this Agreement under this Section 8.01(i)
for so
long as Parent continues to exercise its reasonable best efforts to cure such
breach, unless such breach is not cured within 30 days after notice of such
breach is provided by the Company to Parent; provided
further
that the
Company shall not itself be in breach such that the conditions set forth in
Section 7.02(a)
or
(b)
would
not be satisfied; or
(j) by
the
Company (at any time prior to the Company Stockholders’ Meeting) in order to
enter into a definitive agreement with respect to a Superior Proposal if the
Company Board shall have made a Change in the Company Board Recommendation
in
compliance with Section 6.04(c);
provided,
however,
that
any termination of this Agreement pursuant to this Section 8.01(j)
shall
not be effective until the Company has made full payment of all amounts provided
under Section 8.03;
or
(k) by
Parent
(at any time prior to the Parent Shareholders’ Meeting) in order to enter into a
definitive agreement with respect to a Superior Proposal if the Parent Board
shall have made a Change in the Parent Board Recommendation in compliance with
Section 6.04(d);
provided,
however,
that
any termination of this Agreement pursuant to this Section 8.01(k)
shall
not be effective until Parent has made full payment of all amounts provided
under
Section 8.03.
For
purposes of this Agreement, a “Triggering
Event”
with
respect to a party hereto shall be deemed to have occurred if: (i) the Board
of
Directors of such party or any committee thereof withdraws, modifies or changes
its recommendation of this Agreement, the Merger or the Transactions in a manner
adverse to the other party or shall have resolved to do so; (ii) the Board
of
Directors of such party shall have recommended to the stockholders of such
party
a Competing Transaction or shall have resolved to do so or shall have entered
into any letter of intent or similar document or any agreement, contract or
commitment accepting any Competing Transaction; (iii) such party shall have
failed to include in the Proxy Statement or the Parent Shareholders Circular,
as
the case may be, the recommendation of the Board of Directors of such party
in
favor of the approval and adoption of this Agreement and the approval of the
Merger and other Transactions or approval of the Share Issuance, the New Stock
Option Plans Adoption or the Parent Board Appointments, as applicable; or (iv)
a
tender offer or exchange offer for 20% or more of the outstanding shares of
capital stock of such party is commenced, and the Board of Directors of such
party fails to recommend against acceptance of such tender offer or exchange
offer by its stockholders (including by taking no position with respect to
the
acceptance of such tender offer or exchange offer by its stockholders) within
20
days of the announcement of such tender offer or exchange offer.
83
SECTION
8.02 Effect
of Termination.
Any
termination of this Agreement pursuant to Section 8.01
will be
effective immediately upon the delivery of a valid written notice of the
terminating party to the non-terminating party. In the event of the termination
of this Agreement pursuant to Section 8.01,
this
Agreement shall forthwith become void, and there shall be no liability under
this Agreement on the part of any party hereto, except (a) as set forth in
Section 8.03
and
Article IX
and (b)
nothing herein shall relieve any party from liability for any fraud or any
breach of any of its representations, warranties, covenants or agreements set
forth in this Agreement prior to such termination; provided,
however,
that
the Confidentiality Arrangements shall survive any termination of this
Agreement.
SECTION
8.03 Fees
and Expenses; Termination Fees.
(a) All
fees
and expenses incurred in connection with this Agreement, the Merger and the
other Transactions, including fees and expenses of financial advisors, financial
sponsors, legal counsel and other advisors (collectively, “Advisors”),
will
be paid by the party incurring such expenses whether or not the Merger is
consummated; provided,
however,
that
(A) Parent and the Company will share equally the filing fee for the
Notification and Report Forms, if any, filed with the FTC and DOJ under the
HSR
Act and (B) the Company shall bear all costs and fees associated with the
engagement of the Depositary and the negotiation, execution and delivery of
the
Parent Deposit Agreement and the filing of the Form F-6 Registration Statement;
provided further
that the
fees in (A) shall not be deemed to include fees or expenses payable to
Advisors.
