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Exhibit 10.2
[LOGO]
EXECUTION VERSION
Dated 18 May 2000
Sale and Purchase Agreement
1. Paxar Far East Limited, 8/F., Paxar Building, 210 ▇▇▇▇ ▇▇▇▇ Road, San Po
Kong, Kowloon, Hong Kong, represented by ▇▇▇ ▇▇▇ Lop, ▇▇▇▇ according to
the board resolution dated 12 May 2000 attached as Exhibit A.
2. ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, born on 2 June 1962, residing
at ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, No.4A Carmel Road, ▇▇▇▇▇▇▇, Hong
Kong.
herewith enter into the following
Sale and Purchase Agreement (the "AGREEMENT"):
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TABLE OF CONTENTS
ARTICLE PAGE
PRELIMINARY REMARKS.................................................. 3
1. Sale and Purchase.............................................. 3
2. Purchase Price and payment..................................... 5
3. Transfer Accounts of the Hong Kong Company..................... 8
4. Adjustment of the Purchase Price............................... 8
5. Representations, Warranties and Guarantees of the seller....... 8
6. Legal Consequences in Case of Violation of Representations,
Warranties and Guarantees...................................... 29
7. No compete Restraint........................................... 30
8. Statute of Limitations......................................... 31
9. Inspection by the Purchaser.................................... 32
10. Taxes.......................................................... 32
11. Conditions precedent........................................... 33
12. (Intentionally omitted)........................................ 34
13. Rights and Obligations of the Parties.......................... 34
14. Post Completion Undertakings................................... 37
15. Seller'S Profit Participation.................................. 38
16. Interim period................................................. 41
17. Arbitration.................................................... 42
18. Miscellaneous.................................................. 42
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Table of Attachments
NO. CONTENTS OF ATTACHMENT
5.2.7 Most recent annual return, memorandum and articles of
association of the Hong Kong Company
5.2.8 Most recent business licence, approval certificate and
articles of association of the Panyu Company
5.2.26 List of other equity, interest, shares, participations or
sub-participations owned or held by the Companies
5.2.35 List of over-indebtedness or insolvency
5.3.5(a) Assets, properties and rights not owned by the Companies which were
used by the Companies on the basis of binding agreements with the
Seller
5.3.5(b) Assets, properties and rights not owned by the Companies which were
used by the Companies on the basis of binding agreements with third
parties
5.4(a) Real Estate
5.4(g) Real estate property leased or rented by the Companies
5.4(l)(ii) Terminated leased agreements during the last 5 (five) years
5.6.1(e) Filed tax returns and countries of filing
5.7(a)(i) Patents, trademarks/service marks, business or trade name
5.7(a)(ii) Intellectual Property Rights of the Companies
5.7(h) Intellectual Property Rights licensed to, but not owned by
the Companies
5.8 Insurance policies (setting forth whether the third party liability
insurance contract is of claim made or occurrence type) in each
case with the statement of the insured amount and the annual
premium
5.9.1 Material licences, certificates, permits, permit
applications, franchises, private product approvals
5.10.5 Names, titles, locations, annual compensation and all
bonuses, benefits and similar payments for all board
members, et al.
5.11(a) Rental, leasing or similar contracts
5.11(c) Obligations owed to a benevolent fund, pension liabilities,
pension- and related benefit liabilities et al.
5.11(d)(i) Standard sales contract
5.11(l) Intellectual Property Rights and Know-how with licence
agreements
5.11(o)(i) Distribution agreements (distributor- or commercial agent
agreements) (appointing the Companies as distributor or commercial
agent)
5.11(o)(ii) Distribution agreements (distributor- or commercial agent
agreements) (appointing a third party as distributor or
commercial agent)
5.11(x) Loan agreements and other banking and overdraft facilities
5.13.2(i) Managing director of the Hong Kong Company
5.13.2(ii) Legal representative of the Panyu Company
5.13.4(i) Open accounts receivable of the Companies which came into existence
up to 31
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March 2000
5.13.4(ii) Open liabilities of the Companies which came into existence
up to 31 March 2000
5.13.5 Contracts, agreements or arrangements, providing for an aggregate
annual payment obligation of more than HK$1,500,000 or with a
termination period of more than 6 (six) months
5.13.6 Bank accounts of the Companies
5.14.2(a) List of other equity, interest, shares, participations or
sub-participations owned or held by the Seller
6.4 Persons whose knowledge is deemed to be knowledge of the
Seller
13.2 Intellectual property rights being owned by the Seller or
another party
13.4 Legal relationships between the Seller and the Companies
13.8 Sureties
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PRELIMINARY REMARKS
1. Paxar Far East Limited, is a company duly incorporated in the Hong Kong
Special Administrative Region of the People's Republic of China ("HONG
KONG"), whose registered office is at 8/F., Paxar Building, 210 ▇▇▇▇ ▇▇▇▇
Road, San Po Kong, Kowloon, Hong Kong (the "PURCHASER").
2. ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ is a businessman whose business
address is at ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, No.4A Carmel Road, ▇▇▇▇▇▇▇, Hong
Kong (the "SELLER").
3. Bonny Nice Industries Limited is a private company duly incorporated in
the Hong Kong Special Administrative Region of the People's Republic of
China whose registered office is at 6/F, Tin On Industrial Building,
777-779 ▇▇▇▇▇▇ Sha Wan Road, ▇▇▇▇▇▇ Sha Wan, Kowloon, Hong Kong (the "HONG
KONG COMPANY"). The Hong Kong Company has an issued and paid-up capital of
HK$1,000 which is divided into 1,000 ordinary shares of HK$1 each (the
"HONG KONG SHARES").
4. The Seller is the legal and beneficial owner of 999 Hong Kong Shares and
the beneficial owner of the remaining one Hong Kong Share.
5. The Hong Kong Company owns one hundred percent of the equity interest in
Bonny Nice (Panyu) Label Co., Ltd (" ( ) "), a
wholly foreign owned enterprise duly organised and validly existing under
the laws of the People's Republic of China whose legal address is at ▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Town, Panyu Municipality, Guangdong
Province, the People's Republic of China (the "PANYU COMPANY"; the Hong
Kong Company and the Panyu Company, together, the "COMPANIES" or each a
"COMPANY").
6. (Intentionally omitted)
7. The Companies manufacture and market apparel identification products.
8. (Intentionally omitted)
9. The Seller has agreed to sell and the Purchaser has agreed to purchase the
Hong Kong Shares. The Seller and the Purchaser have agreed to enter into
the above transactions according to the terms and conditions of the
Agreement and on the basis of the representations and warranties made, and
undertakings, guarantees and indemnities given by, the Seller.
1. SALE AND PURCHASE
1.1 The Seller as beneficial owner agrees to sell and the Purchaser agrees to
buy the Hong Kong Shares, free from all mortgages, charges, pledges,
liens, options, restrictions, right of first refusal, right of
pre-emption, third-party rights or interests, other encumbrance or
security interest of any kind, or another type of preferential
arrangements (including, without limitation, title transfer or retention
arrangements) having similar effect and together with all rights of any
nature whatsoever attaching to the Hong Kong Shares as
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of the Effective Date (as defined in section 1.3 below), including all
rights to any dividends or other distribution declared, paid or made in
respect of the Hong Kong Shares as of the Effective Date.
1.2 (Intentionally omitted)
1.3 The sale and purchase of the Hong Kong Shares shall become effective on
the later of 18 May 2000 and the date (not being later than 30 June
2000) on which the last of the conditions set out in Article 11
(including all obligations of the Seller at Completion as set forth
therein) to be satisfied or waived is satisfied or waived (the
"TRANSFER DATE"). Notwithstanding the foregoing, contractually
(schuldrechtlich) such sale and purchase is made with retroactive
effect as of 31 March 2000 at 24.00 hours (the "EFFECTIVE DATE").
1.4 (Intentionally omitted)
1.5 The Seller guarantees that the net asset value of the Companies, which
shall be determined on the basis of the total assets minus total
liabilities as shown in the audited consolidated financial statements of
the Companies as of 31 March 2000 (the "NET ASSET VALUE"), shall be at
least HK$44,000,000 (Hong Kong Dollar; forty four million) as of the
Effective Date, the date of the Agreement and the Transfer Date. The Net
Asset Value to be determined on the basis of the consolidated financial
statements of the Companies as of 31 March 2000, as audited by ▇▇▇▇▇▇ ▇▇
and Company, shall be reviewed and confirmed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (the
"CONFIRMED NET ASSET VALUE") and the Seller and the Purchaser shall be
notified of the Confirmed Net Asset Value by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in writing.
If either of the Seller or the Purchaser raises objections to the
Confirmed Net Asset Value, the parties shall use their best efforts to
resolve such objections. In case the objections raised by either party
should lead to an amendment of the Confirmed Net Asset Value, the Net
Asset Value amended by the Seller and the Purchaser by mutual written
agreement signed by the parties shall be deemed to be approved and shall
be final and binding on the parties (the "BINDING NET ASSET VALUE").
1.6 If the parties fail to reach an agreement on the disputed issues within a
period of 60 (sixty) days after the date on which ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ issued
the notice of Confirmed Net Asset Value (the "DATE OF NOTICE"), the
disputed issues shall be referred to an independent firm of auditors with
significant international experience appointed as expert
(Schiedsgutachter) in the sense of Section 317 German Civil Code
(Burgerliches Gesetzbuch, "BGB") (the "EXPERT") and not as an arbitrator
jointly by the Seller and the Purchaser, who will resolve the disputed
issues. The decision of the Expert shall be final and binding on the
parties. The Net Asset Value as amended by the decision of the Expert
shall be final and binding on the parties (the "BINDING NET ASSET VALUE").
If the parties fail to agree on the firm of auditors to appoint as the
Expert within a period of 70 (seventy) days after the Date of Notice, the
Expert (which shall be an independent firm of auditors with significant
international experience) shall be appointed by the President of the
Institut der Wirtschaftsprufer e. V., Dusseldorf upon the request of
either party of the Agreement.
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1.7 Each party bears the cost of the firm of auditors it retains to review
the Net Asset Value. Each party shall bear one half of the costs of the
Expert appointed pursuant to section 1.6.
1.8 The Seller is prohibited from making withdrawals from the Companies or
to permit the making of such withdrawals from the date of the
Agreement.
1.9 The Seller sells and assigns to the Purchaser all tangible or
intangible assets to which the Seller may hold legal or equitable
title, which serve the object of the Companies or which are designated
to serve the object of the Companies, as well as all eventual rights of
the Seller in respect of the Companies in so far as the Agreement does
not explicitly provide otherwise. The Purchaser accept such sale and
assignment.
1.10 The Seller hereby waives all option rights, sale rights
(Verkaufsrechte), right of first refusal (Vorkaufsrechte) and rights of
pre-emption, to which he might be entitled in connection with the
transactions contemplated in the Agreement.
1.11 The Seller shall do and execute and deliver all such further acts,
deeds, documents, instruments of conveyance, assignment and transfer
and things as may be necessary to give effect to the terms of the
Agreement and to place control of the Companies in the hands of the
Purchaser. The Seller shall also use its reasonable endeavours to
assist the Purchaser in obtaining any and all materials permits,
licences, consents, approvals, certificates, qualifications,
specifications, registrations or other authorisations necessary in the
jurisdiction incorporation of each of the Companies for the effective
operation of the Companies and the use of any of the assets of the
Companies.
1.12 The sale and purchase and assignment according to section 1.1 and
section 1.9 shall become valid and binding on the date on which the
following conditions precedent are satisfied:
1.12.1 Credit of the First Instalment (as defined in section 2.2.1) to the
account set forth in section 2.4.1, and
1.12.2 Credit of the Escrow Amount (as defined in section 2.2.2) to the
account set forth in section 2.4.2.
2. PURCHASE PRICE AND PAYMENT
2.1 The total consideration for the sale and transfer of the Hong Kong
Shares according to Article 1, for the sale of all tangible and
intangible assets to which the Seller may hold full or partial title,
which serve the object of the Companies or which are designated to
serve the object of the Companies, for the sale of all eventual rights
of the Seller against the Companies according to section 1.9 as well as
for all other obligations taken over by the Seller in the Agreement
amounts to HK$140,160,600 (Hong Kong Dollar: one hundred forty million
one hundred sixty thousand and six hundred) (the "PURCHASE PRICE").
2.2 The Purchase Price according to section 2.1 shall be paid to the Seller
in two instalments on the following due dates:
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2.2.1 The first instalment shall be in the amount of HK$119,136,510 (Hong
Kong Dollar: one hundred nineteen million one hundred thirty six
thousand five hundred and ten) (the "FIRST INSTALMENT") and shall be
paid by the Purchaser to the Seller at the date of the Agreement
subject to all conditions precedent pursuant to Article 11 (including
all obligations of the Seller at Completion as set forth therein)
having been satisfied.
The First Instalment is paid by the Purchaser to the Seller by wire
transfer.
2.2.2 The second instalment shall be in the amount of HK$21,024,090 (Hong
Kong Dollar: twenty one million twenty four thousand and ninety) (the
"ESCROW AMOUNT") and shall be paid by the Purchaser to HSBC
International Trustee Limited, 6th Floor, Tower 1, HSBC Centre, ▇▇.▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ (the "ESCROW AGENT") at the date of
the Agreement subject to all conditions precedent pursuant to Article
11 (including all obligations of the Seller at Completion as set forth
therein) having been satisfied to the interest bearing account
regarding which the Escrow Agent is only authorised to dispose of after
receipt by the Escrow Agent of irrevocable written instructions signed
by both (i) the Managing Director of the Purchaser, the Chief Financial
Officer, the Chief Executive Officer, the Treasurer or an Assistant
Treasurer of Paxar Corporation, each of them with single authority of
representation on behalf of the Purchaser (each of the aforementioned
officers of the Purchaser or of Paxar Corporation, the "PAXAR
REPRESENTATIVE") and the Seller, ▇▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, each of them with single authority of representation on
behalf of the Seller (each of the aforementioned persons the Seller,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the "SELLER REPRESENTATIVE") (the
"ESCROW ACCOUNT"). Interest accruing on the Escrow Amount shall be
added to the Escrow Amount and as a consequence shall increase the
Escrow Amount.
