Exhibit 10.2
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STOCK TRANSFER AGREEMENT
DATED AS OF DECEMBER 22, 2004
BY AND AMONG
PARLEX ASIA PACIFIC LTD.
AND
PARLEX CORPORATION
AND
INFINEON TECHNOLOGIES ASIA PACIFIC PTE LTD
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TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS 4
ARTICLE II. PURCHASE AND SALE; CLOSING 8
2.1 PURCHASE AND SALE 8
2.2 PURCHASE PRICE 8
2.3 EXECUTION OF LICENSE AGREEMENT 9
2.4 THE CLOSING 9
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER 10
3.1 ORGANIZATION AND GOOD STANDING 10
3.2 AUTHORITY; VALIDITY; CONSENTS 10
3.3 NO CONFLICT 11
3.4 CAPITALIZATION 11
3.5 OPENING BALANCE 11
3.6 TAX, RECORDS AND RETURNS 12
3.7 OWNED REAL PROPERTY 12
3.8 LEGAL PROCEEDINGS 13
3.9 INDEBTEDNESS 13
3.10 BANKRUPTCY OR JUDICIAL COMPOSITION PROCEEDINGS 13
3.11 ENVIRONMENTAL ISSUES/HEALTH & SAFETY LAWS 13
3.12 CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERT 14
3.13 INSURANCE 14
3.14 PERMITS 14
3.15 INFORMATION TECHNOLOGY 14
3.16 ASSETS 15
3.17 MATERIAL AGREEMENTS 15
3.18 COMPLIANCE WITH MATERIAL AGREEMENTS 17
3.19 EMPLOYMENT 17
3.20 INTELLECTUAL PROPERTY 17
3.21 ARRANGEMENTS WITH CONNECTED PERSONS ETC. 18
3.22 BROKERS OR FINDERS 18
3.23 ACCURACY OF INFORMATION PROVIDED 18
3.24 EXCLUSIVITY 18
3.25 BEST KNOWLEDGE 18
3.26 INDEMNIFICATION 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 19
4.1 ORGANIZATION AND GOOD STANDING 19
4.2 AUTHORITY; VALIDITY; CONSENTS 19
4.3 NO CONFLICT 20
4.4 LEGAL PROCEEDINGS 20
4.5 BROKERS OR FINDERS 20
4.6 PURCHASE PRICE 20
4.7 BUYER'S DUE DILIGENCE 20
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4.8 EXCLUSIVITY 21
4.9 INDEMNIFICATION 21
ARTICLE V. CLOSING CONDITIONS 21
5.1 CLOSING CONDITIONS OF THE SELLER 21
5.2 CLOSING CONDITIONS OF THE BUYER 22
5.3 LONG STOP DATE 24
ARTICLE VI. SELLER'S COVENANTS 24
ARTICLE VII. NON-COMPETITION AND NON-SOLICITATION COVENANTS 25
ARTICLE VIII. GENERAL PROVISIONS 26
8.1 EXPENSES 26
8.2 PUBLIC ANNOUNCEMENTS 26
8.3 NOTICES 26
8.4 ENTIRE AGREEMENT 27
8.5 AMENDMENTS 28
8.6 BINDING AGREEMENT; ASSIGNMENTS 28
8.7 SEVERABILITY 28
8.8 CLAUSE HEADINGS, CONSTRUCTION 29
8.9 DISPUTE RESOLUTION 29
8.10 GOVERNING LAW 30
8.11 COUNTERPARTS 30
8.12 TIME OF ESSENCE 30
8.13 NO THIRD PARTY BENEFICIARIES 30
8.14 NO STRICT CONSTRUCTION 30
LIST OF EXHIBITS
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EXHIBIT 3.2 AUTHORITY; VALIDITY; CONSENTS
EXHIBIT 3.7 OWNED AND LEASED REAL PROPERTY
EXHIBIT 3.8 LEGAL PROCEEDINGS
EXHIBIT 3.17 MATERIAL AGREEMENTS
EXHIBIT 3.18 COMPLIANCE WITH MATERIAL AGREEMENTS
EXHIBIT 3.20 INTELLECTUAL PROPERTY
EXHIBIT 5.2(B)(M)(I) LEGAL OPINION FROM PRC COUNSEL
EXHIBIT 5.2(B)(M)(II) LEGAL OPINION FROM HONG KONG COUNSEL
EXHIBIT 5.2(E)(I) KEY EMPLOYEES OF PARLEX SHANGHAI
EXHIBIT 5.2(E)(II) OTHER EMPLOYEES OF PARLEX SHANGHAI
EXHIBIT 5.2(H) LIST OF DOCUMENTS FOR TRANSFER OF BUSINESS FROM
PARLEX SHANGHAI TO NEWCO
EXHIBIT 6.5 PERMITS TO BE OBTAINED BY NEWCO WITHIN 30 BUSINESS
DAYS OF CLOSING DATE
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STOCK TRANSFER AGREEMENT
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This Stock Transfer Agreement (this "Agreement") is entered into as of
22nd day of December, 2004, by and among Parlex Corporation, a corporation
organized under the laws of the Commonwealth of Massachusetts with its place
of business at One Parlex Place, Methuen, MA 01844 ("Parlex Corporation"),
Parlex Asia Pacific Ltd., a Hong Kong corporation with its registered office
at 2802 Admiralty Centre Tower One, 18 Harcourt Road, Hong Kong ("Parlex" or
"Seller") and Infineon Technologies Asia Pacific Pte. Ltd., Company
Registration Number: 197000667M, a company duly incorporated in Singapore
with its place of business at 168, Kallang Way, Singapore 349253 ("Buyer").
RECITALS
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WHEREAS, the Seller shall own 10,000 ordinary shares of par value
HK$1.00 each in HoldCo at the Closing Date; and
WHEREAS, HoldCo is, or shall be at the Closing Date, the sole investor
in NewCo, a wholly foreign owned enterprise established, or to be
established, under the laws of the PRC with registered office in Shanghai,
China; and
WHEREAS, Parlex desires to sell Four Thousand and Nine Hundred (4,900)
shares of par value HK$1.00 each in HoldCo which is equivalent to 49% of the
issued and paid up capital of HoldCo, and the Buyer desires to purchase the
same for the consideration and upon the terms specified herein.
NOW, THEREFORE, in consideration of the purchase price hereinafter set
forth to be paid by Buyer and the mutual agreements and covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Parties, it is mutually
agreed and covenanted by and between the Parties to this Agreement as
follows:
ARTICLE I
DEFINITIONS
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"Affiliate" means in relation to a Party hereto, an enterprise or
company in which such Party holds not less than 50% of the issued and voting
share capital or in which it directly or indirectly has management control
or the holding company of a Party or an enterprise or company which is under
common control as a Party.