(b) If
a
Company Payment Event occurs, the Company shall pay Parent (by wire transfer
of
immediately available funds), if pursuant to clause (i) below, simultaneously
with the occurrence of such Company Payment Event or,
if
pursuant to clause (ii) below, within two business days following such Company
Payment Event, a fee of 3% of the aggregate Merger Consideration. A
“Company
Payment Event”
means
the termination of this Agreement pursuant to:
(i) (A)
Section 8.01(d),
(B)
Section 8.01(h)
with
respect to a material breach of Section 6.04
by the
Company, or (C) Section
8.01(j);
or
(ii) Section 8.01(b),
but
only if, both (A) prior to the End Date, a Competing Transaction shall have
been
publicly announced or otherwise communicated to the Company Board and not
withdrawn, revoked or rejected prior to the date of termination of this
Agreement pursuant to Section 8.01(b),
and (B)
the Company, within 12 months after such termination, enters into a definitive
agreement with respect to, or consummates a Competing Transaction (provided
that
for
purposes of this clause (ii), each reference to “20%” in the definition of
Competing Transaction shall be deemed a reference to “50%”).
(c) If
a
Parent Payment Event occurs, Parent shall pay the Company (by wire transfer
of
immediately available funds) if pursuant to clause (ii) in the succeeding
sentence, simultaneously with the occurrence of such Parent Payment Event or,
if
pursuant to clause (i) in the succeeding sentence, within two business days
following such Parent Payment Event, a fee of 3% of the aggregate Merger
Consideration. A “Parent
Payment Event”
means
the termination of this Agreement pursuant to:
(i) (A)
Section 8.01(e),
(B)
Section 8.01(i)
with
respect to a material breach of Section 6.04
by
Parent, or (C) Section 8.01(k);
or
84
(ii) Section 8.01(b),
but
only if, both (A) prior to the End Date, a Competing Transaction shall have
been
publicly announced or otherwise communicated to the Parent Board and not
withdrawn, revoked or rejected prior to the date of termination of this
Agreement pursuant to Section 8.01(b),
and (B)
Parent, within 12 months after such termination, enters into a definitive
agreement with respect to, or consummates a Competing Transaction (provided
that
for purposes of this clauses (ii), each reference to “20%” in the definition of
Competing Transaction shall be deemed a reference to “50%”).
(d) If
a
Company Payment Event occurs, the Company shall reimburse Parent (by wire
transfer of immediately available funds), no later than two business days after
such termination, for 100% of its documented out-of-pocket fees and expenses
(including reasonable fees and expenses of its counsel) up to US$500,000
actually incurred by it in connection with this Agreement and the transactions
contemplated hereby.
(e) If
a
Parent Payment Event occurs, Parent shall reimburse the Company (by wire
transfer of immediately available funds), no later than two business days after
such termination, for 100% of its documented out-of-pocket fees and expenses
(including reasonable fees and expenses of its counsel) up to US$500,000
actually incurred by it in connection with this Agreement and the transactions
contemplated hereby.
SECTION
8.04 Amendment.
This
Agreement may be amended by the parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to the Effective
Time;
provided,
however,
that,
after the approval and adoption of this Agreement and the Transactions by the
stockholders of the Company, no amendment may be made that would reduce the
amount or change the type of consideration into which each Share shall be
converted upon consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by each of the parties
hereto.
SECTION
8.05 Waiver.
At any
time prior to the Effective Time, any party hereto may, by action taken or
authorized by its Board of Directors, (a) extend the time for the performance
of
any obligation or other act of any other party hereto, (b) waive any breach
in
the representations and warranties of any other party contained herein or in
any
document delivered pursuant hereto and (c) waive compliance with any agreement
of any other party or any condition to its own obligations contained herein.
Any
such extension or waiver shall be valid only if set forth in an instrument
in
writing signed by the party or parties to be bound thereby.
85
ARTICLE
IX
GENERAL
PROVISIONS
SECTION
9.01 Survival.
The
representations and warranties in this Agreement and in any certificate
delivered pursuant hereto shall terminate at the Effective Time or upon the
termination of this Agreement pursuant to Section 8.01
as
provided in Section 8.02.
The
covenants and agreements of the parties hereto (including the Surviving
Corporation after the Merger) that by their terms survive the Effective Time,
shall survive the Effective Time.