(a) (Intentionally omitted)
(b) The Escrow Amount shall serve the Purchaser as security for
its claims against the Seller of all kind arising out of or in
connection with the Agreement (the "CLAIMS") raised by the
Purchaser against the Seller within a period of 18 (eighteen)
months after 31 May 2000 (the "CLAIMS PERIOD").
The Paxar Representative and the Seller Representative are
obliged to take all actions which are necessary and
appropriate including giving joint instructions to the Escrow
Agent to transfer an amount equivalent to the Claims raised
during the Claims Period not exceeding the Escrow Amount from
the Escrow Account to the Purchaser after the Claims have been
determined by mutual agreement between the parties of the
Agreement or by arbitration according to Article 17.
Subject to section 2.2.2(d), the Paxar Representative and the
Seller Representative are obliged to take all actions which
are necessary and appropriate including giving joint
instructions to the Escrow Agent to transfer an amount, if
any, equivalent to the Escrow Amount reduced by the amount
equivalent to the Claims, if any, raised during the Claims
Period and further
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reduced by an amount equivalent to 5% (five percent) of the Purchase
Price from the Escrow Account to the Seller after the Claims Period
has lapsed.
(c) 5% (five percent) of the Purchase Price, if any, which remains on
the Escrow Account after the lapse of the Claims Period (the "TAX
ESCROW ACCOUNT") shall serve as the Purchaser's security for its
claims against the Seller in connection with Taxes according to
section 6.1 in connection with 5.6 and Article 10 (the "TAX CLAIMS")
raised by the Purchaser against the Seller within a period of 36
(thirty-six) months after the Completion Date (as defined in Article
11) in respect of all Taxes payable by the Companies for the period
up to the Effective Date (the "TAX CLAIMS PERIOD").
The Paxar Representative and the Seller Representative are obliged
to take all actions which are necessary and appropriate including
giving joint instructions to the Escrow Agent to transfer an amount
equivalent to the Tax Claims raised during the Tax Claims Period
from the Escrow Account to the Purchaser after the Tax Claims have
been determined by mutual agreement between the parties of the
Agreement or by arbitration according to Article 17.
Subject to section 2.2.2(d), the Paxar Representative and the Seller
Representative are obliged to take all actions which are necessary
and appropriate including giving joint instructions to the Escrow
Agent to transfer an amount equivalent to the Tax Escrow Amount
reduced by the amount equivalent to the Tax Claims, if any, raised
during the Tax Claims Period from the Escrow Account to the Seller
after the Tax Claims Period has lapsed.
(d) Notwithstanding other provisions to the contrary in this section
2.2.2, no part of the Escrow Amount shall be transferred to the
Seller unless and until the Seller has fully complied with his
obligations under Article 14 of the Agreement.
2.3 In case of default in payment, the contracting parties agree that a
default interest (Verzugszinsen) shall be payable at the rate of 5.5%
(five point five percent) annually above the respective base percentage
(Basiszinssatz) according to Section 1 German Statute Regarding Transitory
Regulations for the Discount Rate (Diskontsatzuberleitungsgesetz, "DUG")
for the period between the due date and the receipt of payment.
2.4 The Purchaser shall make payment of the Purchase Price to the accounts set
forth below:
2.4.1 the First Instalment shall be paid to the following account:
Hongkong & Shanghai Banking Corporation
Branch: Premier Centre, New Mandarin Plaza, ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
Account Number: 108 078 775 001
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Account Name: ▇▇▇▇▇▇▇▇▇ U W H
2.4.2 the Escrow Amount shall be paid to the Escrow-Account
Hongkong & Shanghai Banking Corporation
Account Number: ▇▇▇-▇▇▇▇▇▇-▇▇▇
Account Name: HSBC International Trustee Limited - Subscription Account
Reference Code: Bonny Nice Escrow Agreement
3. TRANSFER ACCOUNTS OF THE HONG KONG COMPANY
(Intentionally omitted)
4. ADJUSTMENT OF THE PURCHASE PRICE
4.1 Adjustment of the Purchaser Price due to lower Net Asset Value:
4.1.1 In the course of the determination of the Purchase Price the parties
proceeded on the assumption that the Binding Net Asset Value of the
Companies amounts to at least HK$44,000,000 (Hong Kong Dollar: forty four
million).
4.1.2 Should the Binding Net Asset Value of the Companies be lower than the
amount of HK$44,000,000 (Hong Kong Dollar: forty four million) the
Purchase Price shall be reduced by an amount equivalent to the difference.
4.1.3 The amount by which the Purchase Price is reduced in accordance with
section 4.1.2 is due and payable by the Seller to the Purchaser, 10 (ten)
bank working days after the Confirmed Net Asset Value became the Binding
Net Asset Value and shall carry interest starting from such due date on to
the date at which the amount by which the Purchase Price is reduced is
credited on the account of the Purchaser at the rate set forth in section
2.3.
5. REPRESENTATIONS, WARRANTIES AND GUARANTEES OF THE SELLER
The Seller hereby represents, warrants and undertakes that the statements
and declarations set out in this Article 5 (the "WARRANTIES") are complete
and correct in all respects as of the date of the Agreement and the
Transfer Date, except as provided otherwise in the Agreement. The Seller
acknowledges that the Purchaser is entering into the Agreement in reliance
on each of the Warranties with the intention of inducing the Purchaser to
enter into the Agreement. No knowledge of the Purchaser relating to the
Companies (actual, constructive or imputed) prevents or limits a claim
made by the Purchaser for breach of any of the Warranties and the Seller
may not invoke any such knowledge of the Purchaser as a defence to a claim
for breach of any of the Warranties. Each of the Warranties is to be
constructed independently and is not limited by another provision of the
Agreement or any of the other Warranties.
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5.1 Preliminary Remarks
The representations made in the Preliminary Remarks to the Agreement are
complete and correct in every respect.
5.2 Corporate Matters
5.2.1 The Hong Kong Company is a limited liability company duly incorporated
under the laws of Hong Kong and validly existing, is licensed or qualified
to transact business in all locations in which it transacts business and
has the corporate power and authority to own, lease or operate its assets
and properties and to carry on its business as now being conducted.
5.2.2 The Panyu Company is a wholly foreign owned enterprise duly organised and
validly existing under the laws of the People's Republic of China, is
licensed or qualified to transact business in all locations in which it
transacts business and has the corporate power and authority to own, lease
or operate its assets and properties and to carry on its business as now
being conducted.
5.2.3 (Intentionally omitted)
5.2.4 (Intentionally omitted)
5.2.5 (Intentionally omitted)
5.2.6 (Intentionally omitted)
5.2.7 Attachment 5.2.7 contains the most recent annual return of the Hong Kong
Company which has been filed with the Hong Kong Companies Registry and a
true, accurate and complete version of the memorandum and articles of
association of the Hong Kong Company presently valid and in full force and
effect. Other than such articles of association or memorandum of
association there are no agreements, resolutions or arrangements
whatsoever which relate to the relationship between the Hong Kong Company
and shareholders of the Hong Kong Company or the relationship among the
shareholders of the Hong Kong Company. There are no obligations to enter
into such agreements, resolutions or arrangements which the Purchaser
would be subject to as a consequence of the acquisition of the Hong Kong
Shares.
5.2.8 Attachment 5.2.8 contains the most recent business licence and approval
certificate of the Panyu Company and a true, accurate and complete version
of the articles of association of the Panyu Company. The business licence
and the approval certificate are presently valid and in full force and
effect and have not been revoked. No changes have been made thereto. Other
than such articles of association, there are no agreements, resolutions or
arrangements whatsoever which relate to the relationship between the Panyu
Company and its investor. There are no obligations to enter into such
agreements, resolutions or arrangements which the Purchaser or the
Companies would be subject to as a consequence of the acquisition of the
Hong Kong Shares.
5.2.9 (Intentionally omitted)
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5.2.10 (Intentionally omitted)
5.2.11 (Intentionally omitted)
5.2.12 (Intentionally omitted)
5.2.13 The Companies are not bound by or otherwise a party to an agreement to
make up for losses of whatsoever kind of a person or company.
5.2.14 The Hong Kong Shares comprise the whole of the allotted and issued
share capital of the Hong Kong Company, have been properly allotted and
issued and are fully paid up. Other than the Agreement, there is no
agreement, arrangement or obligation requiring the creation, allotment,
issue, transfer, redemption or repayment of, or the grant to a person
of the right (conditional or not) to require the allotment, issue,
transfer, redemption or repayment of, a share in the capital of the
Hong Kong Company (including, without limitation, an option or right of
pre-emption or conversion).
5.2.15 The Hong Kong Company has made capital contribution of not less than
HK$29,339,881 (Hong Kong Dollar: twenty nine million three hundred
thirty nine thousand eight hundred and eighty one) to the registered
capital of the Panyu Company and such capital contribution has been
verified by capital verification reports issued by certified public
accountants registered in the People's Republic of China as having been
fully and duly made in accordance with PRC laws and regulations. There
is no agreement, arrangement or obligation requiring the transfer or
assignment of, or the grant to a person of the right (conditional or
not) to require the transfer or assignment of the whole or any part of
the equity interest in the registered capital of the Panyu Company
(including, without limitation, an option or right of pre-emption).
5.2.16 (Intentionally omitted)
5.2.17 (Intentionally omitted)
5.2.18 (Intentionally omitted)
5.2.19 (Intentionally omitted)
5.2.20 No other persons or companies, except those mentioned in the
Preliminary Remarks of the Agreement, hold any direct or indirect
interest in the Companies (including, without limitation, any right
(conditional or not) to require the allotment, issue, transfer,
assignment, redemption or repayment of, a share in the capital of the
Hong Kong Company or any equity interest in the registered capital of
the Panyu Company) and no rights to grant such interests exist.
5.2.21 (Intentionally omitted)
5.2.22 (Intentionally omitted)
5.2.23 The Seller is the sole beneficial owner of the Hong Kong Shares. There
is no, nor is there any agreement or arrangement to create any,
mortgage, charge, pledge, lien,
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option, restriction, right of first refusal, right of pre-emption,
third-party right or interest, other encumbrance or security interest
of any kind on, over or affecting any of the Hong Kong Shares and no
claim has been made by any person to be entitled to any of the
foregoing.
5.2.24 The Hong Kong Company is the sole legal and beneficial owner of all
equity interest in the registered capital of the Panyu Company. There
is no, nor is there any agreement on arrangement to create any
mortgage, charge, pledge, lien, option, restriction, right of first
refusal, right of pre-emption, third-party right or interest, other
encumbrance on security interest of any kind on, over or affecting any
part of the equity interest in the Panyu Company, and no claim has been
made by any person to be entitled to any of the foregoing.
5.2.25 (Intentionally omitted)
5.2.26 None of the Companies owns or holds any other equity, interest, shares,
participations or sub-participations of any kind in any other person or
entity (other than the entities listed in Attachment 5.2.26).
5.2.27 The Seller has the unrestricted right to freely dispose of the Hong
Kong Shares. There are no restrictions regarding the right to dispose
of, or rights of third parties regarding the Hong Kong Shares.
Sub-participations (Unterbeteiligungen) do not exist.
5.2.28 (Intentionally omitted)
5.2.29 (Intentionally omitted)
5.2.30 (Intentionally omitted)
5.2.31 (Intentionally omitted)
5.2.32 (Intentionally omitted)
5.2.33 None of the Companies has any right or obligation to acquire or to
subscribe to any equity, shares or other interest in any other person
or entity and no person or entity has the right to call for the
allotment, issuance, conversion, sale or transfer of any share or
interest of, or other securities as the case may be, giving rise to a
right over the capital of or equity interest in any of the Companies.
5.2.34 The Seller has full power and authority, and has taken all necessary
and proper action, to execute and deliver the Agreement and any other
agreements and instruments executed in connection with the Agreement
and to consummate the transactions contemplated hereby and thereby.
Such agreements and instruments when executed and delivered will
constitute valid, binding and enforceable obligations of the Seller.
5.2.35 None of the Companies is over-indebted or insolvent (uberschuldet oder
zahlungsunfahig), except as listed in Attachment 5.2.35.
14
5.2.36 None of the Companies is a party to any joint venture agreement,
cooperation agreement, working party agreement
(Arbeitsgemeinschaftsvertrag) or similar contractual arrangement with
third parties (excluding membership in professional associations).
5.2.37 None of the Companies has branch offices or other business operations
apart from the administrative headquarters.
5.2.38 (Intentionally omitted)
5.2.39 Neither the execution or delivery of the Agreement and any other
agreements or instruments executed or to be executed in connection with
the Agreement to which the Seller will become a party, nor the
consummation of the transactions contemplated hereby or thereby:
(a) requires any filing or registration with, or permit,
authorisation, consent or approval of, any court,
governmental, administrative or regulatory authority or any
third party which will not or has not been done,
(b) violates any legal provisions or instruments or other
agreements the Seller is subject to,
(c) violates the memorandum and/or articles of association of the
Companies or similar legal provisions or instruments the
Companies are subject to,
(d) conflicts with, violates, results in breach of, or constitutes
a default under, any contract, agreement, arrangement or
instrument to which any of the Companies is a party or by
which any of the Companies is bound or relieves any other
party to such contract, agreement, arrangement or instrument
of its obligations thereunder or entitles any such party to
terminate, amend, supplement, suspend or renegotiate such
contract, agreement, arrangement or instrument,
(e) creates or increases the amount of any liability or obligation
of any of the Companies under such contract, agreement,
arrangement or instrument (or give any other party the right
to accelerate the obligation thereunder or claim any fee or
penalty with respect thereto) or any liability or obligation
for which the Purchaser or any of the Companies will assume
responsibility following the date of the Agreement, or
(f) will result in the lapse of rights of any of the Companies.