"Agreement" has the meaning set forth in the introductory paragraph,
and includes the Exhibits hereto.
"Business" means the production of FCOS(TM) substrate and flip chip
module substrate materials as well as RFID antennas and the further
development of these
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product technologies (process and equipment) which was operated by Parlex
Shanghai prior to and up to the date hereof and shall be transferred from
Parlex Shanghai to NewCo on or before the Closing Date, such transfer to be
in accordance with the provisions of the Joint Venture Agreement entered
into between Seller and Buyer as at the date hereof.
"Business Day" is any day that is not a Saturday, Sunday or a day on
which Infineon is closed.
"Closing" has the meaning set forth in Clause 2.4 hereof.
"Closing Date" has the meaning set forth in Clause 2.4 hereof.
"Companies" means HoldCo and NewCo collectively.
"control" means the possession, directly or indirectly, of the power
to direct the management and policies of an enterprise or company whether
through the ownership of voting rights or otherwise.
"Exhibits" means the disclosure Exhibits attached hereto to be
delivered by the Seller not later than 5 Business Days prior to the Closing
Date and such disclosure Exhibits to be dated no earlier than the date of
delivery of such disclosure Exhibits to Buyer.
"Encumbrance" means any charge, lien, mortgage, hypothec, deed of
trust, pledge, security interest, option, right of first refusal, easement,
servitude, restrictive covenant, encroachment, encumbrance, or other similar
restriction.
"Governmental Authority" means any federal, state or local or any
government, governmental authority, regulatory or administrative authority,
any court, tribunal or judicial body or any arbitrator.
"Governmental Authorization" means any approval, consent, license,
permit, waiver, or other authorization issued, granted or otherwise made
available by or under the authority of any Governmental Authority.
"HoldCo" means a company limited by shares established under the laws
of Hong Kong, which is wholly owned by Seller, with an authorized share
capital of 10,000 Hong Kong Dollars, of which 10,000 shares of par value
HK$1.00 have been issued and fully paid up in HoldCo as at the Closing Date.
"Hong Kong" means the Hong Kong Special Administrative Region of the
PRC.
"Indebtedness" means, with respect to any Person, (i) any indebtedness
for borrowed money, whether short term or long term, (ii) any indebtedness
arising under capitalized leases, conditional sales contracts and other
similar title retention instruments, (iii) all liabilities secured by any
Encumbrance on any property owned by such Person,
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(iv) all indebtedness for the deferred purchase price of property or
services represented by a note, (v) all reimbursement obligations relating
to letters of credit, bankers' acceptances, surety or other bonds or similar
instruments, and (vi) all interest, fees, penalties and other expenses owed
with respect to indebtedness described in the foregoing clauses (i) through
(v), and (vii) all indebtedness referred to in the foregoing clauses (i)
through (vi) which is directly or indirectly guaranteed by such Person.
"Initial Advance" has the meaning set forth in Clause 2.2(a)(i)
hereof.
"Intellectual Property" means any or all of the following and all
worldwide common law and statutory rights in, arising out of, or associated
therewith: (i) patents and utility models and applications therefor and all
reissues, divisions, re-examinations, renewals, and extensions thereof;
(ii) inventions (whether patentable or not), improvements, trade secrets,
proprietary information, know how, and any rights in technology, invention
disclosures, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) copyrights, copyright registrations
and applications therefor, and all other rights corresponding thereto
throughout the world; (iv) domain names; (v) industrial designs and any
registrations and applications therefor; (vi) trade names, logos, common law
trademarks and service marks, trademark and service mark registrations,
related goodwill and applications therefor throughout the world; (vii) all
moral and economic rights of authors and inventors, however denominated; and
(viii) any similar or equivalent rights to any of the foregoing (as
applicable).
"Lease Agreement" means that certain Lease Agreement to be entered
into between Shanghai Jingling Holding Co. Ltd. and NewCo on the Closing
Date, the form of which is attached as Exhibit 6.4 to the Joint Venture
Agreement.
"License Agreement" means that certain License Agreement by and
between Parlex Corporation and Buyer, to be executed on even date herewith,
the form of which is attached as Exhibit 6.1 to the Joint Venture Agreement.
"License Fee" means the sum of US$500,000.00, payable by Buyer to
Parlex Corporation in consideration for Parlex Corporation's execution of
the License Agreement.
"Long Stop Date" means 31 March 2005.
"Material Adverse Effect" means any change, event, effect or condition
that, individually or together with any other change, event, effect or
condition, is materially adverse to the business, results of operations or
financial condition of an entity, taken as a whole, or on the ability of
such entity to consummate timely the transactions contemplated hereby.
"Mediation" has the meaning set forth in Clause 8.9(b) hereof.
"Negotiation" has the meaning set forth in Clause 8.9(a) hereof.
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"Neutral" has the meaning set forth in Clause 8.9(b) hereof.
"NewCo" means a wholly foreign owned enterprise established, or to be
established prior to the Closing Date, under the laws of the PRC which is
based in Shanghai, China.
"Opening Balance" means the audited opening date balance sheets of the
Companies (each such financial statement comprising a balance sheet, profit
and loss account, cash flow statement, notes and directors' and auditors'
report).
"Organizational Documents" means, with respect to any entity, the
articles of organization or incorporation of such entity, as well as the by-
laws or equivalent constitutional documents of such entity.
"Outstanding Invoices" means the amounts owing from Infineon
Technologies AG to Parlex Corporation with respect to invoices generated by
the Business up to ninety days after the Long Stop Date, except that the
amount of the Outstanding Invoices shall not exceed One Million United
States Dollars (US$1,000,000.00).
"Parlex Shanghai" means Parlex Shanghai Interconnect Products Ltd, an
Affiliate of Parlex which operated the Business as of the date hereof and
shall transfer the Business to NewCo on or before the Closing Date.
"Parties" means Seller, Parlex Corporation and Buyer collectively and
"Party" means any one of them individually.
"Person" means any individual, corporation (including any non-profit
corporation), partnership, limited liability company, joint venture, estate,
trust, association, organization, labor union or other entity or
Governmental Authority.
"PRC" means the People's Republic of China.
"Purchase Price" has the meaning set forth in Clause 2.2 hereof.
"Repayment Date" has the meaning set forth in Clause 2.3 hereof.