SECTION
9.02 Notices.
All
notices, requests, claims, demands and other communications hereunder shall
be
in writing and shall be given (and shall be deemed to have been duly given
upon
receipt) by delivery in person, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.02:
(a) if
to
Parent or Merger Sub:
Easyknit
Enterprises Holdings Limited
▇▇▇
▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇
6,
481-483 Castle
Peak
Road, ▇▇▇▇▇▇ Sha Wan,
Kowloon,
Hong Kong SAR
Attention:
▇▇. ▇▇▇▇▇ ▇▇▇▇▇
Facsimile
No: ▇▇▇-▇▇▇▇-▇▇▇▇
with
copies to:
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
20F
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇-▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇
Attention:
Mr. ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile
No: 852-2810-0664
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ LLP
▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇
Attention:
Ms. ▇▇▇▇▇▇ ▇▇▇
Facsimile
No: 852-2533-7898
▇▇▇▇▇▇▇
▇▇▇▇▇▇ Bailhache
▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇’▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇
Attention:
▇▇. ▇▇▇▇ ▇▇▇▇▇
Facsimile
No: ▇▇▇-▇▇▇▇-▇▇▇▇
86
(b) if
to the
Company:
▇▇
▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
U.S.A.
Attention:
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile
No: ▇-▇▇▇-▇▇▇-▇▇▇▇
with
copies to:
▇▇▇▇▇
& ▇▇▇▇▇▇▇▇
▇▇/▇.,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇
▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
Facsimile
No: ▇▇▇-▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Brand, LLP
3300
▇▇▇▇▇ Fargo Center
▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
U.S.A.
Attention:
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile
No: ▇-▇▇▇-▇▇▇-▇▇▇▇
SECTION
9.03 Certain
Definitions.
ll) For
purposes of this Agreement:
“affiliate”
of
a
specified person means a person who is an affiliate within the meaning of Rule
145 of the rules and regulations promulgated under the Securities
Act.
“beneficial
owner”,
with
respect to any securities, has the meaning ascribed to such term under Rule
13d-3(a) of the Exchange Act.
“business
day”
means
any day on which the principal offices of the SEC in Washington, D.C. are open
to accept filings, or, in the case of determining a date when any payment is
due, any day on which banks are not required or authorized to close and are
not
closed in Hong Kong or New York.
“Central
Provident Scheme”
means
any recognized mandatory social security scheme that is not subject to U.S.
Law
and under which benefits may be payable only upon the retirement, unemployment,
physical injury or disability of the insured, which has or is capable of having
effect in relation to one or more descriptions or categories of employment
so as
to provide benefits, in the form of pensions, allowances, gratuities or other
payments, payable on termination of service, death or retirement, to or in
respect of persons gainfully employed under a contract of service in any
employment.
87
“Company
ERISA Affiliate”
means
each entity that is treated as a single employer with the Company or any Company
Subsidiary pursuant to Section 414 of the Code.
“Company
Material Adverse Effect”
means
any change, event, violation, circumstance or effect (any such item, an
“Effect”)
that,
individually or when taken together with all other Effects that have occurred
during the applicable measurement period prior to the date of determination
of
the occurrence of the Company Material Adverse Effect, is or is reasonably
likely to be materially adverse to the business, financial condition or results
of operations of the Company and the Company Subsidiaries, taken as a whole;
provided,
however,
in no
event will any of the following, alone or in combination, be deemed to
constitute nor will any of the following be taken into account in determining
whether there has been or will be, a Company Material Adverse Effect: (i)
changes in general economic conditions or changes in securities markets in
general, which Effects do not have a materially disproportionate effect on
the
Company and the Company Subsidiaries, taken as a whole; (ii) changes in the
industries in which the Company and the Company Subsidiaries operate, which
Effects do not have a materially disproportionate effect on the Company and
the
Company Subsidiaries, taken as a whole; (iii) any Effect caused by the public
announcement or pendency of the transactions contemplated hereby; (iv) any
Effect resulting from compliance by the Company with the terms and conditions
of
this Agreement, including actions or omissions of the Company or any Company
Subsidiary taken with the written consent of Parent; (v) a change in Law or
US
GAAP or the interpretations thereof, which Effects do not have a materially
disproportionate effect on the Company and the Company Subsidiaries, taken
as a
whole; and (vi) any declaration of war by or against, or an escalation of
hostilities involving, or an act of terrorism against, the United States, China
or Hong Kong, which Effects do not have a materially disproportionate effect
on
the Company and the Company Subsidiaries, taken as a whole.
“control”
(including the terms “controlled
by”
and
“under
common control with”)
means
the possession, directly or indirectly, or as trustee or executor, of the power
to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, as trustee or executor,
by
contract or credit arrangement or otherwise.
“Easyknit
International”
means
Easyknit International Holdings Limited, a company incorporated in
Bermuda.