5.2.40 (Intentionally omitted)
5.3 Financial Matters
5.3.1 The Seller will procure delivery to the Purchaser the audited financial
statement (balance sheet and profit and loss account) of the Hong Kong
Company for the fiscal year ending 31 March 2000 as well as the audited
consolidated financial statement of the Companies for the fiscal year
ending 31 March 2000 on or before 30 June 2000 (the
15
financial statement of the Hong Kong Company and the consolidated
financial statement of the Companies together, the "FINANCIAL
STATEMENTS"). The Financial Statements will be prepared with the due
diligence of an orderly and prudent businessman in accordance with the
requirements of the relevant laws of Hong Kong and on a consistent
basis in accordance with generally accepted accounting principles and
practices of Hong Kong. The Financial Statements will be audited and
certified without qualification by the firm of auditors of the Hong
Kong Company. The Financial Statements will contain all known assets
and all recognizable liabilities. All recognizable risks, depreciation
in value and/or losses will be reflected by sufficient depreciation,
value adjustments or provisions. The Financial Statements will be
complete and correct and will truly and fairly reflect the economic,
financial and profit situation of the Hong Kong Company or, as the case
may be, the consolidated economic financial and profit situation of the
Companies as of the date and for the period of the Financial
Statements.
5.3.2 The Seller will procure delivery to the Purchaser the audited financial
statement (balance sheet and profit and loss account) of the Panyu
Company for the fiscal year ending 31 December 1999 on or before 30
June 2000 (the "FINANCIAL STATEMENT OF THE PANYU COMPANY"). The
Financial Statement of the Panyu Company will be prepared with the due
diligence of an orderly and prudent businessman in accordance with the
requirements of the relevant laws and regulations of the PRC and on a
consistent basis in accordance with generally accepted accounting
principles and practices of the PRC. Such Financial Statement of the
Panyu Company will be audited and certified without qualification by
the auditors of the Panyu Company. The Financial Statement of the Panyu
Company will contain all known assets and all recognizable liabilities.
All recognizable risks, depreciation in value and/or losses will be
taken care of by sufficient depreciation, value adjustments or
provisions with the exception of potential provisions in connection
with the past business practices of the Panyu Company. The Financial
Statement of the Panyu Company will be complete and correct and will
correctly reflect the economic, financial and profit situation of the
Panyu Company as of the date and for the period of the Financial
Statement of the Panyu Company with the exception of potential
provisions in connection with the past business practices of the Panyu
Company. The exception made in the two preceding sentences regarding
the Panyu Company is also applicable to all other representations,
warranties and guarantees of the Seller regarding the Panyu Company
referred to in the Agreement.
5.3.3 (Intentionally omitted)
5.3.4 (Intentionally omitted)
5.3.5 All the tangible assets having a book value in excess of HK$300,000
(Hong Kong Dollar: three hundred thousand) reflected in the Financial
Statements are fit to be used and in good operating condition and
repair (with the exception of normal wear and tear). All the tangible
and intangible assets, properties and rights reflected in the Financial
Statements are in unrestricted ownership of the Companies, which the
Companies can freely dispose of, and which are, except as set forth
under section 5.3.6, free and clear of any mortgages, charges, pledges,
liens, encumbrances or other rights or
16
security interests of third parties and comprise all the business
assets which are necessary for carrying on the business of the
Companies as now carried on and such assets, properties and rights,
were sufficient to produce the income for the period between 31 March
2000 and the Transfer Date as shown on the relevant income statements
for that period contained in the relevant financial statements other
than assets, properties and rights not owned by the Companies which
were used by the Companies pursuant to binding agreements with (i) the
Seller as set forth in Attachment 5.3.5(a) or (ii) third parties as
listed in Attachment 5.3.5(b). The Companies do not have any
liabilities that are not directly related to, and that are not arising
directly out of their business. Each single asset has a value of at
least the amount as shown in the Financial Statements.
5.3.6 The stock (Vorrate) stated in the Financial Statements is only
encumbered with title retention rights (Eigentumsvorbehaltsrechte) or
other securities for liabilities which came into existence during the
ordinary course of the business and which are shown in the Financial
Statements. The stock of the Companies is readily saleable or properly
reserved against. The stock of the Companies as stated in the Financial
Statements has been valued in accordance with the generally accepted
accounting principles and practices of Hong Kong.
5.3.7 The Financial Statements including the notes (Anhang) thereto, makes
full and adequate disclosure of, and provision for, all obligations and
liabilities of the Companies to which they relate as of the date
thereof. The Companies do not have any liabilities, debts, claims or
obligations (including "off-balance sheet" liabilities, debts, claims
or obligations) and nothing of the foregoing comes into existence out
of events, actions or omissions occurring during the time period up to
the Transfer Date in excess of HK$750,000 (Hong Kong Dollar: seven
hundred and fifty thousand) in each single case, whether accrued,
absolute, contingent or otherwise, and whether due or to become due,
other than (i) as fully provided for in the Financial Statements, or
(ii) trade payables and accrued expenses incurred in the ordinary
course of business since the respective dates of the Financial
Statements.
5.3.8 (Intentionally omitted)
5.3.9 (Intentionally omitted)
5.4 Real Estate Property
(a) The Companies are the legal and beneficial owners of the real
estate property described in Attachment 5.4(a) as to location,
size and ownership (the "REAL ESTATE") and have good and
marketable title to the Real Estate. The Real Estate described
in Attachment 5.4(a) is identical to such real estate property
which is marked with red colour on the maps contained in
Attachment 5.4(a). Such Real Estate property is only
encumbered as shown in Attachment 5.4(a). The Companies are
entitled to and have exclusive vacant possession of the Real
Estate. The Companies have no obligations to pay local
improvement assessments in respect of the Real Estate. There
are no mortgages, other security interests or encumbrances on
the Real Estate, other than those set forth
17
above, which may result in any financial obligation of the
Companies or would have a detrimental effect on the present
and future use of the Real Estate.
(b) (Intentionally omitted)
(c) (Intentionally omitted)
(d) (Intentionally omitted)
(e) (Intentionally omitted)
(f) (Intentionally omitted)
(g) All real estate property leased or rented by the Companies is
described in Attachment 5.4(g) as to lessor, lessee, location,
size and annual lease payment (the "LEASED Property"). All
consents (including mortgagee consents) required in connection
with the lease or tenancy agreements have been obtained and
have not been withdrawn. The use of the Leased Property by the
Companies is not in breach of the permitted use specified in
the lease or tenancy agreements. The lessee under such lease
or tenancy agreements has not committed a material violation
of the lease or tenancy agreement which would give the owner
or lessor of the real estate property the right to prematurely
terminate the lease or tenancy agreement concerned. The
Companies are not in default of payments or other obligations
owed under the lease or tenancy agreements. The lessor has not
given notice of termination regarding such lease or tenancy
agreements.
(h) (Intentionally omitted)
(i) (Intentionally omitted)
(j) The Companies do not use or possess any real estate property
which is neither the Real Estate nor the Leased Property.
The Companies do not own and have not leased any real estate
property which is not set forth in Attachment 5.4(a) (Real
Estate) and Attachment 5.4(g) (Leased Property).
The Companies do not have any obligation to acquire or lease
any real estate property.
(k) The Companies have not leased to any party any real estate
property wherever located.
(l) During the last 5 (five) years the Companies
(i) have not sold any real estate property wherever
located and
(ii) have terminated lease agreements regarding real
estate property listed in Attachment 5.4(l)(ii). The
Companies do not have any outstanding
18
obligations under such lease agreements, including
without limitation, any obligation to make payments
or satisfy any claims arising from or in connection
with such lease agreements.
(m) To the best knowledge of the Seller after due inquiry, the
buildings of the Real Estate and the buildings used by the
Companies have been erected in compliance with the relevant
laws applicable to the buildings at their respective location
and are used and maintained in compliance with such laws. The
Real Estate is not subject to the laws regarding protection of
monuments (Denkmalschutz). All public permits and licences
required for the construction and operation of the buildings
and constructions installed on the Real Estate or on the
buildings used by the Companies have been obtained. No
withdrawal or revocation of such public permits and licences
has been threatened and there are no circumstances which would
allow such withdrawal or revocation of any such public permit
or licence. All statements in the application for such public
permits and licences are, and to the best knowledge, all
statements in such public permit and licences are true,
accurate and complete and all permits and licences that are
necessary or useful for the operation of the buildings and
constructions are transferable.
(n) There are no disputes or outstanding or expected notices
(whether given by a lessor, a licensor, a government authority
or any other person) affecting the Real Estate. The Companies
have duly performed, observed and complied with and there is
no subsisting breach of any covenants, restrictions,
conditions, agreements, statutory requirements, by-laws,
orders, building regulations or other obligations affecting
the Real Estate or the use thereof and all outgoings, rents
and service charges have been disclosed and paid to date.
5.5 Period following the end of the recent fiscal year
Since 31 March 2000 until the date of the Agreement the business and
the operations of the Companies have been conducted according to the
principles of a prudent businessman; no changes in the business
activities or the financial circumstances or the kind and manner of
conducting the business of the Companies have occurred, which are
outside the ordinary course of the business activities of the Companies
and which are not consistent with past practices. Without limiting the
foregoing, since 31 March 2000 until the date of the Agreement:
(a) The Companies have not suffered any material adverse effect
on, or material adverse change in the condition (financial or
otherwise), business, operations, assets, liabilities, results
of operation, cash flows, or prospects.
(b) The Companies have not incurred any obligation (contingent or
otherwise) or entered into any contract, agreement or
arrangement which, ab initio, either
(i) requires a payment by any party in excess of, or a
series of payments which in the aggregate exceed,
HK$1,500,000 (Hong Kong Dollar: one million and five
hundred thousand) or provides for the delivery of
19
goods or performance of services, or any combination
thereof, having a value in excess of HK$1,500,000
(Hong Kong Dollar: one million and five hundred
thousand), or
(ii) has a term in excess of, or requires the performance
of any obligations by the Companies over a period in
excess of 6 (six) months.
(c) The Companies have not taken any action, or entered into or
authorised any contract, agreement or arrangement or
transaction, other than in the ordinary course of business and
consistent with past practice. None of the Companies incurred
any obligations in excess of HK$600,000 (Hong Kong Dollar: six
hundred thousand) in the aggregate which are not shown in the
books of the Companies or which were not incurred in the
ordinary course of the business of the Companies.
(d) The Companies have not sold, transferred, conveyed, assigned
or otherwise disposed of any of their assets or properties in
each single case in excess of HK$600,000 (Hong Kong Dollar:
six hundred thousand), except sales of inventory in the
ordinary course of business and consistent with past practice.
(e) The Companies have not acquired or disposed of any shares or
interest in other companies or partnerships.
(f) The Companies have not entered into, authorised, or permitted
any transaction with the Seller.
(g) The Companies have not authorised for issuance, issued, sold,
delivered or agreed or committed to issue, sell or deliver
(whether through the issuance or granting of options,
warrants, convertible or exchangeable securities, commitments,
subscriptions, rights to purchase or otherwise) any of their
capital or any other securities, or amended any of the terms
of any such capital or securities. The Companies have not
changed their corporate documents or changed their registered
capital.
(h) The Companies have not split, combined, or reclassified any
interests in their capital, declared, set aside or paid any
dividend or other distribution (whether in cash, securities or
property or any combination thereof) in respect of their
capital, or redeemed or otherwise acquired any capital or
securities of the Companies.
(i) The Companies have not made any borrowings or entered into any
agreements to borrow, incurred any debt or applied for the
granting or increase of a credit line (other than trade
payables in the ordinary course of business and consistent
with past practice), or assumed, guaranteed, endorsed (except
for the negotiation or collection of negotiable instruments in
transactions in the ordinary course of business and consistent
with past practice) or otherwise become liable (whether
directly, contingently or otherwise) for the obligations of
any other person or entity, or made any payment or repayment
in respect of
20
any indebtedness (other than trade payables and accrued
expenses in the ordinary course of business and consistent
with past practice).
(j) The Companies have not made any loans or extensions of credit
to, advances or capital contributions to, or investments in,
any other person or entity in excess of HK$300,000 (Hong Kong
Dollar: three hundred thousand) in each single case or
HK$750,000 (Hong Kong Dollar: seven hundred and fifty
thousand) in the aggregate.
(k) The Companies have not entered into, adopted, amended or
terminated any bonus, profit sharing, compensation,
termination, stock option, stock appreciation right,
restricted stock, performance unit, pension, retirement,
deferred compensation, employment, severance or other employee
benefit agreements, trusts, plans, funds or other arrangements
for the benefit or welfare of any director, officer,
consultant or employee, or increased in any manner the
compensation or fringe benefits of any director, officer,
consultant or employee or paid any benefit not required by any
existing plan and arrangement or entered into any contract,
agreement, commitment or arrangement to do any of the
foregoing in excess of an annual obligation of HK$450,000
(Hong Kong Dollar: four hundred and fifty thousand) in each
single case.
(l) The Companies have not except for capital expenditures
contemplated by section 5.5 (m) acquired, leased or encumbered
any assets or properties outside the ordinary course of
business or any assets with a market value of more than
HK$300,000 (Hong Kong Dollar: three hundred thousand) in each
single case or HK$750,000 (Hong Kong Dollar: seven hundred and
fifty thousand) in the aggregate.
(m) The Companies have not authorised or made any capital
expenditures which individually is in excess of HK$600,000
(Hong Kong Dollar: six hundred thousand).
(n) The Companies have not made any tax election or settled or
compromised any liability for Taxes (as defined in section
5.6).
(o) The Companies have not paid any amount, performed any
obligation or agreed to pay any amount or perform any
obligation, in settlement or compromise of any suits or claims
of liability against the Companies or any of their respective
board members, managing directors, officers, employees or
agents in excess of HK$150,000 (Hong Kong Dollar: one hundred
and fifty thousand) in each single case and HK$300,000 (Hong
Kong Dollar: three hundred thousand) in the aggregate.
(p) The Companies have not been subject to a substantial change or
termination of any Material Contract (as defined in section
5.13.5 below).