"Restricted Business" means the production of FCOS(TM) substrate and
flip chip module substrate materials and the further development of these
product technologies (process and equipment) which was operated by Parlex
Shanghai as of the date hereof and shall be transferred from Parlex Shanghai
to NewCo on or before the Closing Date subject to the Joint Venture
Agreement. .
"Shares" has the meaning set forth in Clause 2.1 hereof.
"Shortfall" has the meaning set forth in Clause 2.2(a)(iii) hereof.
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"Transaction Documents" means this Agreement, the Joint Venture
Agreement, the Supply Agreement (the form of which is attached as Exhibit
6.2 to the Joint Venture Agreement), the Service Agreement (the form of
which is attached as Exhibit 6.5 to the Joint Venture Agreement), the Lease
Agreement, the License Agreement, the Shareholder Loan Agreement (the form
of which is attached as Exhibit 4.2 to the Joint Venture Agreement) and the
Laser Drilling Service Agreement (the form of which is attached as Exhibit
6.7 to the Joint Venture Agreement), each of which is to be entered into by
and between some or all of Parlex Corporation, Parlex Shanghai or Parlex,
HoldCo, NewCo, and/or Buyer, and any other agreements, instruments,
certificates or documents entered into and/or delivered pursuant hereto or
thereto.
"Warrantors" means Parlex Corporation and Seller collectively and
"Warrantor" means any one of them.
ARTICLE II
PURCHASE AND SALE; CLOSING
--------------------------
2.1 Purchase and Sale
-----------------
Subject to the terms and conditions of this Agreement, at the Closing,
Parlex shall sell, assign, convey, transfer and deliver to the Buyer free
from any Encumbrance, and the Buyer shall purchase, acquire and accept from
Parlex, forty-nine per cent. of the issued and paid up capital of HoldCo
which is equivalent to four thousand nine hundred (4,900) ordinary shares at
par value of HK$1.00 per share, in HoldCo (the "Shares").
2.2 Purchase Price
--------------
The Purchase Price for the Shares is the aggregate sum of Two Million
Five Hundred Thousand United States Dollars (US$2,500,000.00) (the "Purchase
Price") which shall be paid by the Buyer as set forth below.
(a)(i) Upon execution of this Agreement and subject to the conditions
set out in Clause 2.2(a)(ii) and (iii) below and the simultaneous execution
of the License Agreement referred to in Clause 2.3 below, Buyer shall pay to
Parlex the sum of Five Hundred Thousand United States Dollars
(US$500,000.00) as an advance towards the Purchase Price ("Initial Advance")
by wire or other immediately available funds.
(a)(ii) It is also agreed between the Parties that in the event that
the Closing does not occur by the Long Stop Date, the Initial Advance will
be repaid by Seller forthwith, failing which the Initial Advance shall be
repaid by Parlex Corporation by way of set off of such amounts under the
Outstanding Invoices. Seller and/or Parlex Corporation shall release
Infineon Technologies AG from its obligations to make such payment under the
Outstanding Invoices which is equivalent to the amount of the Initial
Advance and Buyer shall be entitled to receive such duly executed
documentation as may be reasonably requested by Buyer to evidence the
foregoing.
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(a)(iii) The Parties further agree that in the event that the amounts
owing under the Outstanding Invoices do not equal the Initial Advance
("Shortfall"), said amount shall be set off against such other outstanding
invoices issued to Infineon Technologies AG from Parlex Corporation up to
the amount of the Initial Advance.
(b) At the Closing Date, Buyer shall pay Parlex the remaining sum of
Two Million United States Dollars (US$2,000,000) ("Remaining Purchase
Price") by wire or other immediately available funds and shall receive a
credit equivalent to the Initial Advance towards the Purchase Price from
Parlex. Parlex hereby acknowledges that, assuming the prior payment of the
Initial Advance in accordance with Section 2.2(a)(i) hereof, the payment of
the Remaining Purchase Price by Buyer on the Closing Date shall constitute
full payment of the Purchase Price, the receipt and sufficiency of which is
hereby acknowledged by Parlex.
2.3 Execution of License Agreement
------------------------------
Simultaneous with the execution of this Agreement as at the date
hereof, Buyer and Parlex Corporation shall enter into the License Agreement
and Buyer shall pay the License Fee to Parlex Corporation, subject to the
terms and conditions of the License Agreement. It is also agreed between the
Parties that in the event that the Closing does not occur by the Long Stop
Date, Parlex Corporation shall repay the License Fee to Buyer within ninety
(90) days of the Long Stop Date. In the event that Parlex Corporation fails
to repay the Licence Fee to Buyer within the 90 day timeframe, Buyer shall
be entitled to set off the Licence Fee against the amounts owing under the
Outstanding Invoices or such other invoices received by Infineon
Technologies AG from Parlex Corporation as such invoices become due and
payable. It is agreed that the rights granted to Buyer under the Licence
Agreement shall remain valid and in full effect until the Licence Fee is
fully paid by Parlex Corporation in the manner contemplated herein. It is
conditioned solely upon such receipt of full repayment of the Licence Fee by
Buyer ("Repayment Date") that all rights granted to Buyer under the License
Agreement shall terminate and such agreement shall be terminated and have no
further force and effect as at the Repayment Date.
2.4 The Closing
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(a) Subject to the provisions of Clauses 5.1 and 5.2, the purchase
and sale of the Shares provided for in this Agreement (the "Closing") shall
take place on the fifth (5th) Business Day following the issuance of a
Business License by the State Administration for Industry and Commerce or
such other relevant authority in PRC to NewCo or such other date as the
Parties may agree and in any event no later than the Long Stop Date (the
applicable date on which the Closing shall occur is referred to herein as
the "Closing Date").
(b) The Closing shall take place at the offices of Infineon
Technologies Hong Kong Ltd., unless the Seller and Buyer mutually agree in
writing otherwise.