“Environmental
Laws”
means
any United States federal, state or local or non-United States law at national,
provincial or local level (including the common law, statutes, regulations,
rules, orders and contractual obligations) relating to: (i) releases or
threatened releases of Hazardous Substances or materials containing Hazardous
Substances; (ii) the manufacture, handling, transport, use, treatment, storage
or disposal of Hazardous Substances or materials containing Hazardous
Substances; or (iii) pollution or protection of the environment or human health,
occupational safety or health, sanitation, or natural resources, including
laws
relating to emissions, spills, discharges, generation, storage, leaks,
injection, leaching, seepage, releases, or threatened releases of Hazardous
Substances into the environment (including ambient air, surface water,
groundwater, mining or reclamation of mineral land, land surface or subsurface
strata).
88
“Environmental
Permits”
means
any permit (including waste water discharge permit), approval, identification
number, license and other authorization required under or issued pursuant to
any
applicable Environmental Laws.
“Hazardous
Substances”
means:
(i) those substances defined in or regulated under the following United States
federal statutes and their state counterparts, as each may be amended from
time
to time, and all regulations thereunder: the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking
Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum products,
including crude oil and any fractions thereof; (iii) natural gas, synthetic
gas,
and any mixtures thereof; (iv) polychlorinated biphenyls, asbestos and radon;
and (v) any other wastes, pollutants, contaminant or other substances (including
liquids, solids, gases, ions, living organisms and noise) that may be harmful
to
human health or other life or the environment or a nuisance to any person or
that may make the use or ownership of any affected land or property more costly,
or any other chemical, material or substance, exposure to which is now or
hereafter prohibited or limited, or which is otherwise regulated by, or for
which standards of conduct are imposed by, any Governmental Authority pursuant
to any Environmental Laws.
“HK$”
means
Hong Kong dollars, the lawful currency of Hong Kong.
“Huzhou
Land”
means,
collectively, the three pieces of land located in Zhili Town of Huzhou
Municipality, Zhejiang Province, the PRC of a total area of approximately 632
mu, the particulars of which are set forth in Section 4.12(a)
of the
Parent Disclosure Schedule.
“Huzhou
Zhili Government”
means
the People’s Government of Zhili Town, Huzhou Municipality, the People's
Republic of China.
“Intellectual
Property”
means:
(i) patents, patent applications, and all proprietary rights associated
therewith; (ii) all trademark rights, trademarks, service marks, trade dress,
logos, trade names, corporate names and other source identifiers, registrations
and applications for registration thereof, business identifiers, domain names
and brand names; (iii) copyrightable works, copyrights, registrations and
applications for registration thereof, and all other rights associated therewith
and the underlying works of authorship; (iv) all inventions, mask works and
mask
work registrations, know-how, discoveries, improvements, designs, computer
source codes, programs and other software (including all machine readable code,
printed listings of code, documentation and related property and information),
trade secrets, websites, shop and royalty rights, employee covenants and
agreements respecting intellectual property and non-competition and all other
types of intellectual property; (v) all confidential and proprietary
information; (vi) all contracts or agreements granting any right, title, license
or privilege under the intellectual property rights of any third party; and
(vii) all registrations of any of the foregoing, all applications therefor,
all
goodwill associated with any of the foregoing and all claims for infringement
or
breach thereof.
“Investment
Agreements”
means,
collectively, the investment agreement entered into between Easyknit (Mauritius)
Limited and the Huzhou Zhili Government on December 24, 2004 and a series of
supplementary agreements thereof between the parties between December 28, 2004
and July 2, 2006 for the purpose of granting to Easyknit (Mauritius) Limited
(or
its wholly owned subsidiaries in Huzhou Municipality) the land use rights to
a
piece of land of 632.289 mu at a price of RMB15,000 per mu.
89
“Land
Grant Contracts”
means,
collectively, the land grant contracts entered into between the Land and
Resources Bureau of Huzhou Municipality, Zhejiang Province, the People's
Republic of China and Easyknit Garment (Huzhou) Co., Ltd. on August 1, 2005
and
August 31, 2006 respectively, pursuant to which the land use rights to two
pieces of land of 184 mu and 67.6 mu in Huzhou Municipality were granted to
Easyknit Garment (Huzhou) Co., Ltd., at a price of approximately RMB90,667.12
per mu and RMB112,667 per mu, respectively.
“Mandatory
Provident Fund”
shall
have the same meaning as is ascribed to it by the Mandatory Provident Fund
Schemes Ordinance, Chapter 485 of the Laws of Hong Kong.
“Parent
ADRs”
means
American Depositary Receipts, each of which evidences one Parent
ADS.