21
5.6 Taxes and Other Levies
5.6.1 The Companies have:
(a) paid when due (and, if not yet due, has fully and adequately
provided for on the Financial Statements) all Taxes (as
defined below), levies, social contributions, duties or other
assessments or charges of any nature whatsoever imposed by any
taxing authority and any amounts representing the recapture of
investment and other incentives. The Companies have not
incurred any liabilities for Taxes other than in the ordinary
course of business for any taxable year for which the
applicable statute of limitations has not expired; there are
no liens (other than liens for current Taxes not yet due and
payable) upon the assets or properties of the Companies. The
Companies have not granted or been requested to grant any
waiver or extension of any statute of limitations applicable
to any claim for Taxes,
(b) filed all Tax Returns (as defined below) for all periods
through and including the date of the Agreement as required by
applicable statutes, law, regulations or common practice and
paid (and, if not yet due, has fully and adequately provided
for in the Financial Statements) all Taxes shown as due on the
Tax Returns and on all tax assessments. Each tax return is
true, accurate and complete and the Companies have not and
will not have any additional liability for Taxes with respect
to any Tax Return, other than as reflected as liabilities on
the Financial Statements. No amended Tax Returns have been or
are proposed to be filed by the Companies nor has any
liability for Taxes been settled or compromised. The Companies
have furnished to the Purchaser correct and complete copies of
all Tax Returns for all tax years for which the applicable
statutes of limitations have not expired. The Companies have
copies of all Tax Returns and supporting work schedules for
all tax periods or portions thereof ending before or including
the Transfer Date and has not destroyed or otherwise disposed
of any such records,
(c) paid the current adequate advance payments for all relevant
Taxes,
(d) duly withheld or collected all Taxes the Companies are
required to withhold or collect,
(e) filed tax returns in the countries listed in Attachment
5.6.1(e) and has no current or former presence in any taxing
jurisdiction in which it does not file Tax Returns that may
cause the Companies to be subject to any Tax in such taxing
jurisdiction,
(f) not made any hidden profit distributions,
(g) not and do not expect to be involved in a dispute in relation
to Tax. No Tax Authority has investigated or indicated that it
intends to investigate the Companies' tax affairs,
22
(h) not entered into nor have agreed to operate any special
arrangement (that is, an arrangement which is not based on a
strict application of all relevant Tax legislation) with a Tax
Authority in relation to the Tax affairs of the Companies. All
notices and other communications from a Tax Authority
requiring or permitting the Companies to deal with their Tax
affairs in a particular manner or on a particular basis are in
the Companies' possession and copies thereof have been made
available to the Purchaser,
(i) not been and will not be parties to or otherwise involved in
any transaction, agreement or arrangement otherwise than by
way of a bargain at arm's length, or any transaction,
agreement or arrangement (whether or not by way of a bargain
at arm's length) under which they have been or are required to
make any payment for any goods, services or facilities
provided to them which is in excess of the market value of
such goods, services or facilities or under which they have
been, or are or may be required to provide goods, services or
facilities for a consideration which is less than the market
value of such goods, services or facilities and/or in
consequence of which they are or will be liable to Tax in
respect of an amount deemed for Tax purposes to be their own
income or gains but actually is not their income or gains,
(j) not been liable and will not become liable for Tax which is
primarily or directly chargeable against or attributable to a
person other than the Companies or which is charged by
reference to the income or gains of or any supplies made by
another person,
(k) have caused all documents by virtue of which the Companies
have any right or an interest in their enforcement to be duly
stamped.
5.6.2 "TAX" or "TAXES" means all income, corporation, gross receipts,
profits, sales, use, value added, transfer, employment, social
contribution, labour insurance contribution, franchise, license,
payroll, unemployment, exercise, capital duties, customs duties,
environmental, property, estimated, withholding or other taxes, fees,
stamp taxes and duties, assessments or charges of any kind whatsoever
(whether payable directly or by withholding), together with any
interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority with respect thereto.
"TAX RETURN(S)" means any return (including any consolidated, combined
or pro forma return), report, declaration, claim for refund,
information return or statement, relating to any Tax, including any
schedule or attachment thereto or any amendment thereof.
5.6.3 No Tax Return of the Companies is currently under examination by any
taxing authority nor have the Companies been contacted by any taxing
authority in order to commence such an examination. There are no
pending appeals or other administrative or judicial proceedings with
respect to any Tax imposed with respect to the activities of the
Companies.
5.7 Intellectual Property Rights
23
(a) Attachment 5.7(a)(i) sets out a true, accurate and complete
list of all patents including utility patents and design
patents (Patente, Gebrauchsmuster und Geschmacksmuster),
trademarks/service marks (▇▇▇▇▇▇) (including logos), business
or trade name including respective applications which are
owned by, licensed to, necessary for or used in the business
of the Companies (including intellectual property rights
licensed to the Companies from the Seller) for products
designed, developed, manufactured, used, marketed, sold,
distributed, serviced or maintained as well as for related
services as of the date of the Agreement or at any time during
the 2 (two) year period prior to the date of the Agreement or
in development as of the date of the Agreement or at any time
during the 2 (two) year period prior to the date of the
Agreement (hereinafter the "INTELLECTUAL PROPERTY RIGHTS").
Attachment 5.7(a)(ii) sets out a true, accurate and complete
list of all such Intellectual Property Rights which are owned
by the Companies (the "INTELLECTUAL PROPERTY RIGHTS OF THE
COMPANIES").
(b) Besides the Intellectual Property Rights there are no
intellectual property rights including respective applications
which are owned by the Seller which relate to the business of
the Companies.
(c) Except for design patents the Companies have fully carried out
their business activities and have used all trademarks/service
marks (▇▇▇▇▇▇) included in the Intellectual Property Rights of
the Companies to the extent required by law for the Companies
to register and enforce such trademarks/service marks.
(d) Third parties neither have challenged nor have threatened to
challenge the Intellectual Property Rights by means of filing
objections, taking action for cancellation or otherwise.
(e) To the best knowledge of the Seller third parties neither have
infringed the Intellectual Property Rights nor have made
unauthorized use of the Know-How.
(f) No intellectual property rights of third parties are
conflicting with or prevent the unlimited use of the
Intellectual Property Rights and Know-How; the products
produced and sold and the services provided by the Companies
and any process, method and design employment in connection
with such products or services and the marketing, use or
provision by the Companies of any such product or service do
not infringe or conflict with any intellectual property rights
of any other person or entity; none of the Intellectual
Property Rights is subject to any pending or threatened
litigation or claim of infringement and no written notice has
been received by the Seller and the Companies contesting the
right of the Companies to use any Intellectual Property
Rights. The Companies can make unlimited use of their
Know-How.
(g) All Intellectual Property Rights of the Companies are properly
registered and maintained and valid, or a proper application
for registration has been filed with regard to such
Intellectual Property Rights of the Companies. The Companies
have not granted any licence or agreed to pay or receive any
royalty in respect
24
to the Intellectual Property Rights of the Companies. The
Intellectual Property Rights of the Companies are free and
clear of any liens, encumbrances and other rights of third
parties.
(h) All Intellectual Property Rights licensed to, but not owned by
the Companies are shown in Attachment 5.7(h) and all such
licenses are valid and enforceable and the Companies are not
in breach or default with respect to any such license or
royalty agreements nor have they received any written notice
of termination thereunder.
(i) The Companies have not granted or received Know-How licences.
(j) The Companies own or hold valid and enforceable licenses for
the use of all software rights and applications used in their
business.
(k) All software and computers used in the business of the
Companies is Year 2000 compliant.
5.8 Insurance
Attachment 5.8 contains a true, accurate and complete list of all
insurance policies applicable to the Companies (and its respective
business and assets) including the third party liability insurance
contracts (setting forth whether the third party liability insurance
contract is of claim made or occurrence type) in each case with the
statement of the insured amount and the annual premium. Such insurance
policies cover all Real Property and personal property owned, leased or
used by the Companies. Such insurance policies provide type and amounts
of insurance customarily obtained by businesses similar to the business
of the Companies.
5.9 Approvals
5.9.1 Attachment 5.9.1 sets out a true, accurate and complete list of all
material licences, certificates, permits, permit applications,
franchises, private product approvals ("Approvals") held by or applied
for by the Companies. The Approvals listed in Attachment 5.9.1 are the
only material approvals required according to public and private law to
conduct the respective business operations of the Companies, as
presently conducted and the revocation, withdrawal or refusal of any of
the Approvals is not pending. The business of the Companies is carried
out in compliance with such Approvals. Except as listed in Attachment
5.9.1 all material approvals required for the production, marketing and
sale of all products and the import and export of all materials of the
Companies have been obtained and are valid and in full force and
effect. All products sold by the Companies comply with the applicable
statutory or other legal provisions and the Approvals.
Neither the Seller nor the Companies are aware of nor have received
notice that any national, state or local governmental or regulatory
authority or agency (the "AUTHORITIES") in their respective
jurisdiction has commenced, or is considering commencing, any action to
seize, withdraw any of the Approvals of, or recall any device
developed, produced, manufactured, tested, distributed, packaged or
sold or
25
serviced by the Companies, and have no grounds to believe that these or
other enforcement actions are imminent.
5.9.2 Except as previously disclosed to Paxar Corporation or its accountant
to the best knowledge of the Seller after due inquiry, the Companies
have not and no officer, employee, or agent of the Companies has made
an untrue statement of material fact or fraudulent statement to the
Authorities, failed to disclose a material fact required to be
disclosed to the Authorities, or committed an act, made a statement, or
failed to make a statement that could reasonably be expected to provide
a basis for the Authorities to invoke any investigative or other
proceedings.
5.9.3 Except as previously disclosed to Paxar Corporation or its accountant
to the best knowledge of the Seller after due inquiry, the Companies do
not violate in their businesses any right or rights of third parties.
The Companies and their businesses and all of their properties, assets
and equipment are in compliance with, and no violation exists under,
any and all laws, statutes, rules, regulations, ordinances and decrees
applicable to the Companies and to such businesses, properties assets
and equipment (including applicable laws, regulations and orders of any
Authorities). The Companies are currently not the subject of any
compliance or enforcement actions by any Authorities nor are they
subject to any consent orders or decrees. No notice from any
Authorities has been received by the Companies claiming any violation
of any law, statute, rule, regulation, ordinance or decree or requiring
any work, construction or expenditure, or asserting any tax, assessment
or penalty.
5.10 Pension/Labour
5.10.1 the Companies have not entered into any labour union agreements, works
council agreements (Betriebsvereinbarungen) or collective bargaining
agreements (Tarifvertrage). No further labour union, works council or
collective bargaining agreements are currently being negotiated in
respect of the Companies.
5.10.2 (Intentionally omitted)
5.10.3 the relationships of the Companies with their employees are good and
there is, and during the past 3 (three) years prior to the date of the
Agreement there has been, no material dispute with labour unions,
labour strike, dispute, slow-down, work stoppage or other labour
difficulty actually pending or threatened against or involving the
Companies.
5.10.4 the Companies have conducted and currently are conducting their
business in full compliance with all laws, rules, regulations and
ordinances, labour union, works council agreements and collective
bargaining agreements relating to employment and employment practices,
terms and conditions of employment, contributions to social and labour
insurance, leave, wages (including minimum wages), normal and overtime
hours, overtime pay, and nondiscrimination employment.
5.10.5 Attachment 5.10.5 sets out a true, accurate and complete list of the
names, titles, locations, annual compensation and all bonuses,
allowances, benefits and similar
26
payments made with respect to each such individual for the current and
preceding fiscal years for all board members, managing directors,
directors, officers and employees of the Companies who have an annual
base salary of more than HK$450,000 (Hong Kong Dollar: four hundred and
fifty thousand) or who can only be terminated by the Companies with a
notice period of 3 (three) or more months.
5.10.6 (Intentionally omitted)
5.10.7 (Intentionally omitted)
5.10.8 the Companies have no obligations arising from the termination or
cancellation of any employment agreement exceeding HK$150,000 (Hong
Kong Dollar: one hundred and fifty thousand) in each single case.
5.10.9 The Companies have no obligation, whether contractually established or
by plant exercise (betriebliche Ubung), to pay or grant to any of its
current or former employees any salary, fringe benefit exceeding
HK$450,000 (Hong Kong Dollar: four hundred and fifty thousand) annually
in each single case.