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(c) At the Closing, in addition to any and all other such actions as
may be provided for herein, the Seller shall deliver to Buyer any and all
certificates representing the Shares, duly endorsed, or accompanied by
appropriate stock powers duly endorsed in blank, for transfer as well.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
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Buyer acknowledges that it has had the opportunity to conduct a review
and analysis of the assets, general affairs, business, properties and
financial position of HoldCo and that it has completed to its satisfaction,
said review and analysis. Buyer acknowledges that in purchasing the Shares,
it is relying solely upon the results of its review and analysis and the
specific warranties and representations made by the Warrantors in this
Agreement, and nothing else. Subject to the exceptions set forth in the
Exhibits attached hereto, each of the Warrantors jointly and severally
represents and warrants to Buyer as follows:
3.1 Organization and Good Standing
------------------------------
Parlex is a corporation organized, validly existing and in good
standing under the laws of Hong Kong. HoldCo is a corporation organized,
validly existing and in good standing under the laws of Hong Kong. NewCo is,
or as of the Closing Date shall be, a limited liability company organized,
validly existing and in good standing under the laws of PRC. Each of HoldCo
and NewCo has, or by the Closing Date shall have, all requisite corporate
power and authority and authorizations, permits and licenses necessary to
own its property. Each of HoldCo and NewCo is, or by the Closing Date shall
be, qualified or licensed to do business and is, or by the Closing Date
shall be, in good standing in each jurisdiction where the character of its
business or the nature of its properties makes such qualification or
licensing necessary, except where the failure to so qualify or be licensed
would not have a Material Adverse Effect. Copies of the Organizational
Documents of HoldCo and NewCo will be made available for inspection by Buyer
not less than five (5) Business Days prior to the Closing Date, and the
Organizational Documents of the Companies are true and complete in all
material respects.
3.2 Authority; Validity; Consents
-----------------------------
Each of the Warrantors (as the case may be) has the requisite power,
capacity and authority necessary to enter into and perform its respective
obligations under this Agreement and the other Transaction Documents and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated herein and
therein have been duly and validly authorized. This Agreement and the other
Transaction Documents constitute legal, valid, and binding obligations of
the relevant Warrantor, enforceable against the relevant Warrantor in
accordance with their respective terms, except as such enforceability is
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in
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effect relating to creditors' rights generally or general principles of
equity or public policy. Except as set forth in Exhibit 3.2 and in Exhibit
6.5, the Warrantors are not required to give any notice to, make any filing
with or obtain any consent from any Person in connection with the execution
and delivery of this Agreement and the other Transaction Documents or the
consummation or performance of any of the transactions contemplated hereby
and thereby. Without limiting the generality of the foregoing, there are no
agreements, options, commitments or rights for any Person (other than Buyer)
to purchase or otherwise acquire any of the capital stock or other equity
interests of HoldCo.
3.3 No Conflict
-----------
The execution and delivery of this Agreement and the other Transaction
Documents and the consummation of the transactions provided for herein and
therein will not result in the breach of any of the terms and provisions of,
or constitute a default under, or conflict with, or cause any acceleration
of any obligation of any Warrantor under, or result in any diminution of any
material right or benefit under any Warrantor's Organizational Documents, or
to the Warrantors' knowledge, under any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute
or treaty, except, in all such cases, to the extent such breach, default or
conflict would not result in a Material Adverse Effect.
3.4 Capitalization
--------------
The registered capital of NewCo shall be Five Million US Dollars
(US$5,000,000).
HoldCo is authorized to issue 10,000 ordinary shares at par value of
HK$1.00 per share, of which 10,000 shares are currently issued and
outstanding to Parlex. The Shares shall be transferred to Buyer free and
clear of all Encumbrances and represents 49 per cent of the issued and paid
up capital of HoldCo as at the Closing Date, and the delivery of the Shares
to Buyer at the Closing pursuant to this Agreement will transfer to Buyer,
valid title thereto, free and clear of all Encumbrances.
3.5 Opening Balance
---------------
The Opening Balance has been prepared in accordance with the
requirements of all relevant statutes and US Generally Accepted Accounting
Principles and practice consistently applied. It is complete and accurate in
all respects, shows a true and fair view of the state of affairs of the
Business and of the assets and liabilities, results and profits on the
opening date. The Opening Balance discloses and makes full provision or
reserve for all liabilities (whether actual or contingent and whether
quantified or disputed or otherwise) and there are no such liabilities
except as taken into account in the Opening Balance.
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3.6 Tax, Records and Returns
------------------------
The Companies and the Business have duly filed all returns,
computations, notices and information required to be made or provided by the
Companies or the Business for any tax purpose and the same have been made or
given within the requisite periods and on a proper basis and when made were
true and accurate in all material respects and are up to date and none of
them is or is, to the Best Knowledge of the Warrantors, likely to be the
subject of any material dispute with any tax authority.
The Companies and the Business have paid, and have withheld, deducted
and accounted to the relevant tax authorities for, all tax which it has
become liable to pay, withhold, deduct or account for on or before the date
hereof and, within the legal limitation period prior to the date hereof,
neither the Companies nor any director or officer of the Companies have paid
or become liable to pay any fine, penalty, surcharge or interest in relation
to tax.
Save as provided for in the accounts of the Companies, there is no
existing contingent or deferred liability for tax including liability for
tax which would arise on the Companies ceasing to trade or on its ceasing to
use or occupy any asset for the purposes of its trade or on its disposing of
any asset at its book value as shown in the Accounts or which might arise as
a result of the execution of this Agreement (but excluding any liability for
tax which arises solely as the result of the realization by the Company of
trading stock or work in progress in the ordinary course of its business)
and no material changes in the assets and liabilities as shown in the
Accounts have occurred since June 30, 2004 which might result in any such
liability.
The Companies and the Business have not entered into or been engaged
in or been a party to any transaction or series of transactions or scheme or
arrangement of which the main purpose or one of the main purposes was the
avoidance or deferral of tax or a reduction in the liability to tax of the
Companies or the Business.
All documents to which the Companies or the Business are a party or
which form part of the Companies' title to any asset or in the enforcement
of which the Companies are or may be interested which are subject to stamp
or similar duty or transfer tax have been duly stamped and adjudicated or
have had such tax duly paid on them; any relief obtained from any such duty
or tax has been properly obtained, and no event has occurred as a result of
which any such duty or tax for which relief was obtained has become payable.
3.7 Owned and Leased Real Property
------------------------------
HoldCo and NewCo do not own, and have not at any time owned, any real
property. Exhibit 3.7 sets forth a list of all real properties currently
leased or otherwise occupied by the Companies or the Business (the "Leased
Real Property"), including the name of the lessor, the date of the lease and
each amendment thereto and, with respect to any current lease, the aggregate
annual rental payable under any such lease.
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3.8 Legal Proceedings
-----------------
Except as set forth in Exhibit 3.8, neither the Companies nor the
Business is engaged whether as plaintiff or defendant or otherwise in any
civil, criminal or arbitration proceedings or any proceedings before any
tribunal (save for debt collection by the Companies in the ordinary course
of business) and there are no proceedings threatened or pending against the
Companies or the Business and, to the Best Knowledge of the Warrantors,
there are no facts which are likely to give rise to any such litigation or
proceedings.
The Companies and the Business are not the subject of any official
investigation or inquiry and neither the Companies nor any of its directors
or officers are aware of any facts which are likely to give rise to any such
investigation or inquiry.