“Parent
ADSs”
means
the American Depositary Shares issued pursuant to the Parent Deposit Agreement,
each of which represents the right to receive 100 Parent Ordinary
Shares.
“Parent
ERISA Affiliate”
means
each entity that is treated as a single employer with Parent or any Parent
Subsidiary under Section 414 of the Code.
“Parent
Material Adverse Effect”
means
any Effect that, individually or when taken together with all other Effects
that
have occurred during the applicable measurement period prior to the date of
determination of the occurrence of the Parent Material Adverse Effect, is or
is
reasonably likely to be materially adverse to the business, financial condition
or results of operations of Parent and the Parent Subsidiaries, taken as a
whole; provided,
however,
in no
event will any of the following, alone or in combination, be deemed to
constitute nor will any of the following be taken into account in determining
whether there has been or will be, a Parent Material Adverse Effect: (i) changes
in general economic conditions or changes in securities markets in general,
which Effects do not have a materially disproportionate effect on Parent and
the
Parent Subsidiaries, taken as a whole; (ii) changes in the industries in which
Parent and the Parent Subsidiaries operate, which Effects do not have a
materially disproportionate effect on Parent and the Parent Subsidiaries, taken
as a whole; (iii) any Effect caused by the public announcement or pendency
of
the transactions contemplated hereby; (iv) any Effect resulting from compliance
by Parent or Merger Sub with the terms and conditions of this Agreement,
including actions or omissions of Parent or any Parent Subsidiary taken with
the
written consent of the Company; (v) a change in Law or HKFRS or the
interpretations thereof, which Effects do not have a materially disproportionate
effect on Parent and the Parent Subsidiaries, taken as a whole; and (vi) any
declaration of war by or against, or an escalation of hostilities involving,
or
an act of terrorism against, the United States, China or Hong Kong, which
Effects do not have a materially disproportionate effect on Parent and the
Parent Subsidiaries, taken as a whole.
“Parent
PRC Real Properties”
mean,
collectively, each parcel of the Huzhou Land, the parcel of land respectively
in
Dongguan and Heyuan of the PRC and the buildings and structures thereon, the
particulars of which are set forth in Section 4.12(a)
of the
Parent Disclosure Schedule.
90
“Parent
PRC Subsidiaries”
mean,
collectively,
Dongguan ▇▇▇▇ ▇▇▇ Bleaching and Dyeing Company Limited, ▇▇▇▇ ▇▇ Knitting
(Heyuen) Company Limited, ▇▇▇▇ ▇▇ Garment (Huzhou) Company Limited, ▇▇▇▇ ▇▇
Knitting (Huzhou) Company Limited, ▇▇▇▇ ▇▇ Bleaching and Dyeing Company Limited;
and a “Parent
PRC Subsidiary”
means
any one of them.
“Permitted
Liens”
means:
(i) Liens for current taxes and assessments not yet past due as of the Effective
Time or which are being legitimately contested by appropriate proceedings;
(ii)
inchoate mechanics’ and materialmen’s Liens for construction in progress; and
(iii) workmen’s, repairmen’s, warehousemen’s, landlord’s and carriers’ Liens
arising in the ordinary course of business consistent with past practice that
are not delinquent and which, individually or in the aggregate, could not
reasonably be expected to be materially adverse to the use, value or ownership
of the subject property.
“person”
means
an individual, corporation, partnership, limited partnership, limited liability
company, syndicate, person (including, without limitation, a “person” as defined
in Section 13(d)(3) of the Exchange Act), trust, association or entity or
government, political subdivision, agency or instrumentality of a
government.
“PRC”
means
the People’s Republic of China.
“subsidiary”
or
“subsidiaries”
of
the
Company, the Surviving Corporation, Parent or any other person means an
affiliate controlled by such person, directly or indirectly, through one or
more
intermediaries. Where appropriate in the context, “subsidiary” includes any of
the branches, liaison offices or representative offices as established by any
of
the Company, the Surviving Corporation or Parent in the PRC.
“Taxes”
shall
mean any and all taxes, fees, levies, duties, tariffs, imposts and other charges
of any kind (together with any and all interest, penalties, additions to tax
and
additional amounts imposed with respect thereto) imposed by any Governmental
Authority or taxing authority, including, without limitation: taxes or other
charges on or with respect to income, franchise, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment, social
security, workers’ compensation, unemployment compensation or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value-added or gains taxes; license, registration and documentation
fees; and customers’ duties, tariffs and similar charges.