5.10.10 (Intentionally omitted)
5.11 Negative Representations
The Companies are not party or subject to:
(a) rental, leasing or similar contracts with continuing
obligations which in each single case provide for an annual
payment in excess of HK$750,000 (Hong Kong Dollar: seven
hundred and fifty thousand) except as listed in Attachment
5.11(a),
(b) consultancy and/or commission agreements (whether oral or
written) which provide for an annual payment in excess of
HK$600,000 (Hong Kong Dollar: six hundred thousand),
(c) obligations owed to a benevolent fund, pension liabilities,
pension- and related benefit liabilities or other agreements
for payments in case of sickness, disability, maternity, old
age, unemployment, long service and severance payments except
as listed in Attachment 5.11(c),
(d) sales agreements with a value of more than HK$750,000 (Hong
Kong Dollar: seven hundred and fifty thousand) annually of the
Companies which have different terms compared to the standard
sales contract of the Companies which is contained in
Attachment 5.11(d)(i), whereby sales agreements with varying
delivery terms, discounted payment terms of less than 61
(sixty-one) days and annual volume bonuses of less than 3%
(three percent) of invoiced prices are not considered as
having different wording compared to the standard sales
contract of the Companies,
27
(e) agreements regarding compensation, dependant on profit or
turnover of the Companies, profit sharing or similar
arrangements,
(f) competition restraints or contracts or other documents that
limit the freedom of the Companies to compete or similar
restrictions to the detriment of the Companies,
(g) sureties, guarantees, comfort letters, performance bonds,
letters of credit or similar undertakings regarding the
indebtedness of any person or entity incurred or issued by the
Companies with a face value of more than HK$750,000 (Hong Kong
Dollar: seven hundred and fifty thousand),
(h) contingent or actual repayment obligations in connection with
grants or subsidies received by the Companies,
(i) contractual obligations of whatsoever kind which are not shown
in the Financial Statements with a face value of more than
HK$750,000 (Hong Kong Dollar: seven hundred and fifty
thousand), except as set forth in section 5.11(a) through to
5.11(h) or in sales agreements,
(j) pending, expected or threatened actions, claims, disputes,
inquiries or proceedings before courts, administrative
authorities or arbitration bodies, investigations or inquiries
by administrative authorities, including, without limitation,
those relating to environmental pollution (including any
criminal investigations) where the Companies are a party to or
involved or named in or where properties or assets of the
Companies are involved in, with an aggregate value in dispute
(Streitwert) in excess of HK$1,500,000 (Hong Kong Dollar: one
million and five hundred thousand]). There are no facts known
which could give reason to institute the aforementioned
proceedings,
(k) forward contracts regarding goods, foreign currencies and
interest (Waren-, Devisen- und Zinstermingeschafte),
(l) licence agreements with the Companies as licensor or licensee
regarding Intellectual Property Rights or other unprotected
Know-How except as listed in Attachment 5.11(l),
(m) contractual or statutory obligations to make lump sum payments
(Abfindungen) of whatsoever kind,
(n) commitments to pay out loans or loans with a principal amount
of more than HK$30,000 (Hong Kong Dollar: thirty thousand)
which have been paid out by the Companies,
(o) distribution agreements (distributor or commercial agent
agreements) (Eigenhandler oder Handelsvertretervertrage) of
whatsoever kind (including similar commission arrangement)
except as listed in Attachment 5.11(o)(i) (appointing the
Companies as distributor or commercial agent) and Attachment
5.11(o)(ii) (appointing a third party as distributor or
commercial agent). All
28
such agreements are in conformity with the respective
applicable law including EU-law, if EU-law is applicable on
such agreements, except as stated in the aforementioned
attachments,
(p) powers of attorney of whatsoever kind including bank,
cashier's or powers of attorney regarding bills of exchange,
(q) acts in breach of antitrust or unfair competition laws and
regulations,
(r) orders by the Companies, except in the ordinary course of
business, especially no orders for investments in an amount
exceeding HK$600,000 (Hong Kong Dollar: six hundred thousand)
in each single case,
(s) obligations outside the ordinary course of business,
(t) any judgement or order rendered by court or administrative
proceedings or any settlement entered into in such context
which would substantially impair or restrict the Companies in
conducting their businesses, in acquiring or selling of goods
or assets or in competing in the market,
(u) agreements with an annual volume of more than HK$750,000 (Hong
Kong Dollar: seven hundred and fifty thousand) which either do
not automatically come to an end 6 (six) months after the
entering into of the Agreement or which cannot be terminated
by the Companies so that they come to an end the latest within
6 (six) months after the entering into of the Agreement,
(v) agreements which in each single case lead to payments which
are received or which have to be made by the Companies of more
than HK$750,000 (Hong Kong Dollar: seven hundred and fifty
thousand) annually or which are otherwise of special
significance for the Companies other than sales in the
ordinary course. The Seller does not know of any impairment of
the performance of obligations arising out of such agreements,
especially the Companies are not in default of any of their
obligations arising out of such agreements,
(w) agreements which are to the best knowledge of the Seller not
valid,
(x) loan agreements and other banking and overdraft facilities
other than those set forth in Attachment 5.11(x).
5.12 Environmental
No harmful substances (Schadstoffe) have been let (einlassen), have
seeped (einsickern), have been stored (einlagern) or otherwise have
been put (einbringen) into the ground (Erdreich), water (Grundwasser
und Oberflachenwasser) and air (▇▇▇▇) of any of the property, owned,
leased or used by the Companies and no such substances have been on
such property in violation of any applicable laws. All harmful
substances have been dealt with (umgehen), stored (lagern) and disposed
of (entsorgen) in
29
compliance with all Environmental Laws and Environmental Permits
applicable from time to time when any such action has been taken.
The Companies are in compliance with all Environmental Laws and
Environmental Permits. All waste products generated by the Companies
are disposed of in compliance with applicable Environmental Laws in
effect now or at the time of such disposal, and, where applicable,
pursuant to and in accordance with all Environmental Permits.
There is no liability, whether asserted or unasserted, fixed or
contingent, relating to the real estate property, owned, leased or used
by the Companies which results from any environmental matters,
including, the use, discharge, disposal, storage, accumulation,
transport, leakage, spillage or other actions by the Companies with
respect to any harmful or toxic substances, hazardous waste or other
pollutants, contaminants or nuisances.
No claim has been made with respect to the operation of facilities of
the Companies resulting from any harmful substance, hazardous waste or
from any asbestos or similar materials used in the construction thereof
and there is no valid basis for any such claim.
For purposes of this Article:
(a) the term "ENVIRONMENTAL LAW(S)" means any law, statute,
regulation, ordinance, rule, order, decree, judgement, consent
decree, settlement agreement or governmental requirement
enacted, promulgated, entered into, agreed or imposed by any
government of any country in which the properties owned,
leased or used by the Companies are located, or any state or
political subdivision thereof and any entity, body or
authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government in such country, which relates to or otherwise
imposes liability or standard of conduct concerning
discharges, emissions, releases or threatened releases of
noises, odours or any pollutants, contaminants or hazardous or
toxic wastes, substances or materials, whether as matter of
energy, into ambient air, water, or land, or otherwise
relating to manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or
handling of pollutants, contaminants, or hazardous or toxic
wastes, substances or materials; and
(b) the term "ENVIRONMENTAL PERMIT(S)" means any permit, license,
approval, consent or other authorization required by pursuant
to any applicable Environmental Law.
5.13 Miscellaneous
5.13.1 Neither the Purchaser nor any affiliate of the Purchaser nor the
Companies have or shall have any liability or otherwise suffer or incur
any loss, cost or damage as a result of or in connection with any
brokerage or finder's fee or other commission of any person retained by
the Seller or the Companies in connection with any of the transactions
contemplated by the Agreement.
30
5.13.2 The managing director of the Hong Kong Company is listed in Attachment
5.13.2(i) and the legal representative of the Panyu Company is listed
in Attachment 5.13.2(ii). There are no other managing director, legal
representative or other persons who have authority under a power of
attorney or other document to represent the Companies.
5.13.3 Except as previously disclosed to the Purchaser and its accountant to
the best knowledge of the Seller after due inquiry, neither the
Companies nor the Subsidiary and Affiliates nor any of its respective
board members, managing directors, directors, officers, employees,
agents or representatives, nor any other person or entity acting on
behalf of any of them, has made, paid or received bribes, kickbacks or
other similar payments to or from any person, whether lawful or
unlawful.
5.13.4 Attachment 5.13.4 (i) contains a true, accurate and complete list of
all open accounts receivable of the Companies which came into existence
up to 31 March 2000 including its respective due dates and Attachment
5.13.4 (ii) contains a true, accurate and complete list of all open
liabilities of the Companies which came into existence up to 31 March
2000 including its respective due dates with the exception of such
accounts receivable and liabilities of the Companies which are
contained in the Financial Statements.
5.13.5 Attachment 5.13.5 contains a true, accurate and complete list of all
contracts, agreements or arrangements, other than contracts set forth
under section 13.4, by which the Companies are bound, or in respect of
which any of their assets or properties are subject, providing for an
aggregate annual payment obligation of more than HK$1,500,000 (Hong
Kong Dollar: one million and five hundred thousand) or with a
termination period of more than 6 (six) months (all contracts,
agreements or arrangements listed in Attachment 5.13.5, the "MATERIAL
CONTRACTS"). All Material Contracts (true, accurate and complete copies
of which have been delivered to the Purchaser) are in full force and
have not been terminated by any party thereto. The Companies are not in
default in the fulfillment of any of the obligations under or resulting
from such Material Contracts. No other party to such Material Contract
is in default of its obligations thereunder. The execution, delivery
and performance of the Agreement will not result in the breach,
cancellation and/or termination of any of the terms or conditions of or
constitute a default under any of the Material Contracts or affected or
give rise to a right of any other party to terminate or cancel any of
the Material Contracts.
5.13.6 The list of all bank accounts of the Companies set forth in Attachment
5.13.6 is complete and correct including the list of all persons which
are authorised to sign or to dispose of such accounts.
5.13.7 The Seller has not issued any guarantee (Garantien, Burgschaften,
Kreditauftrage) for the benefit of the Companies nor has a Company
issued any such guarantee for any of the other Companies.
5.13.8 The Companies do not have any credit-lines.
31
5.13.9 The information provided by the Seller and the Companies in the course
of the due diligence process to the Purchaser and on the Purchaser's
behalf to its advisors, is true, accurate and complete in all respects.
No information has been withheld which is of importance for the
evaluation of the Companies and their business.
5.14 Further Representations and Warranties
5.14.1 Without limiting the generality of the foregoing, the Seller makes
further representations and warranties as set out at Schedule 2 hereto.
5.14.2 The Seller further represents and warrants that:
(a) he does not own or hold any other equity, interest, shares,
participations or sub-participations of any kind in any other
person or entity (other than the Companies and the Shenzhen
Company and the entities listed in Attachment 5.14.2(a));
(b) prior to the Completion Date, he does not have any contract of
employment with any of the Companies;
(c) he will obtain written consent in respect of the change of
ownership of the Hong Kong Company from ▇▇▇▇▇▇ (Hong Kong)
Limited, the landlord of the premises leased by the Hong Kong
Company, on or before 31 May 2000.
(d) the Companies are not subject to any warranty claims and/or
product liability claims based on products or services sold,
delivered or manufactured by the Companies prior to the
Completion Date and for which no sufficient provision in the
Financial Statements have been made.
6. LEGAL CONSEQUENCES IN CASE OF VIOLATION OF REPRESENTATIONS, WARRANTIES
AND GUARANTEES
6.1 In case a representation or warranty or guarantee given by the Seller
in Article 5 and Schedule 2 should be incorrect, the Purchaser shall
give the Seller notice by registered letter and shall request the
Seller to bring about the contractual condition which would have
existed if such representation or warranty or guarantee would have been
fulfilled within a period, selected at the discretion of the Purchaser,
but being at least 60 (sixty) calendar days. In the event that
(i) the Seller is not able to bring about such contractual
condition, or
(ii) the Seller refuses to bring about such contractual condition,
or
(iii) the Seller fails to bring about such contractual condition
within the period of time identified in the Purchaser's
notice, and
(iv) the Purchaser or the Companies suffer any financial damage or
loss as a consequence of such breach of representation or
warranty or guarantee (whether or not the Seller has brought
about the contractual condition),
32
then at the discretion of the Purchaser, either (A) the Purchaser shall
reduce the Purchase Price (Minderung) in the respective amount of the
loss or damage arising from such breach of a representation or warranty
or guarantee or (B) the Seller shall put at the discretion of the
Purchaser or the Companies in the position the Purchaser or the
Companies would have been in if the representation or warranty or
guarantee were correct.
6.2 The Purchaser is only entitled to assert claims based on breach of
representations, warranties or guarantees if the aggregate amount of
such claims exceeds the amount of HK$3,000,000 (Hong Kong Dollar: three
million) provided that to the extent that the Binding Net Asset Value
exceeds HK$46,500,000, the Seller shall be entitled to offset such
excess amount against the claims of the Purchaser.
6.3 The aggregate amount of all claims of the Purchaser against the Seller
arising out of Article 6 and Schedule 2 shall not exceed 30% (thirty
percent) of the Purchase Price as reduced (if any) in accordance with
Article 4.
6.4 To the extent that representations or warranties or guarantees are
based upon knowledge (Kenntnis) or constructive knowledge
(Kennenmussen) of the Seller, knowledge or constructive knowledge of
the Seller or of the persons listed in Attachment 6.4 is or is deemed
to be knowledge or constructive knowledge of the Seller.
6.5 Rights of the Purchaser pursuant to Article 6 in connection with
Article 5 are excluded to the extent that losses or damages resulting
from a breach of representations, warranties and guarantees have lead
to a reduction of the Purchase Price according to section 4.1.
7. NO COMPETE RESTRAINT
7.1 The Seller shall not without prior written consent of the Purchaser,
7.1.1 for a period of 3 (three) years, beginning with the date of the
Agreement, commence or pursue any activity in the business area of
designing, developing, manufacturing, using, marketing, distributing
and selling woven labels, printed labels, merchandise tags and other
apparel identification products in which the Companies are active in at
the date of the Agreement in the territory of Hong Kong and People's
Republic of China no matter for his own account or in connection with
or to the benefit of any third party; the Seller shall neither support
such activities directly or indirectly, nor shall he receive any
economic benefit from such activities, nor shall they participate in an
enterprise in any way whatsoever which is active in such areas, nor
shall they disturb, or attempt to disturb, any business relationship
between any third party and the Companies or make any statement to any
third party, including the press or media, likely to result in adverse
or negative publicity for the Companies,
7.1.2 for a period of 3 (three) years, beginning with the date of the
Agreement, solicit, divert or attempt to solicit or divert any third
party who is, was, or was solicited to become, a customer or supplier
of the Companies at any time prior to the date of the Agreement,
33
7.1.3 for a period of 3 (three) years, beginning with the date of the
Agreement, cause any employee, distributor or advisor or independent
consultant (with the exception of attorneys, chartered accountants and
tax advisers) who is presently active for the Companies or has been
active for the Companies since January, 1990 or will be active for the
Companies in the future, or any client, customer or supplier of the
Companies, to become active for the Seller or for a company in which
the Seller participates or for a competing company in any way
whatsoever, be it for the Seller or to the benefit of any person, firm
or company,
7.1.4 at any time after the date of the Agreement provide or disclose to
third parties, neither directly nor indirectly, business secrets of the
Companies, and shall neither cause third parties to provide or to
disclose such business secrets, nor to promote or cover such provision
or disclosure, nor to use such business secrets for his personal
purposes.
7.2 For the purposes of section 7.1.1 there shall be disregarded the
financial interest of any person or company in a class of securities
which are listed on any recognised stock exchange if that interest is
less that 5 (five) per cent of that class.