3.9 Indebtedness
------------
Neither the Companies nor the Business has any Indebtedness
outstanding except as otherwise contemplated by this Agreement or any other
Transaction Document.
3.10 Bankruptcy or Judicial Composition Proceedings
----------------------------------------------
No bankruptcy or judicial composition proceedings concerning any
Warrantor or either of the Companies have been applied for and, to the Best
Knowledge of the Warrantors, no circumstances exist which would require the
application for any bankruptcy or judicial composition proceedings under
mandatory law and, to the Best Knowledge of the Warrantors, no circumstances
exist pursuant to any applicable bankruptcy laws which could justify the
voidance of this Agreement or any of the Transaction Documents.
3.11 Environmental Issues/Health & Safety Laws
-----------------------------------------
To the Best Knowledge of the Warrantors, the Companies and the
Business are not in violation of any applicable statutes, law or regulations
relating to the environment or occupational health and safety and no
material expenditure are or will be required in order to comply with any
such existing statute, law or regulation.
To the Best Knowledge of the Warrantors, the Companies possess all
environmental permits necessary in order to conduct the Business as it is
now being conducted. Each environmental permit previously issued to Parlex
Shanghai and relating to the Business shall be, as of the Closing Date,
issued to NewCo and shall be in full force and effect as of the Closing
Date. NewCo is in compliance with all requirements, terms and provisions of
the environmental permits issued to NewCo and relating to the Business,
except where failure to comply would not result in a Material Adverse Effect
on the Companies or the Business. For purposes of this Clause 3.11, Material
Adverse shall be defined as total expenditures in excess of US$100,000.00.
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3.12 Confidential Information and Intellectual Property
--------------------------------------------------
The carrying on of the Business does not require any authorizations,
permissions, licenses or consents from, or the making of royalty or similar
payments to, any third party and the Companies are not engaged in any
activities which involve the use of or which infringe any Intellectual
Property belonging to any third party.
3.13 Insurance
---------
All assets of the Companies of an insurable nature have at all times
been and are insured in amounts to the full replacement value thereof
against such risks as are in accordance with good commercial practice
normally insured against. The Companies and the Business have at all times
been adequately covered against accident, third party, public liability,
product liability and other risks normally covered by insurance and nothing
has been done or omitted to be done by or on behalf of the Companies which
would make any policy of insurance void or voidable or enable the insurers
to avoid the same. There is no claim outstanding under any such policy and
neither the Companies nor its directors or officers are aware of any
circumstances likely to give rise to such a claim or result in an increased
rate of premium.
3.14 Permits
-------
Each Company is in possession of all material governmental approvals,
licenses, authorizations, consents and permits, including, without
limitation, those in the areas of emission laws, safety laws and
construction laws necessary to operate the Business as it is conducted as of
the Closing Date (collectively "Permits"). To Best Knowledge of the
Warrantors, no circumstances exist which would reasonably be expected to
result in, as a consequence of the implementation of this Agreement or
otherwise, (i) a revocation or limitation of the Permits or (ii) the
imposition of conditions to the Permits. Notwithstanding the generality of
the foregoing, all actions consents, permits, approvals and registrations
for items 1.1 to 1.9 in Exhibit 6.5 to this Agreement shall be obtained and
issued to NewCo within 30 Business Days of the Closing Date and all actions,
consents, permits, approvals and registrations for items 1.10 to 1.12 in
Exhibit 6.5 to this Agreement shall be obtained and issued to NewCo within
60 Business Days of the Closing Date.
3.15 Information Technology
----------------------
The internal information technology systems of each Company (the "IT
Systems") are either owned by, or properly licensed or leased to, the
respective Company. Neither Seller nor such Company is in material default
under such licenses or leases. The IT Systems have not experienced a failure
or been corrupted in a manner which has resulted in a Material Adverse
Effect on the Business. To the Best Knowledge of the Warrantors, the IT
Systems do not contain viruses, bugs or things which distort their proper
functioning, permit unauthorized access or disable them without the consent
of the user.
14
3.16 Assets
------
Each Company holds good title to all fixed assets which are reflected
as being owned by them in the Companies' books and records (the "Fixed
Assets"). The Fixed Assets are not subject to any Encumbrance. The Fixed
Assets are in a reasonably useable condition, except for regular needs for
maintenance and repair, in order to continue the Business substantially in
the same fashion and manner as conducted as at the signing date of this
Agreement. The properties, assets and intellectual properties owned, leased
or licensed by the Companies, together with the Fixed Assets include all
material tangible or intangible properties and assets necessary for the
conduct of the Business as previously conducted by Parlex Shanghai and
presently conducted and proposed to be conducted by the Companies. Neither
Seller, nor Parlex Shanghai nor any of their Affiliates own any tangible or
intangible properties or assets used in any business activity related to the
Business.
3.17 Material Agreements
-------------------
3.17.1 The rights and obligations of Parlex Shanghai under any
agreements and commitments that exclusively or predominantly relate to the
Business have been validly assigned to NewCo and all Government
Authorizations and third party consents necessary for the assignment have
been obtained.
3.17.2 None of the Companies is bound by any of the agreements and
commitments listed in (i) to (xi) below, except for such agreements and
commitments which are listed or disclosed in Exhibit 3.17 (herein
collectively "Material Agreements").
(i) Loan agreements and credit facilities, or other agreements or
instruments creating indebtedness of the Company in excess of US$ 50,000.00
or securing such indebtedness such as pledges, guarantees, securities or
letters of comfort extended by the Company, to any third parties and that
will continue in effect or with respect to which the Company will have any
liabilities after the Closing Date;
(ii) Patents, trademarks and know how license agreements which
involve annual royalties in excess of US$ 50,000.00;
(iii) Agreements relating to the acquisition, encumbrance or
disposition (whether by stock or asset purchase, merger or otherwise) of
fixed assets, interests in companies or businesses, partnerships or other
business organizations, which in each case involve payment obligations in
excess of US$ 50,000.00;
(iv) Lease, leasehold or hereditary building right agreements
relating to real and personal properties where the annual rent exceeds
US$ 10,000.00;
(v) Agreements with suppliers and customers (relating to the
Business) which involve yearly payment obligations of more than
US$ 50,000.00;
15
(vi) Any contract for any joint venture or any agreement relating to
holding, voting or transferring any equity interests in any Company;
(vii) Any agreement, contract or commitment containing any covenant
limiting in any respect the right to engage in any line of business or to
compete with any person or granting any exclusive distribution rights
material to the Business;
(viii) Any reseller, distributor, joint marketing, alliance,
development or other agreement currently in force under which any Company
has continuing material obligations to jointly market any product,
technology or service material to the Business, or any material agreement
pursuant to which any Company has continuing material obligations to jointly
develop any intellectual property material to the Business that will not be
owned, in whole or in part, by a Company;
(ix) Any agreement, contract or commitment currently in force to
provide source code or any other intellectual property, know how or trade
secret to any third party, including any escrow agent, for any product or
technology that is material to the Business;
(x) Any material agreement, contract or commitment currently in
force to license any third party to manufacture or reproduce any Business
products, or any related service or technology or any material agreement,
contract or commitment currently in force to sell or distribute any product
of the Business; or
(xi) Any other agreement, contract or commitment applicable to the
Business in connection with or pursuant to which Parlex Shanghai or any
Company will spend or receive (or is expected to spend or receive), in the
aggregate, more than US$ 50,000.00.during the current fiscal year or during
the next fiscal year.