“Tax
Returns”
means
any and all reports, returns, declarations, claims for refund, elections,
disclosures, estimates, information reports or returns or statements required
to
be supplied to a taxing authority in connection with Taxes, including any
schedule or attachment thereto or amendment thereof.
“US$”
means
United States dollars, the lawful currency of the United States of
America.
91
(b) The
following terms have the meaning set forth in the Sections set forth
below:
|
Defined
Term
|
Location
of Definition
|
|
|
Action
|
§
3.09
|
|
|
Advisors
|
§
8.03(a)
|
|
|
Agreement
|
Preamble
|
|
|
AMEX
|
§
2.02(e)
|
|
|
AMEX
Listing Rules
|
§
6.01(f)
|
|
|
Articles
of Merger
|
§
1.02
|
|
|
Bermuda
Companies Act
|
§
4.07(c)
|
|
|
Blue
Sky Laws
|
§
3.05(b)
|
|
|
Certificates
|
§
2.02(a)
|
|
|
Change
in the Company Board Recommendation
|
§
6.04(c)
|
|
|
Change
in the Parent Board Recommendation
|
§
6.04(d)
|
|
|
Closing
|
§
1.02
|
|
|
COBRA
|
§
3.10(c)
|
|
|
Code
|
Recitals
|
|
|
Company
|
Preamble
|
|
|
Company
Additional Share and Warrant Obligations
|
§
3.03(a)
|
|
|
Company
Board
|
Recitals
|
|
|
Company
Board Recommendation
|
§
6.01(c)
|
|
|
Company
Common Stock
|
§
2.01(a)
|
|
|
Company
Convertible Notes
|
§
3.03(a)
|
|
|
Company
Designated Directors
|
§
6.14(a)
|
|
|
Company
Disclosure Schedule
|
Article
III
|
|
|
Company
Grant Date
|
§
3.03(a)
|
|
|
Company
Licensed Intellectual Property
|
§
3.13(a)
|
|
|
Company
Notes Purchase Agreement
|
§
3.03(a)
|
|
|
Company
Owned Intellectual Property
|
§
3.13(a)
|
|
|
Company
Payment Event
|
§
8.03(b)
|
|
|
Company
Permits
|
§
3.06(a)
|
|
|
Company
Plans
|
§
SECTION 3.10(a)
|
|
|
Company
Preferred Stock
|
§
3.03(a)
|
|
|
Company
SEC Reports
|
§
3.07(a)
|
|
|
Company
Shares
|
§
2.01(a)
|
|
|
Company
Shares Trust
|
§
2.02(e)
|
|
|
Company
Stock Awards
|
§
3.03(a)
|
|
|
Company
Stock Option Plans
|
§
2.04(a)
|
|
|
Company
Stock Options
|
§
2.04(a)
|
|
|
Company
Stockholders’ Approval
|
§3.18(b)
|
|
|
Company
Stockholders’ Meeting
|
§
6.01(a)
|
|
|
Company
Subsidiary
|
§
3.01(a)
|
|
|
Company
Title Policies
|
§
3.12(a)
|
|
|
Company
Use Documents
|
§
3.12(b)
|
|
|
Company
Warrants
|
§
2.05(a)
|
|
|
Compensation
Plans
|
§
3.10(a)
|
|
|
Competing
Transaction
|
§
6.04(e)
|
92
|
Defined
Term
|
Location
of Definition
|
|
|
Confidentiality
Arrangements
|
§
6.03(b)
|
|
|
Continuing
Employees
|
§
6.05(a)
|
|
|
Dissenting
Shares
|
§
2.07
|
|
|
Effect
|
§
9.03(a)
|
|
|
Effective
Time
|
§
1.02
|
|
|
End
Date
|
§
8.01(b)
|
|
|
ERISA
|
§
3.10(a)
|
|
|
ERISA
Plans
|
§
3.10(a)
|
|
|
Excess
ADSs
|
§
2.02(e)
|
|
|
Exchange
Act
|
§
3.05(b)
|
|
|
Exchange
Agent
|
§
2.02(a)
|
|
|
Exchange
Ratio
|
§
2.01(a)
|
|
|
Excluded
Company Shares
|
§
2.01(b)
|
|
|
Flexible
Benefit Plan
|
§
3.10(a)
|
|
|
Foreign
Corrupt Practices Act
|
§
3.19
|
|
|
Form
F-6 Registration Statement
|
§
6.01(a)
|
|
|
Governmental
Authority
|