7.3 For each individual breach of the provisions contained in section 7.1
the Seller shall pay to the Purchaser an adequate contractual penalty
in an amount to be assessed by the Purchaser according to Section 315
German Civil Code (Burgerliches Gesetzbuch, BGB). If a dispute arises
as to the adequacy of the amount of such contractual penalty, such
amount shall be assessed by the competent court upon request of the
Seller according to Section 315 para. 3 BGB. This provision, however,
does not affect the other remedies of the Purchaser to recover an
exceeding damage as well as the enforcement of other claims. Each day
during which a violation of section 7.1 continues is considered to be
an independent event triggering the contractual penalty.
7.4 The parties of the Agreement assume that the provisions contained in
section 7.1 and section 7.3 are reasonable. If at any time any of the
provisions of section 7.1 and/or section 7.3 shall be determined to be
invalid or unenforceable by reason of being vague or unreasonable as to
duration, territory, scope of activity or otherwise, then this Article
shall be considered divisible (with the other provisions to remain in
full force and effect) and the invalid or unenforceable provisions
shall become and be deemed to be immediately amended to include only
such duration, territory, scope of activity and other restrictions, as
shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter, and parties expressly
agreeing that the Agreement, as so amended, shall be valid and binding
as though any invalid or unenforceable provision had not been included
herein.
8. STATUTE OF LIMITATIONS
8.1 Any claims of the Purchaser pursuant to section 6.1 in connection with
Article 5 shall be time-barred after 2 (two) years following the date
of the Agreement, provided that
(i) any claims of the Purchaser pursuant to section 6.1 in
connection with section 5.1 and section 5.2 shall be
time-barred after 10 (ten) years following the date of the
Agreement and
34
(ii) any claims of the Purchaser pursuant to section 6.1 in
connection with section 5.6 shall be time-barred after 5
(five) years following the date at which the tax assessments
made in respect of the relevant periods of all the Taxes
payable by the Companies for the period up to the Transfer
Date have become final and binding (bestandskraftig).
8.2 The claims of the Seller are time-barred after 5 (five) years following
the date of the Agreement.
9. INSPECTION BY THE PURCHASER
9.1 Any knowledge obtained by the Purchaser or its advisers in the course
of the due diligence exercise or otherwise leave statements,
representations, warranties, guarantees and indemnities of the Seller
made in the Agreement untouched and leave also untouched the right of
the Purchaser to make claims based on such statements, representations,
warranties, guarantees and indemnities of the Seller made in the
Agreement.
10. TAXES
10.1 To the extent that the Companies are subject to payments of any Taxes
(as defined in section 5.6) relating to periods or events prior to the
Effective Date, the Seller hereby indemnifies and holds harmless the
Purchaser and the Companies from and against any and all such Taxes and
any other losses, cost and expenses (including attorney's fees and
disbursements) arising out of or in connection with the obligation to
pay the Taxes, but only to the extent that such payment to be made by
the Companies exceed the specific provisions relating thereto in the
Financial Statements.
10.2 After the Transfer Date the Purchaser will request the Companies, as
far as legally permissible, to give to the Seller reasonable access to
the books and records of the Companies, as necessary and appropriate,
to allow the Seller to safeguard its concerns and interests in tax
assessments relating to the period or events prior to the Effective
Date and the Purchaser is obliged at the cost of the Seller to appeal
against any tax assessments and to challenge a notice of assessment
upon the Seller's request concerning tax purposes involving all periods
prior to the Effective Date, but only to the extent that the affairs of
the Companies and the Purchaser are not thereby prejudiced.
10.3 Furthermore, the Purchaser shall ensure, to the extent legally
permissible, that the Seller is given reasonable opportunity to consult
with the Companies regarding any tax assessments of the Companies
relating to periods or events prior to the Effective Date, but only to
the extent the affairs of the Companies and the Purchaser are not
thereby prejudiced. The Seller is obliged to cooperate with the
Companies concerning any tax assessments of the Companies involving all
periods prior to the Effective Date.
10.4 An increase in the valuation of an asset and a decrease in the
valuation of a liability as consequence of a tax assessment of the
Companies do not lead to claims of the Seller against the Purchaser or
the Companies and do not reduce claims of the Purchaser and the
Companies against the Seller.
35
11. CONDITIONS PRECEDENT
11.1 Upon signing of the Agreement, Articles 16 and 17 shall become valid
and binding for the parties. The remainder of the Agreement, including
the sale and transfer of the Hong Kong Shares shall become valid and
binding upon the satisfaction of each of the following conditions
precedent (aufschiebende Bedingung):
(a) (Intentionally omitted)
(b) (Intentionally omitted)
(c) (Intentionally omitted)
(d) (Intentionally omitted)
(e) (Intentionally omitted)
(f) (Intentionally omitted)
(g) execution of the Employment Contract by the Seller and the
Hong Kong Company
(h) (Intentionally omitted)
(i) (Intentionally omitted)
11.2 Upon satisfaction of each of the conditions precedent set forth in 11.1
above, the Seller shall immediately notify the Purchaser in writing
thereof and submit to the Purchaser copies of the underlying documents,
if any.
11.3 If the conditions set forth in section 11.1 above have not been
satisfied by the Seller or waived by the Purchaser by 30 June 2000, the
Purchaser may until the day preceding the day of the satisfaction of
all such conditions rescind (zurucktreten) the Agreement by written
statement to the Seller in which case all commitments of the Seller and
the Purchaser hereunder shall terminate without any continuing
liability except that each party shall deliver to the other party all
documents, working papers and other materials furnished to it by the
respective other party in connection with the transaction contemplated
by the Agreement hereunder irrespective of whether such materials have
been furnished before or after the signing of the Agreement. Each party
will keep strictly confidential all information which has been so
revealed by the other party.
11.4 Completion shall take place at the offices of ▇▇▇▇▇▇▇▇ Chance on the
same date on which the last of the conditions precedent set out in
section 11.1 above has been satisfied or waived (the "COMPLETION
DATE").
11.5 At Completion, the Seller shall deliver or procure to be delivered to
the Purchaser those items set out in Schedule 1.
36
11.6 The Seller shall procure that the directors of the Hong Kong Company
shall convene and at Completion hold a meeting of the board of the Hong
Kong Company at which the directors shall:
(a) vote in favour of the registration of the Purchaser and its
nominee(s) as members or the Hong Kong Company in respect of
the Hong Kong Shares (subject to the production of duly
stamped transfers);
(b) revoke all existing mandates for the operation of bank
accounts and issue new mandates giving authority to persons
nominated by the Purchaser and authorise the secretary to
notify the specimen signatures of the new officers of the Hong
Kong Company for the operation of its bank accounts;
(c) appoint such persons as the Purchaser may nominate as
directors of the Hong Kong Company with immediate effect;
(d) accept the resignation of ▇▇. ▇▇▇▇▇ ▇▇▇▇ as director of the
Hong Kong Company so as to take effect from the end of the
meeting; and
(e) (Intentionally omitted)
(f) change the accounting reference date of the Hong Kong
Companies to such date as is nominated by the Purchaser.
11.7 The Seller shall procure that the directors of the Panyu Company shall
convene and at Completion hold a meeting of the board of the Panyu
Company at which the directors shall:
(a) appoint such persons as the Purchaser may nominate as
directors, the general manager, the deputy general manager,
other managers or officers and auditors of the Panyu Company
with immediate effect;
(b) accept the resignation of ▇▇. ▇▇▇▇▇ ▇▇▇▇ and Mr. So Wah as
directors of the Panyu Company so as to take effect from the
end of the meeting.
11.8 (Intentionally omitted)
12. (INTENTIONALLY OMITTED)
13. RIGHTS AND OBLIGATIONS OF THE PARTIES
13.1 The Seller grants to the Purchaser, its respective affiliates
(Beteiligungsgesellschaften) and the Companies and their respective
affiliates as well as to their respective successors a worldwide
perpetual royaltyfree and exclusive right to use for itself or for an
affiliate (Beteiligungsgesellschaft), a branch office or a department
with right to sublicense, the name "Bonny Nice" (including the right to
use such name as a "geschaftliche Bezeichnung" and to register new
trademarks (▇▇▇▇▇▇) including the name "Bonny Nice") and/or each
distinctive part thereof in the business of designing, developing,
manufacturing, using, marketing, distributing and selling woven labels,
37
printed labels, merchandise tags and other apparel identification
products and related services. The Seller declares that he does not
know of any other enterprise which uses the name to identify an
enterprise.
The Seller will support the Purchaser, its respective affiliates and
the Companies as well as their respective successors in each and any
permissible way and will give all necessary declarations and will issue
all documents to put the Purchaser its respective affiliates and the
Companies as well as their respective successors in the position to use
such name and/or distinctive parts thereof with and without additions.
13.2 The Seller shall cause that all intellectual property rights which are
identified in Attachment 13.2 as being owned by the Seller or another
party are transferred from the Seller or the respective other party
holding such intellectual property rights to the Companies, at Seller's
expense, as soon as possible after the date hereof and that all
applications or filings necessary for such transfer shall have been
effected prior to the date of the Agreement. Moreover, the Seller
hereby grants the Companies a worldwide, exclusive royalty-free licence
to use, with right to sublicense, such intellectual property rights
during the period between the Transfer Date and the effectiveness of
their transfer to the Companies. With regard to such intellectual
property rights, the Seller hereby gives as of the date of
effectiveness of the transfer of the intellectual property rights the
representations and warranties set forth in section 5.7 above mutatis
mutandis, it being understood that the limitation period pursuant to
section 8.1 will be 2 (two) years following the effectiveness of the
transfers. The Seller shall not, contest or support third parties in
contesting the Company's rights to use the intellectual property rights
or the know-how referred to in section 13.2.
In so far as the Seller owns at the date of the Agreement, intellectual
property rights including respective applications which are adverse to
the business activity of the Companies and which for any reason have
not been transferred to the Companies pursuant to this section, the
Seller herewith grants to the Companies a worldwide, perpetual royalty
free and exclusive licence regarding such intellectual property rights.
13.3 The Seller agrees that all know-how previously provided by the Seller
to the Companies, may continue to be used by the Companies after the
Transfer Date without restriction, including without any further
requirement for licensing or payments with respect thereto. The Seller
has delivered or will deliver to the Companies all know-how related
documents including but not limited to drawings, plans, computer
programs etc. relating to the object of the Companies.
13.4 Except as provided explicitly otherwise in Attachment 13.4, the Seller
neither has any legal relationships with the Companies, nor has the
Seller any rights and claims against the Companies or to any tangible
or intangible asset of the Companies (including rights arising out of
licences), which are necessary for the conduct of the business of the
Companies in its present area and scope of activity, or which are used
by the Companies, nor has the Seller any other rights and claims
against the Companies.
To the extent that any such legal relationships which are not
explicitly mentioned in Attachment 13.4 should exist nevertheless, all
such legal relationships between the
38
Seller and the Companies end on the Transfer Date without coming into
existence of any liability or obligation whatsoever for the Purchaser
or the Companies. To the extent that such rights and claims, which are
not explicitly mentioned in Attachment 13.4, should exist nevertheless,
the Seller is at the discretion of the Purchaser either obliged to
waive such rights and claims or obliged to transfer such rights and
claims to the Companies without further consideration, or such rights
and claims end on the Transfer Date without coming into existence of
any liability or obligation whatsoever for the Purchaser or the
Companies. The Seller herewith guarantees that the same applies to all
legal relationships between the members of their families, the persons
or companies related to the Seller and former partner or
interest-holders of the Companies and persons related to such former
partner or interest-holders of the Companies on the one hand and the
Companies on the other.
13.5 (Internally omitted)
13.6 (Internally omitted)
13.7 (Internally omitted)
13.8 ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ has granted sureties to Commerzbank as security
for loans granted by Commerzbank to the Hong Kong Company attached as
Attachment 13.8 (the "SURETIES"). The Seller undertakes to procure ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ to maintain and not to withdraw the Sureties prior to
such Sureties are replaced by a surety from Paxar Corporation with the
consent of Commerzbank. The Purchaser and Paxar Corporation hereby
jointly and severally indemnify ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ from and against
all liability arising out of the Sureties from the Completion Date.
This indemnity is irrevocable. The Purchaser and Paxar Corporation
shall use their best efforts to externally release ▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ from all liability arising out of the Sureties from the
Completion Date. Any setting off (Aufrechnung) and right of retention
(Zuruckbehaltung) with regard to the indemnity contained in this
section is excluded unless claims have been acknowledged (anerkannt) in
writing or have been confirmed by final decision of a competent court
or court of arbitration.
13.9 (Intentionally Omitted)
13.10 The Seller guarantees payment by Europrint S.A., Bat. 2 BP 49 Torcy,
77201 ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇, ▇▇▇▇▇▇ of all obligations Europrint owes
to the Companies including interest thereon existing at the date of the
Agreement the latest by 31 December 2000 to the respective Company. The
Purchaser is obliged to assign the respective claims of the Companies
to the Seller to the extent the Seller makes payment to the Companies
due to the guarantee contained in this section.
13.11 Notwithstanding the exception made in the 5th and 6th sentences of
Section 5.3.2, the Seller is obliged to indemnify the Purchaser and the
Panyu Company against claims raised by third parties against the Panyu
Company if such claims relate to the past business practices of the
Panyu Company to the extent no provision has been made or to the extent
such claims have not been recorded as liabilities.