3.17.3 The Companies are not a party to:
(i) any contract not entered into in the ordinary course of business
or not on arm's length terms;
(ii) any contract restricting the Companies' freedom of action in
relation to its normal business activities; or
(iii) any contract for the purchase or use by the Companies of
materials, supplies or equipment which is in excess of the requirements of
the Companies' for its normal operating purposes.
3.17.4 To the Best Knowledge of the Warrantors, there are no
contracts or obligations, agreements, arrangements or concerted practices
involving the Companies and no practices in which the Companies are engaged
which are void, illegal, unenforceable, registrable or notifiable under or
which contravene any anti-trust legislation or regulations anywhere in the
world, nor have the Companies received any
16
threat or complaint or request for information or investigation in relation
to or in connection with any such legislation or regulations.
3.18 Compliance with Material Agreements
-----------------------------------
Each of the Material Agreements is a legal, binding and enforceable
obligation of the Companies. Except as disclosed in Exhibit 3.18, the
Companies are not in material breach of any Material Agreements and none of
the Material Agreements have been terminated by any party, nor has any party
given written notice about its intention to terminate a Material Agreement,
nor has the validity or enforceability of any of the Material Agreements
been legally contested.
3.19 Employment
----------
There is no existing or threatened or pending industrial or trade
dispute involving the Companies or the Business and any of its employees and
there are no agreements or arrangements (whether oral or in writing or
existing by reason of custom and practice and whether or not legally
binding) between the Companies and any trade union or other employees'
representatives or organization concerning or affecting the Companies'
employees.. There are no amounts owing from NewCo to any employee of NewCo
as a result of the transfer of Business from Parlex Shanghai to NewCo and no
employee of NewCo has any right of claim against NewCo in respect of
employment matters.
3.20 Intellectual Property
---------------------
Exhibit 3.20 contains a complete list of all Intellectual Property
owned or licensed by Parlex Shanghai and exclusively or predominantly
relating to the Business (the "Business IP").
Parlex Shanghai has validly assigned and/or transferred all Business
IP to NewCo and all Government Authorizations and third party consents
necessary for the assignment and/or transfer thereof have been obtained.
The use of the Business IP by the Companies and the design,
development, manufacture, use, import, sale licensing or other exploitation
of products of the Business do not infringe the rights of any third party.
To the Best Knowledge of the Warrantors, none of the Business IP has
been adjudicated unenforceable or ineffective in any manner.
During the three years period preceding the Closing Date, the Business
and the Companies have not infringed any Intellectual Property of any third
party.
The Business IP is sufficient to conduct the Business in the manner
currently conducted and as it is currently contemplated to be conducted,
including, without limitation, the design, development, manufacture, use,
import, sale licensing or other exploitation of any products of the
Business.
17
3.21 Arrangements with Connected Persons etc.
----------------------------------------
The Companies and the Business have not made any gift or loan to, or
provided any guarantee or security for a loan made by any other person, to
any Affiliate or director or former director or any of their relatives, nor
has it been a party to any transaction or arrangement with any of the
foregoing other than arm's length service contracts, and the Business' or
the Companies' profits or financial position have not at any time been
adversely affected by any contract or arrangement which is not of an
entirely arm's-length nature.
3.22 Brokers or Finders
------------------
The Seller has not incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement or the other Transaction
Documents or the transactions contemplated hereby or thereby.
3.23 Accuracy of Information Provided
--------------------------------
All information contained in this Agreement is true and accurate in
all respects and not misleading in any respect. All written information
provided to Buyer and its professional advisers during the negotiations
prior to this Agreement was when given true and accurate.
3.24 Exclusivity
-----------
The representations and warranties made by the Warrantors in this
Agreement are in lieu of and exclusive of all other representations and
warranties, including without limitation any implied warranties of
merchantability or fitness or adequacy for any particular purpose of use.
The Warrantors hereby excludes and disclaims any such other or implied
representations or warranties, notwithstanding the delivery or disclosure to
Buyer or its officers, directors, employees, stockholders, agents, advisors
or representatives of any documentation or other information by the Seller
or any other person in connection with this Agreement or the transactions
contemplated hereby. Without limiting the generality of the foregoing,
except as expressly covered by a representation and warranty contained in
this Article III, the Warrantors makes no representation or warranty to
Buyer with respect to (a) any projections, estimates or budgets delivered,
or made available to Buyer or its representatives before or after the date
of this Agreement, or (b) any other information or documents (financial or
otherwise) made available to Buyer or its representatives.
3.25 Best Knowledge
--------------
For the purpose of this Agreement, "Best Knowledge of the Warrantors"
shall mean the actual knowledge of Peter J. Murphy, Jonathan R. Kosheff,
Alan Wong, Edmund Chan, F. J. Hoon, and T. Y. Chung. Except for the
aforementioned individuals,
18
each of the Warrantors jointly and severally represents and warrants that
there are no other individuals who have key knowledge on the matters
referred to in the representations and warranties contained in this Article
III.
3.26 Indemnification
---------------
For a period of two (2) years from and after the Closing Date, each of
the Warrantors shall jointly and severally protect, defend, indemnify and
hold harmless Buyer and its Affiliates, officers, directors, employees,
representatives and agents (each of the foregoing Persons is hereinafter
referred to individually as an "Indemnified Person" and collectively as
"Indemnified Persons") from and against any and all losses, costs, damages,
liabilities, fees (including without limitation reasonable attorneys' fees)
and expenses (collectively, the "Damages"), that any of the Indemnified
Persons incurs by reason of or in connection with any claim, demand, action
or cause of action alleging misrepresentation, breach of, or default in
connection with, any of the representations, warranties, covenants or
agreements (a "Breach") of any Warrantor and its Affiliates contained in
this Agreement, including any Exhibits attached hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
4.1 Organization and Good Standing
Buyer is a corporation organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Buyer has the
full corporate power and authority to own its property, carry on its
business as now being conducted, and to carry out the transactions
contemplated hereby.