§
3.05(b)
|
|
|
HKAS(s)
|
§
4.07(d)
|
|
|
HKFRS
|
§
4.07(d)
|
|
|
HKFRS(s)
|
§
4.07(d)
|
|
|
HKSE
Listing Rules
|
§
2.04(a)
|
|
|
Hong
Kong Announcement
|
§
6.01(b)
|
|
|
Hong
Kong Companies Ordinance
|
§
4.07(c)
|
|
|
Hong
Kong Securities Ordinance
|
§
4.07(c)
|
|
|
Hong
Kong Stock Exchange
|
§
2.04(c)
|
|
|
HSR
Act
|
§
3.05(b)
|
|
|
Investment
Company Act
|
§
3.06(b)
|
|
|
IRS
|
§
3.10(b)
|
|
|
Law
|
§
3.05(a)
|
|
|
Liens
|
§
3.12(a)
|
|
|
Material
Company Contracts
|
§
3.16(a)
|
|
|
Material
Parent Contracts
|
§
4.16(a)
|
|
|
MBCA
|
Recitals
|
|
|
Merger
|
Recitals
|
|
|
Merger
Consideration
|
§
2.01(a)
|
|
|
Merger
Sub
|
Preamble
|
|
|
Mining
Permits
|
§
3.12(e)
|
|
|
Mining
Rights
|
§
3.12(e)
|
|
|
Multiemployer
Plan
|
§
3.10(c)
|
|
|
Multiple
Employer Plan
|
§
3.10(c)
|
|
|
NASD
|
§
2.02(e)
|
|
|
New
Stock Option Plans
|
§
2.04(a)
|
|
|
New
Stock Option Plans Adoption
|
Recitals
|
|
|
Non-U.S.
Company Plan
|
§
3.10(b)
|
93
|
Defined
Term
|
Location
of Definition
|
|
|
Non-U.S.
Parent Plan
|
§
4.10(b)
|
|
|
Notice
of Company Superior Proposal
|
§
6.04(c)
|
|
|
Notice
of Parent Superior Proposal
|
§
6.04(d)
|
|
|
Parent
|
Preamble
|
|
|
Parent
Bermuda Filings
|
§
4.07(c)
|
|
|
Parent
Board
|
Recitals
|
|
|
Parent
Board Appointments
|
Recitals
|
|
|
Parent
Board Recommendation
|
§
6.01(d)
|
|
|
Parent
Deposit Agreement
|
§
2.01(a)
|
|
|
Parent
Disclosure Schedule
|
Article
IV
|
|
|
Parent
Grant Date
|
§
4.03(a)
|
|
|
Parent
HKSE Reports
|
§
4.07(a)
|
|
|
Parent
Hong Kong Filings
|
§
4.07(c)
|
|
|
Parent
Licensed Intellectual Property
|
§
4.13(a)
|
|
|
Parent
Ordinary Shares
|
Recitals
|
|
|
Parent
Owned Intellectual Property
|
§
4.13(a)
|
|
|
Parent
Payment Event
|
§
8.03(c)
|
|
|
Parent
Permits
|
§
4.06(a)
|
|
|
Parent
Plans
|
§
4.10(a)
|
|
|
Parent
Shareholders Circular
|
§
6.01(b)
|
|
|
Parent
Shareholders’ Approval
|
§
4.18(b)
|
|
|
Parent
Shareholders’ Meeting
|
§
6.01(b)
|
|
|
Parent
Signing Power Authorization
|
§
6.14(c)
|
|
|
Parent
Stock Option Plan
|
§
4.03(a)
|
|
|
Parent
Stock Options
|
§
4.03(a)
|
|
|
Parent
Subsidiary
|
§
4.01(a)
|
|
|
Parent
Title Policies
|
§
4.12(a)
|
|
|
Parent
Use Documents
|
§
4.12(b)
|
|
|
PRC
Mines
|
§
5.01(c)
|
|
|
Proxy
Statement
|
§
6.01(a)
|
|
|
Registration
Statement
|
§
6.01(a)
|
|
|
Representatives
|
§
6.03(a)
|
|
|
SEC
|
§
3.07(a)
|
|
|
Securities
Act
|
§
3.05(b)
|
|
|
SFC
|
§
4.07(b)
|
|
|
Share
Issuance
|
Recitals
|
|
|
SOX
|
§
3.07(a)
|
|
|
Stockholders’
Meetings
|
§
6.01(b)
|
|
|
Substitute
Option
|
§
2.04(a)
|
|
|
Substitute
Warrant
|
§
2.05(a)
|
|
|
Superior
Proposal
|
§
6.04(f)
|
|
|
Surviving
Corporation
|
§
1.01
|
|
|
Surviving
Corporation Common Stock
|
§
2.01(c)
|
|
|
Terminating
Company Breach
|
§
8.01(h)
|
94
|
Defined
Term
|
Location
of Definition
|
|
|
Terminating
Parent Breach
|
§
8.01(i)
|
|
|
Transactions
|
§
3.01(a)
|
|
|
Triggering
Event
|
§
8.01
|
|
|
U.S.