39
14. POST COMPLETION UNDERTAKINGS
14.1 The Seller undertakes that he will, at his sole cost and expense:
(a) cause F.A.S.T. (Shenzhen) Industries Limited (" ( )
") , a wholly foreign owned enterprise duly
organised and validly existing under the laws of the People's
Republic of China whose legal address is at ▇-▇/▇, ▇▇▇▇▇ ▇,
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇ Bei Road, Luo Hu District,
Shenzhen Municipality, People's Republic of China (the
"SHENZHEN COMPANY") to be liquidated or otherwise terminated
in accordance with the PRC law (as evidenced by the
cancellation of the business licence of the Shenzhen Company
by the Shenzhen Administration of Industry and Commerce) and
settle all amounts due from the Shenzhen Company to the Hong
Kong Company on or before 31 December 2000 or such later date
as is necessary due to compliance with applicable procedures
and requirements of the relevant approval authority in
Shenzhen. Within eight weeks from the Completion Date, the
Seller shall (i) procure a board meeting of the Shenzhen
Company to be held and pass a board resolution for the
liquidation or termination of the Shenzhen Company, (ii)
submit a formal application to the relevant approval authority
in Shenzhen for the liquidation or termination of the Shenzhen
Company; (iii) give notice to terminate the lease contract
relating to the premises occupied by the Shenzhen Company;
(b) dispose of all of the Seller's direct or indirect interests or
shareholdings in the companies listed in Schedule 3 of the
Agreement on or before 31 August 2000;
(c) use his best endeavours to cause ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ Labelling
and Accessories Pte Ltd (the "Singapore Company") to change
its company name by removing the reference to the name
"▇▇▇▇▇▇▇▇▇ & ▇▇▇▇" on or before 30 September 2000. By not
later than 30 September 2000, for the purpose of this section
14.1(c), the Seller shall recommend to the shareholders of the
Singapore Company and advise them that he will vote in favour
of and requests that they vote in favour of a resolution to
change the company name as aforesaid and take all other action
necessary under Singapore law to effect such change of name;
(d) settle all amounts due to the Hong Kong Company from ▇▇▇▇▇▇▇
International Limited and Intertag Labels Limited to the
satisfaction of the Purchaser on or before 31 August 2000;
(e) from the Completion Date, not participate in the management or
decision making process of the Shenzhen Company and the
Companies listed in Schedule 3 of the Agreement other than to
comply with the Seller's obligations set forth in Sections
14.1(a) to 14.1(d) above;
(f) indemnify the Purchaser and the Companies against all claims,
costs, expenses, losses and liabilities arising out of or in
connection with the liquidation or termination of the Shenzhen
Company and/or the disposal of the Seller's interests in the
companies listed in Schedule 3 of the Agreement; and
40
(g) for a period of three years from the Completion Date, not
participate in the management or day-to-day decision making
process of Speedmax International Limited.
15. SELLER'S PROFIT PARTICIPATION
15.1 During the calendar years 2000, 2001 and 2002 the Seller shall receive
a participation in the profits of the Companies in the amount of the
product of the Differential Amount (as defined below) and the factor 3
(three) (the "PROFIT PARTICIPATION"). The parties agree that the fiscal
year of the Companies will be changed to the calendar year after the
date of the Agreement.
The "Differential Amount" is the positive difference between the
Average Consolidated Profit of the Companies (as defined below) and the
consolidated profit of the Companies as of 31 March 2000 in the amount
of HK$23,000,000 (Hong Kong Dollar:
twenty three million).
The average consolidated annual profit of the Companies before taxes on
operating and non-operating income for the calendar years 2000, 2001
and 2002 is 1/3 of the sum of the consolidated profits of the Companies
before taxes on operating and non-operating income for the calendar
years 2000, 2001 and 2002 (the "AVERAGE CONSOLIDATED PROFIT OF THE
COMPANIES"). For the purpose of this Article 15, the consolidated
profits of the Companies before taxes on operating and non-operating
income for the calendar year 2000 shall be determined on the basis of
the consolidated profits of the Companies before taxes on operating and
non-operating income for the period from 1 April 2000 to 31 December
2000 divided by the factor 0.9.
15.2 The parties agree that for the calendar years 2000, 2001 and 2002 the
consolidated profit of the Companies before taxes on operating and
non-operating income
15.2.1 is ascertained as follows:
(a) On the basis of the statutory financial statements of the
Companies which shall be prepared on the basis of the same
principles and practices used to prepare the Financial
Statements referred to in section 5.3,
(b) for the respective Company according to the generally accepted
accounting principles applicable at the seat of the respective
Company,
(c) within the scope of the consolidation of the Companies, is
only computed on the basis that the Hong Kong Company directly
holds 100% equity interest in the Panyu Company,
(d) shall be expressed in Hong Kong $ converted from other
currencies using the generally accepted accounting principles
applicable at the jurisdiction of incorporation of the
respective Company.
15.2.2 is ascertained regarding intercompany transactions between the
Companies on the one side and Paxar Corporation and companies in which
Paxar Corporation directly or
41
indirectly owns interests on the other side (the "INTERCOMPANY
TRANSACTIONS") as follows:
(a) Intercompany Transactions regarding manufactured products
between the Hong Kong Company and the Panyu Company on the one
side and companies in which Paxar Corporation directly or
indirectly owns at least 75% will be at intercompany transfer
prices (the "IC-PRICES"), which are set at a ▇▇▇▇ up of 28%
above direct cost only consisting out of direct materials,
direct labor, direct factory overhead and shipping costs.
IC-Prices so determined will apply unless market conditions
require a lower price, which will then be determined in a fair
and reasonable negotiation between the buyer and the seller of
the manufactured products.
(b) If either the seller or the purchaser of manufactured products
are less than 75% owned by either Paxar Corporation and
companies in which Paxar Corporation directly or indirectly
owns interests or the Seller, the IC Price will be set by the
seller of the manufactured products so as to be no higher than
the lowest price charged to any of its third-party customers.
(c) Purchases or sales of raw materials or other products to which
the selling company does not add significant value will be
sold at cost plus a handling charge not to exceed 5% of cost.
(d) For the elimination of doubt, the Seller and Paxar Corporation
agree that each will endeavour to sell the products
manufactured by the other and will do so with the
understanding that no sales commissions shall be paid.
15.2.3 is ascertained according to cash required or excess cash as follows:
(a) Profit before taxes on operating and non-operating income will
be calculated so as to include an appropriate interest cost
based upon the cash required by any of the Companies provided
by Paxar Corporation beyond amounts generated from the
operations of the businesses. The source and the terms and
conditions of funding of such cash requirements will be
determined by Paxar Corporation.
(b) Profit before taxes on operating and non-operating income will
reflect an appropriate interest income credit to the extent
that the Companies generate more cash than is needed to
support current requirements. The disposition of such excess
(e.g., debt repayment or short-term investments) will be
determined by Paxar Corporation.
15.2.4 is ascertained, since it is likely that there will be some integration
of the Seller's businesses with Paxar Corporation's businesses
according to the following rules:
(a) Where businesses are combined for administrative purposes
(e.g., accounting reasons or customer service) in order to
reduce overall costs, the administrative costs of the combined
businesses will be allocated between the Seller's and Paxar
Corporation's businesses using sales to determine the
apportionment factors. Paxar Corporation agrees that such
combinations will not occur unless
42
the Seller agrees that there is an advantage to making the
combination (lower costs or improved capabilities) or unless
Paxar Corporation agrees to override the apportionment of
costs set forth in the preceding sentence by charging the
Seller's businesses no more than an amount equal to the cost
incurred prior to the combination.
(b) If existing manufacturing operations are combined into one
plant or adjacent plants that are managed by the same plant
management, the indirect costs (i.e. overhead costs) of he
combined operation will be allocated to the previously
separate businesses using sales to determine the apportionment
factors. In this instance, only the results of the Seller's
previously existing business will be included. The foregoing
would apply, for example, if the Seller's and Paxar
Corporation's existing manufacturing operations in Panyu were
to be combined.
15.2.5 is ascertained for the elimination of doubt, in such a way as that
profit before taxes on operating and non-operating income will include
the results of any expansion of activities of the Companies beyond
those taking place on the date of the Agreement. For example, existing
woven label operations of the Seller and Paxar Corporation in Panyu may
be combined. As another example, narrow woven edge tape production may
be introduced to the Panyu Company.
15.3 The Profit Participation shall be due for payment by the Purchaser to
the Seller on 15 April 2003.
15.4 The Profit Participation of the Seller amounts to a maximum of HK$
58,500,000.00 (Hong Kong Dollar: fifty eight million five hundred
thousand), provided, however, that such maximum amount of HK$
58,500,000.00 shall be increased if any by the difference between the
maximum amount of the profit participation as defined in section 15.4
of the Commercial Limited Partnership- Interest Purchase- and
Assignment Agreement between Paxar GmbH & Co. KG as the purchaser, ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ as sellers and Paxar
Corporation as the Guarantor dated with the date of the Agreement (the
"German Agreement") being DM20,000,000.00 (German ▇▇▇▇: twenty million)
and the actual amount paid to ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ under section 15.1
of the German Agreement. For the purpose of this section DM shall be
converted into HK$ using the rates printed in the New York edition of
the Wall Street Journal for the last business day in New York City of
the year 2002. Independent from the provisions contained in Article 15,
the Profit Participation of the Seller amounts to a minimum of
HK$9,750,000.00 (Hong Kong Dollar: nine million seven hundred fifty
thousand).
15.5 The amount of the Profit Participation shall be determined by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and shall be notified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in writing to the
Seller and the Purchaser simultaneously the latest on 1 April 2003 (the
"RECEIPT DATE").
15.6 In case the Purchaser and the Seller do not agree with the
determination made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ according to section 15.5, the
Purchaser or the Seller as the case may be shall notify the respective
other party on such disagreement at the latest 10 (ten) days after the
Receipt Date. If a notification according to this section is not made,
the amount of
43
the Profit Participation as determined by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall be
binding on the parties.
15.7 If the parties fail to reach an agreement on the Profit Participation
after a notification has been made according to section 15.6 within a
period of 45 (forty five) days after the Receipt Date, the dispute
shall be referred to an independent firm of auditors with significant
international experience appointed as an expert (Schiedsgutachter) in
the sense of Section 317 BGB (the "PROFIT PARTICIPATION EXPERT") and
not as an arbitrator jointly by the Seller and the Purchaser, who will
resolve the dispute. The decision of the Profit Participation Expert
shall be final and binding on the parties. The Profit Participation as
decided by the Profit Participation Expert shall be final and binding
on the parties. If the parties fail to agree on the firm of auditors to
appoint as the Profit Participation Expert within a period of 60
(sixty) days after the Receipt Date, the Profit Participation Expert
(which shall be an independent firm of auditors with significant
international experience) shall be appointed by the President of the
Institut der Wirtschaftsprufer e. V., Dusseldorf upon the request of
either party of the Agreement.
15.8 The cost of the determination made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall be borne by
the Purchaser. Each party shall bear one half of the costs of the
Profit Participation Expert appointed pursuant to section 15.7.
15.9 In case the Seller voluntarily resigns as managing director of the Hong
Kong Company prior to 31 December, 2002 the Seller is only entitled to
a payment according to Article 15 equivalent to the Profit
Participation multiplied by a fraction the numerator of which is
equivalent to the number of months the Seller was the managing director
of the Hong Kong Company after January 1, 2000 and the denominator of
which is 36 (thirty six), provided, however, that the Seller is
entitled to a payment of not less than HK$9,750,000 (Hong Kong Dollar:
nine million seven hundred and fifty thousand).
16. INTERIM PERIOD
16.1 The Seller undertakes to procure that during the period between the
date of the Agreement and the Transfer Date the Companies have been and
will be managed in the ordinary course of business in compliance with
the provisions of any applicable laws or regulations and in compliance
with the obligations assumed by them, and that the Companies have not
and will not enter into agreements or arrangements which, by their
nature, scope or duration are outside the ordinary course of business
or which may conflict with the representations and warranties set out
in Article 5.
16.2 In particular, but without limitation thereto, the Companies have not
and will not within the limits mentioned above
16.2.1 give guarantees or surety in respect of obligations of the Seller, or,
in respect of obligations of third parties, other than in the ordinary
course of business;
16.2.2 neither acquire nor dispose of (including by way of leasing agreements)
any businesses, interests or fixed assets, nor undertake to make such
acquisition or disposal;
44
16.2.3 make any legally relevant declaration in respect of any other item
addressed in sections 5.5 (a) through to 5.5 (p).
16.3 The Seller will cause that
16.3.1 the Purchaser's and Paxar Corporation's employees have reasonable
access to the Companies' premises and documents at all times during
normal business hours;
16.3.2 the Purchaser is regularly and continuously informed about the
Companies' business, financial and economic situation.
17. ARBITRATION
17.1 Any dispute arising out of or in connection with the Agreement and its
Attachments, including any questions regarding its existence, validity
or termination, shall be referred to and finally resolved by
arbitration under the Rules of the London Court of International
Arbitration (the "RULES"), which Rules are deemed to be incorporated by
reference into this clause.
17.2 The jurisdiction of the ordinary courts shall be excluded.
17.3 The tribunal shall consist of three arbitrators, two of them shall be
nominated by the respective parties and the third arbitrator shall be
appointed in accordance with the Rules.
17.4 The rules governing the arbitration proceeding before the arbitrators
shall be the Rules and, where the Rules are silent the parties hereof
agree that the procedural law of the Federal Republic of Germany shall
be applicable.
17.5 The language of the arbitration shall be the English language.
17.6 The place of the arbitration shall be Wuppertal, Federal Republic of
Germany.
17.7 (Intentionally omitted)
17.8 The parties hereof agree that the winning party of an arbitration
proceeding has a claim for reimbursement against the losing party for
all reasonable costs which the winning party had to spend for and
during the course of the arbitration proceeding.
17.9 The decision of the arbitrators which has to contain a reasoning (the
"DECISION") shall be binding upon the parties hereof and enforceable by
any court having jurisdiction for the enforcement of the Decision.
18. MISCELLANEOUS
18.1 (Intentionally omitted)
18.2 Any transfer taxes in connection with the sale and purchase of the Hong
Kong Shares according to Article 1 are borne by the Purchaser provided
that the stamp duty payable on the transfer of the Hong Kong Shares
shall be borne equally by the Seller and the
45
Purchaser. Each party, however, bears the cost of its advisors and
chartered accountants itself unless it is provided expressly otherwise
in the Agreement.
18.3 Changes, amendments and supplements to the Agreement shall be in
writing, signed by each of the parties hereto to be valid and require
the explicit reference to the Agreement but need to be notarised if
this is required by mandatory law. This is also applicable for a change
or addition of this section.
18.4 Any demand, notice, declaration or other communication to be given in
connection with the Agreement shall be given in English and in writing
addressed to the recipient as follows:
18.4.1 to the Seller: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇.▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
with a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
Clever ▇▇▇. ▇▇
▇-▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇
18.4.2 to the Purchaser: Paxar Far East Limited
8/F, Paxar Building
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ Chance
▇▇/▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
or to such other individual or address as a party hereto may designate
for itself by notice given as herein provided.