4.2 Authority; Validity; Consents
-----------------------------
Buyer has the requisite power, capacity and authority necessary to
enter into and perform its obligations under this Agreement and the other
Transaction Documents and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement and
the other Transaction Documents by Buyer and the consummation of the
transactions contemplated herein have been duly and validly authorized by
all necessary corporate actions in respect thereof. This Agreement and the
other Transaction Documents constitute the legal, valid, and binding
obligation of Buyer, enforceable against it in accordance with their
respective terms, except as such enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors' rights generally or general principles of
equity or public policy. Buyer is not required to give any notice to or
obtain any consent from any Person in connection with the execution and
delivery of this Agreement and the other Transaction Documents or the
consummation or performance of any of the transactions contemplated hereby
and thereby.
19
4.3 No Conflict
-----------
The execution and delivery of this Agreement and the other Transaction
Documents and the consummation of the transactions provided for herein and
therein will not result in the breach of any of the terms and provisions of,
or constitute a default under, or conflict with, or cause any acceleration
of any obligation of Buyer under Buyer's Organizational Documents or, to
Buyer's knowledge, under any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution,
law, ordinance, principle of common law, regulation, statute or treaty,
except, in all such cases, to the extent such breach, default or conflict
would not result in a Material Adverse Effect.
4.4 Legal Proceedings
-----------------
There is no pending proceeding that has been commenced or, to Buyer's
knowledge, that has been threatened, against or otherwise relating to or
involving Buyer or any of its assets, at law or in equity, that challenges,
or may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, the transaction contemplated hereby.
4.5 Brokers or Finders
------------------
Neither Buyer, nor any of its respective officers and agents, has
incurred any obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment in
connection with this Agreement or the other Transaction Documents or the
transactions contemplated hereby or thereby.
4.6 Purchase Price
--------------
The Buyer has readily-available funds sufficient to pay the Purchase
Price. The fair-market value of the assets of the Buyer and group of
business entities of which the Buyer is a part exceeds its liabilities and
it has the ability to pay its debts as they come due, in the ordinary course
of business. Upon Closing and immediately after the Closing, Buyer is and
will be solvent, has and will have tangible and intangible assets having a
fair value in excess of the amount required to pay its probable liabilities
on its existing debts as they become due, and has access to adequate capital
for the conduct of its business and the ability to pay its debts from time
to time incurred in connection therewith as such debts mature.
4.7 Buyer's Due Diligence
---------------------
The Buyer represents that it has had an opportunity to ask questions
of and receive answers from the Seller regarding HoldCo and NewCo, its
business and its prospects, and the Shares. The Buyer believes that it has
received all of the information that it considers necessary or appropriate
for deciding whether to acquire the Shares.
20
4.8 Exclusivity
-----------
The representations and warranties made by Buyer in this Agreement are
in lieu of and are exclusive of all other representations and warranties,
including without limitation any implied warranties of merchantability or
fitness or adequacy for any particular purpose or use. Buyer hereby excludes
and disclaims any such other or implied representations or warranties,
notwithstanding the delivery or disclosure to the Seller or their officers,
directors, employees, stockholders, agents, advisors or representatives of
any documentation or other information by Buyer or any other Person in
connection with this Agreement or the transactions contemplated hereby.
4.9 Indemnification
---------------
For a period of two (2) years from and after the Closing Date, Buyer
shall protect, defend, indemnify and hold harmless Seller and its
Affiliates, officers, directors, employees, representatives and agents (each
of the foregoing Persons is hereinafter referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and
against any and all losses, costs, damages, liabilities, fees (including
without limitation reasonable attorneys' fees) and expenses (collectively,
the "Damages"), that any of the Indemnified Persons incurs by reason of or
in connection with any claim, demand, action or cause of action alleging
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements (a "Breach") of the
Buyer and its Affiliates contained in this Agreement, including any Exhibits
attached hereto.
ARTICLE V
CLOSING CONDITIONS
------------------
5.1 Closing Conditions of the Seller
--------------------------------
The obligations of the Seller hereunder to complete the transactions
provided for herein are subject, at the option of Seller, to the fulfillment
by Buyer of each of the following conditions at or prior to the Closing, and
Buyer shall use its best efforts to cause each such condition to be so
fulfilled:
(a) Buyer shall have paid to Parlex the Purchase Price in
accordance with the procedure set forth in Clause 2.2 above;
(b) Buyer shall have delivered copies of the resolutions of
its Board of Directors, certified by its secretary, authorizing and
approving this Agreement and the transactions contemplated hereby;
(c) Buyer shall have delivered an officer's certificate
stating that all of the representations and warranties contained
herein shall be true and correct in all material respects on and as of
the date of Closing, and that all of the terms, covenants and
21
conditions of this Agreement to be complied with or performed by at or
before the Closing shall have been duly complied with and performed;
(d) The Transaction Documents and all other documents
hereunder required to be executed and delivered to Seller at or prior
to the Closing shall have been so executed and delivered;
(e) The consents required from third parties, as set forth in
Exhibit 3.2, shall have been received;
(f) Buyer shall have performed or complied in all material
respects with its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Closing Date;
(g) Buyer shall have obtained all material consents,
approvals, orders, permits or other authorizations required in respect
of the execution, delivery and performance of this Agreement and the
Transaction Documents and the consummation of the transactions
contemplated herein and therein; and
(h) No legal proceeding shall be pending wherein an
unfavorable judgment, order, decree, stipulation or injunction would
(i) prevent consummation of any of the transactions contemplated by
this Agreement or (ii) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, and no such
judgment, order, decree, stipulation or injunction shall be in effect.