Company Plan
|
§
3.10(b)
|
|
|
US
GAAP
|
§
3.07(c)
|
|
|
WARN
Act
|
§
3.11(b)
|
SECTION
9.04 Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the Transactions is not affected
in any manner materially adverse to any party. Upon such determination that
any
term or other provision is invalid, illegal or incapable of being enforced,
the
parties hereto shall negotiate in good faith to modify this Agreement so as
to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the Transactions be consummated as originally
contemplated to the fullest extent possible.
SECTION
9.05 Entire
Agreement; Assignment.
This
Agreement, together with the schedules and exhibits thereto, the Employment
Agreements and the Confidentiality Arrangements constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede,
except as set forth in Sections 6.03(b),
all
prior agreements and undertakings, both written and oral, among the parties,
or
any of them, with respect to the subject matter hereof. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned
by
any of the parties hereto, in whole or in part (whether pursuant to a merger,
by
operation of law or otherwise), without the prior written consent of the other
parties hereto, and any attempt to make any such assignment without such consent
shall be null and void, except that Merger Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations under this
Agreement to any direct or indirect wholly owned subsidiary of Parent without
the consent of the Company, but no such assignment shall relieve Merger Sub
of
any of its obligations hereunder.
SECTION
9.06 Parties
in Interest; Third Parties.
This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto and, subject to Section 9.05,
their
respective successors and assigns, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement. Except
to the extent set forth in Sections 9.05
and
9.06,
no
person who is not a party to this Agreement has any rights under the Contracts
(Rights of Third Parties) Act, Chapter 53B of Hong Kong to enforce any provision
of this Agreement.
SECTION
9.07 Specific
Performance.
The
parties hereto agree that irreparable damage would occur in the event any
provision of this Agreement were not performed in accordance with the terms
hereof and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.
95
SECTION
9.08 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Minnesota applicable to contracts executed in and to be performed
in that State (other than those provisions set forth herein that are required
to
be governed by the laws of Hong Kong). All actions and proceedings arising
out
of or relating to this Agreement shall be heard and determined exclusively
in
any Minnesota state court or any Minnesota federal court. The parties hereto
hereby (a) submit to the exclusive jurisdiction of the Minnesota state court
or
any Minnesota federal court for the purpose of any Action arising out of or
relating to this Agreement brought by any party hereto, and (b) irrevocably
waive, and agree not to assert by way of motion, defense, or otherwise, in
any
such Action, any claim that it is not subject personally to the jurisdiction
of
the above-named courts, that its property is exempt or immune from attachment
or
execution, that the Action is brought in an inconvenient forum, that the venue
of the Action is improper, or that this Agreement or the Transactions may not
be
enforced in or by any of the above-named courts.
SECTION
9.09 Headings.
The
descriptive headings contained in this Agreement are included for convenience
of
reference only and shall not affect in any way the meaning or interpretation
of
this Agreement.
SECTION
9.10 Counterparts.
This
Agreement may be executed and delivered (including by facsimile transmission)
in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but
all of which taken together shall constitute one and the same
agreement.
SECTION
9.11 Waiver
of Jury Trial.
EACH OF
THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT
NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK
TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS,
AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION
9.11.
[SIGNATURE
PAGE FOLLOWS]
96
IN
WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
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EASYKNIT
ENTERPRISES HOLDINGS LIMITED
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| By: | /s/ ▇▇▇▇▇ ▇▇▇ Wing ▇▇▇▇ | |
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Name:
▇▇▇▇▇ ▇▇▇ Wing ▇▇▇▇
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Title:
Chairman and CEO
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RACE
MERGER, INC.
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| By: |
/s/
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
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Name:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
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Title:
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| By: |
/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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Title:
Chief Executive Officer
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97