18.5 If any provision of the Agreement or any provision to be incorporated
into the Agreement is or becomes invalid or impracticable or should a
necessary provision not be contained in the Agreement, the validity of
the Agreement and the remaining provisions of the Agreement shall
remain unaffected. Instead of the invalid or impracticable provision or
to bridge the gap, a valid provision is applicable which to the fullest
extent possible corresponds to what the parties would have wanted or
according to the sense and object of the Agreement would have agreed if
they had known the invalidity or impracticability or had realised the
gap.
18.6 Except to the extent that they have been performed and except where the
Agreement provides otherwise, the obligations contained in the
Agreement shall remain in force after completion.
46
18.7 Declarations which are contained in an Attachment to the Agreement are
part of the Agreement and are deemed also for purposes of all other
Attachments to the Agreement as part of the Agreement.
18.8 The Agreement is exclusively governed by and construed in accordance
with the law of the Federal Republic of Germany applicable to parties
residing within the Federal Republic of Germany.
18.9 (Intentionally omitted)
18.10 The Agreement is written in the English language (except that certain
of the Attachments may be in the German and/or the Chinese language).
The Agreement may be translated into any language other than the
English language, provided, however, that, for all purposes, the
English language text of the Agreement shall prevail, provided,
further, that, such terms to which a German translation has been added
in parenthesis shall be interpreted throughout the Agreement in the
meaning assigned to them by the German translation.
18.11 The Agreement including the Attachments hereto contain all of the
terms, conditions, representations and warranties agreed upon between
the parties relating to the subject matter of the Agreement and
supersedes all prior negotiations, agreements and undertaking of the
parties, oral, written, with respect to the subject matter hereof. Oral
side agreements to the Agreement do not exist.
18.12 Except as required by law and except as required to perform the
Agreement, no public announcements or press releases concerning the
entering into of the Agreement shall be made by any party hereto
without the prior written consent of the other party. If required by
law and except as required to perform the Agreement, public
announcements or press releases shall only be made upon consultation
with the other party.
18.13 No party shall assign the Agreement, any part hereof or any rights
arising hereunder to any third party (including affiliates of such
party) without having obtained the prior written consent of the other
party provided, however, that the Purchaser may at any time and from
time to time, even without the prior written consent of the Seller
assign in whole or in part its respective rights and obligations under
the Agreement to one or more wholly owned subsidiaries of the
Purchaser, such assignee(s) shall collectively be deemed to be the
"PURCHASER" for all purposes of the Agreement and the assignee in such
assignment shall have no further obligations with respect to the
portions of its rights and obligations that have been assigned.
18.14 Except as expressly provided herein, no delay or omission to exercise
any right, power or remedy accruing to any party to the Agreement,
shall impair any such right, power or remedy of such party nor shall it
be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any
kind or character of any breach or default under the
47
Agreement, or any waiver of any provisions or conditions of the
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing.
18.15 Each party shall from time to time execute and deliver all such
additional documents and take all such additional actions as the other
party may reasonably require in order to effectively consummate the
Agreement as provided herein.
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in Hong Kong on the date first above written.
SIGNED by /s/ ▇▇▇ ▇▇▇ Oop, ▇▇▇▇ )
For and on behalf of )
PAXAR FAR EAST LIMITED )
In the presence of:- /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ )
SIGNED by /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ )
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ )
In the presence of:- /s/ ▇▇▇ ▇▇▇▇▇ )
49
SCHEDULE 1
SELLER'S COMPLETION OBLIGATIONS
At Completion, the Seller shall deliver or procure to be delivered to the
Purchaser:
A. IN RESPECT OF THE HONG KONG COMPANY
1. Duly executed instruments of transfer and bought and sold notes in
respect of the Hong Kong Shares in favour of the Purchaser and its
nominee(s) together with the relevant share certificates;
2. Copies of statements of each bank account of the Hong Kong Company made
up to a date not earlier than four business days before the Completion
Date;
3. Business Registration Certificate (copy);
4. Original Memorandum and Articles of Association;
5. Original Certificate of Incorporation;
6. Two Common Seals of the Company;
7. Copy annual returns of the Hong Kong Company which have been duly filed
with the Company Registry;
8. Originals of all shareholder resolutions passed to date (whether in the
form of a written resolution or at a meeting of the shareholders);
9. Original register of shareholders, register of directors and the
register of directors' interests in shares notified to the Hong Kong
Company;
10. Originals of all other registers or statutory books and records which
the Hong Kong Company is required to keep under Hong Kong law including
all minutes books of directors' meetings;
11. Any waivers, consents or other documents necessary to vest in the
Purchaser the full beneficial ownership of the Hong Kong Shares and to
enable Purchaser and its nominee(s) to be registered as legal owners
thereof;
12. Letter of resignation in the agreed form from ▇▇. ▇▇▇▇▇ ▇▇▇▇
acknowledging under seal that the writer has no claim against the Hong
Kong Company for compensation for loss of office or otherwise;
13. Deed of acknowledgement executed by ▇▇. ▇▇▇▇▇ ▇▇▇ acknowledging under
seal that she holds one Hong Kong Share as nominee for the Seller and
she has no claim against the Hong Kong Company or the Purchaser.
14. (Intentionally omitted)
50
B. IN RESPECT OF THE PANYU COMPANY:
1. Letters of resignation in the agreed form from the present directors,
▇▇. ▇▇▇▇▇ ▇▇▇▇ and Mr. So Wah, of the Panyu Company in each case
acknowledging that the writer has no claim against the Panyu Company or
the Hong Kong Company for compensation for loss of office or otherwise;
2. Business Licence (copy);
3. Original Approval Letter (Pan Wai ▇▇▇▇ ▇▇▇ [1995] No.119) issued by
Panyu Commission of Foreign Trade and Economic Cooperation ("PANYU
COFTEC") on 18 April 1995;
4. Original Approval Letters (Pan Wai ▇▇▇▇ ▇▇▇ [1996] No.385) and (Pan Wai
▇▇▇▇ ▇▇▇ [1997] No.3) in relation to expansion of business scope issued
by Panyu COFTEC dated 27 November 1996 and 7 January 1997 respectively;
5. Original Approval letter (Pan Wai ▇▇▇▇ ▇▇▇ [1998] No.052) in relation
to increase of registered capital issued by Panyu Foreign Trade and
Economic Bureau dated 6 March 1998;
6. Original Approval Letter (Pan ▇▇▇ ▇▇▇▇ Ye [1998] No.078) in relation to
adjustment of export ratio issued by Panyu Foreign Trade and Economic
Bureau dated 28 March 1998;
7. Copies of all resolutions of the board of directors of the Panyu
Company;
8. All original valuation reports issued by the Guangdong Import & Export
Commodity Inspection Bureau of the PRC in respect of the import of
equipment by the Panyu Company;
9. All original capital verification reports confirming capital
contributions totalling HK$29,339,881 to the Panyu Company;
10. Original Articles of Association and all amendments thereto (if any);
11. Original Feasibility Study Report;
12. All original audited financial statements of the Panyu Company;
13. Certified true copies of real estate sale and purchase contracts,
original receipts evidencing full payment of the purchase price,
certified true copies of land and building ownership certificates
(excluding Property D5) and all planning, construction and completion
permits and certificates (in respect of Property D5 only) of the
following properties located in Panyu, PRC:
a. Property B20
b. Property C23
c. Property B72
d. Property B73
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e. Property C50
f. Property D5;
14. All original loan contracts in connection with the purchase of the
above properties; and
15. Evidence satisfactory to the Purchaser that the Panyu Company has
passed the 1999 annual examination by the relevant PRC authorities
(including tax, finance, labour, customs and foreign exchange
authorities and administration of industry and commerce).
16. Original application letter for an extension of the period for making
the outstanding capital contribution of the Panyu Company which bears
the chop of Panyu Foreign Economic and Trade Bureau dated 10 April
2000.
17. Original certificate of approval issued to the Panyu Company by the
Guangzhou Municipal People's Government.
52
SCHEDULE 2
The Seller further represents, warrants and undertakes to the Purchaser that:
1. No order has been made or application for bankruptcy presented to the
People's Court or resolution passed for the winding up of any of the
Panyu Company; no distress, execution or other process has been levied
on any of its assets; the Panyu Company has not stopped payment or is
unable to pay its debts nor is it insolvent under PRC law and the Panyu
Company has not applied for conciliation in order to settle its debts;
no liquidation committee has been appointed by the Panyu Company, the
People's Court or any other person for the purpose of liquidating the
business or assets of the Panyu Company or any part thereof; no meeting
of the creditors of the Panyu Company has been held or is in prospect;
no ruling declaring the bankruptcy of the Panyu Company has been made
and no public announcement in respect of the same has been pronounced
by the People's Court, and there is no unfulfilled or unsatisfied
judgment or order of the People's Court outstanding against it; and
there has been no delay by the Panyu Company in the payment of any
obligation due for payment.
2. The Panyu Company has obtained all necessary approvals, licences,
quotas, consents, permissions, authorisations and exceptions from any
person, body or authority required for the establishment of the Panyu
Company and the commencement and proper carrying on of the business of
the Panyu Company (including, without limitation, all licences and
quotas required to be obtained with respect to imports or exports or
processing operations in the PRC) and all such approvals, licences,
quotas, consents, permissions, authorisations and exceptions are valid
and subsisting and in full force and effect.
The Panyu Company is not in breach of any such approvals, licences,
consents, permissions, authorisations and exceptions and there are no
factors that might in any way prejudice the continuation or renewal of
any of them, in whole or in part.
The Panyu Company has conducted its business and its corporate affairs
in accordance with all applicable PRC laws and regulations and has not
done or omitted to do anything in contravention or breach of any law or
regulation of the PRC or elsewhere applicable to it or the business of
the Panyu Company.
Notwithstanding the generality of the foregoing, the Seller further
warrants that the Panyu Company has at all times carried on its
business in all respects in accordance with, and all acts and things
done or performed by the Panyu Company were within the scope of
operations of, its business licence and articles of association; the
Panyu Company has in all respects complied with the Regulations of the
PRC on the Administration of Company Registration and the Measures on
Annual Inspection of Legal Person Business Licences, and there is no
event which would give rise to the revocation of the business licence
by the State Administration for Industry and Commerce or other
competent authority or which in any way may prejudice the renewal by
such authority of the business licence;
53
there is no event which would render the Panyu Company liable to any
fine, penalty or other sanction.
3. The Panyu Company has in relation to each of its employees (and, so far
as relevant, to each of its former employees) complied with all
applicable laws and regulations of the PRC and requirements of all
relevant labour authorities (including, without limitation, those
relating to normal working hours, overtime hours, minimum wage and
overtime pay) and all other obligations imposed on them by, and all
orders and awards made under all regulations, codes of conduct and
practice, collective agreements, customs and practices relevant to the
relations between the Panyu Company and its employees or any trade
union or the conditions of service of its employees.
4. The Panyu Company has provided labour insurance to its employees
(including, without limitation, work injury, unemployment, medical,
maternity insurances and pension) in accordance with relevant PRC laws
and regulations (including local regulations), has paid all amounts due
to the PRC government by way of subsidies in housing, basic living
necessities, culture, education, and the hygiene and health of such
employees, and where the extent of such funds and subsidies have been
checked by the labour authority and adjustment has been ordered, the
appropriate adjustment has been effected accordingly.
5. The Panyu Company is, and always has been, able to maintain a balance
of foreign exchange income and expenditure without infringing any PRC
laws.
The Panyu Company has obtained and holds a valid and subsisting Foreign
Exchange Registration Certificate in accordance with the previous and
subsequent notices issued by the State Administration of Foreign
Exchange ("SAFE") relating to the administration of foreign exchange;
there is no event which would give rise to the revocation of the
Foreign Exchange Registration Certificate by SAFE or other competent
authority or which in any way may prejudice the renewal by such
administration or authority of the Foreign Exchange Registration
Certificate.
The Seller is not aware of any reason why the Foreign Exchange
Registration Certificate for the Panyu Company will not be renewed upon
the expiry of its current term.
There is no event which would render the Panyu Company liable to any
fine, penalty or other sanction (including revocation of its business
licence) as a result of any breach of the applicable PRC foreign
exchange laws and regulations.
6. In respect of all land and buildings located in the People's Republic
of China which are owned by the Hong Kong Company and the Panyu
Company, all land grant premiums in respect of all such land and all
amounts payable by the Hong Kong Company and the Panyu Company to
acquire such land and buildings have been paid in full; the Hong Kong
Company and the Panyu Company have good and marketable title to, and
have been issued building and land ownership certificates in respect
of, all such land and buildings; except otherwise disclosed in
Attachment 5.4(a), such land and buildings are not subject to any
pledges, charges, liens, mortgages, security interests, pre-emption
54
rights and other encumbrances or third party rights or claims of any
kind and there are no rights, interest, covenants, conditions,
restrictions, exceptions, reservations, licenses, easements,
agreements, claims or any other matters or things affecting such land
and buildings; the Hong Kong Company and the Panyu Company have
exclusive ownership and possession of such buildings and have obtained
all material approvals and permits in respect of the construction,
occupation and use of such buildings, and the Hong Kong Company and the
Panyu Company have in all material respects performed, observed and
complied with and there is no subsisting breach of any covenants,
restrictions, conditions, agreements, statutory requirements, by-laws,
orders, building regulations or other obligations affecting such
buildings; all infrastructure facilities connecting to such land and
buildings (including electricity, gas, steam, tap water, industrial
water and telecommunications) that are necessary to the operation of
the business carried on therein or thereon are available in adequate
quantity and quality, the site coverage (percentage of the land covered
by the buildings), plot ratio (ratio of total floor base of buildings
constructed on the land to the total area of the land), green area
(part of the land set aside for gardens, lawns or shrubbery) and other
aspects of the constructions on the land comply in all material
respects with the requirements of the original land grant contracts
relating to such land and buildings, conditions of use attached to such
land grant contracts and planning and other requirements of the PRC
national and local governments.