5.2 Closing Conditions of the Buyer
-------------------------------
The obligations of Buyer hereunder to complete the transactions
provided for herein are subject, at the option of Buyer, to the fulfillment
by the Warrantors (as the case may be) of each of the following conditions
at or prior to the Closing, and each Warrantor shall use its best efforts to
cause each such condition to be so fulfilled:
(a) Seller shall have delivered certificates representing the
Shares and any and all other duly executed instruments of transfer and
sold notes as shall be necessary or appropriate to convey, transfer,
assign and vest in the Buyer all ownership, right, interest and title
in fee simple, free of any obligations, liens, liabilities,
encumbrances, security interests or charges in and to the Shares to be
purchased hereunder;
(b) Each Warrantor shall have delivered copies of the
resolutions of its Board of Directors, certified by its secretary,
authorizing and approving this Agreement and the transactions
contemplated hereby;
(c) Each Warrantor shall have delivered an officer's
certificate stating that all of the representations and warranties
contained herein shall be true and correct in all material respects on
and as of the date of Closing, and that all of the terms, covenants
22
and conditions of this Agreement to be complied with or performed by
at or before the Closing shall have been duly complied with and
performed;
(d) The Transaction Documents and all other documents referred
to in this Agreement and the Transaction Documents which are required
to be executed and delivered to Buyer at or prior to the Closing shall
have been so executed and delivered to Buyer;
(e) one of the key employees of Parlex Shanghai named in
Exhibit 5.2 (e)(i) and not more than 20% of the other employees of
Parlex Shanghai named in Exhibit 5.2 (e)(ii) to this Agreement have
rejected an employment offer by NewCo; provided, however, that in the
event a key employee has so rejected an employment offer, such
employee may be replaced by an individual with comparable professional
experience no later than ten (10) days after the Closing Date and that
such replacement is reasonably acceptable to Buyer. Buyer may provide
written objections, if any, within five business days of receipt of
such replacement employee's resume or curriculum vitae. In such event,
Buyer will provide Seller with a brief description of the reason(s)
for its objection(s). In the event Buyer does not provide written
objections within such time period, they shall be deemed to have
assented to the hiring;
(f) The Companies have not experienced a Material Adverse
Effect and the representations and warranties of the Warrantors
contained herein shall be true and correct in all material respects,
in each case as of the date of this Agreement and as of the Closing
Date;
(g) Each of Seller and its Affiliates shall have performed or
complied in all material respects with its agreements and covenants
required to be performed or complied with under this Agreement as of
or prior to the Closing Date;
(h) Seller and its Affiliates shall have obtained approval of
the environmental assessment report for NewCo by the Environmental
Bureau in PRC and have executed all relevant documentation as set
forth in Exhibit in 5.2(h) in respect of the transfer of the Business
from Parlex Shanghai to NewCo, such documentation to be provided to
Buyer's reasonable satisfaction not less then five (5) Business Days
prior to Closing;
(i) Seller, Parlex Corporation and its Affiliates shall have
obtained all material consents, approvals, orders, permits or other
authorizations required in respect of the execution, delivery and
performance of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated herein and therein;
(j) No legal proceeding shall be pending wherein an
unfavorable judgment, order, decree, stipulation or injunction would
(i) prevent consummation of any of the transactions contemplated by
this Agreement or (ii) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, and no such
judgment, order, decree, stipulation or injunction shall be in effect;
23
(k) HoldCo did not authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver (whether through
the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any shares of any
class or any other securities of, or other ownership interests in
HoldCo;
(l) HoldCo did not increase or reduce the registered capital
and total investment amount of NewCo; and
(m) Seller shall provide Buyer with a legal opinion from the
PRC law firm Siway & Seaway, 14th Floor, Panorama Mansion, 53 HuangPu
Road, Bund, 200080 Shanghai P.R. China in the form attached here to as
Exhibit 5.2(m)(i) and a legal opinion from the Hong Kong law firm of
Morrison & Foerster , in the form attached hereto as Exhibit
5.2(m)(ii).
5.3 Long Stop Date
--------------
(a) On or after the Long Stop Date, Seller may withdraw from this
Agreement by written notice to Buyer unless all of the closing conditions as
per Clause 5.1 above have been fulfilled on or before such date unless
Seller is responsible for the non-fulfillment of said closing conditions.
(b) On or after the Long Stop Date, Buyer may withdraw from this
Agreement by written notice to Seller unless all of the closing conditions
as per Clause 5.2 above have been fulfilled on or before such date unless
Buyer is responsible for the non-fulfillment of said closing conditions.
(c) In the event of such withdrawal, the withdrawing Party shall
have no obligation or incur any liability towards the other Party and the
Parties herewith waive all such claims they may have against the withdrawing
Party in connection with such withdrawal, except for any liability of any
Party for fraud or for damages for willful breach of any covenant or other
obligation under this Agreement and the Licence Agreement.
ARTICLE VI
WARRANTORS' COVENANTS
---------------------
6.1 Seller covenants that before the Closing Date, NewCo shall offer
employment to the employees of Parlex Shanghai listed in Exhibits 5.2(e)(i)
and 5.2(e)(ii) and shall direct Parlex Shanghai to recommend to the
employees that they accept such offered employment with NewCo.
6.2 For the period between the signing date and the Closing Date,
Seller shall use its best efforts to ensure that the Companies shall (i)
preserve relationships with customers, suppliers, licensors, licensees,
industry associations, and others with which it has business dealings
related to the Business, (ii) preserve the assets of the Business in good
working condition, reasonable wear and tear excepted, (iii) keep the
necessary
24
insurance for the Business in place, and (iv) maintain accounting procedures
consistent with past practice.
6.3 For the period between the signing date and the Closing Date,
Seller shall ensure that the Companies shall not, with respect to the
Business, without the consent of Buyer, (i) permit any of its material
assets to be subjected to any Encumbrance, except for those arising by
operation of law, (ii) make any capital expenditure exceeding an aggregate
amount of US$50,000.00, (iii) enter into any material contract or commitment
with onerous terms which are not consistent with past practices, (iv) grant
any increase in wages, salaries, bonus or other remuneration of any
employee, (v) cancel or waive any claims or rights of substantial value,
(vi) incur or assume any long-term or short-term debt; assume, guarantee,
endorse or otherwise become liable (whether directly, contingently or
otherwise) for the obligation of any other Person; make any loans, advances
or capital contributions to, or investments in any Person, or (vii) agree,
whether or not in writing, to do any of the foregoing.
6.4 Seller shall procure that from the signing date the management
of the Companies will grant Buyer and its Affiliates reasonable access to
all premises, assets, records, personnel, information and documentation, and
will lend to Buyer and its Affiliates all support reasonably required for
the conduct of the Business. Seller shall regularly update specified
personnel of Buyer and/or its Affiliates on the status of the transfer of
the Business from Parlex Shanghai to NewCo.
6.5 Each of the Warrantors hereby irrevocably jointly and severally
undertakes to the Buyer that all actions, permits, approvals and
registrations as set out in Exhibit 6.5 shall be done by, obtained by, or
issued to NewCo within the timeframes set forth in such exhibit.
ARTICLE VII
NON-COMPETITION AND NON-SOLICITATION COVENANTS
----------------------------------------------
7.1 Seller and Buyer each hereby agree that for a period of two (2)
years following the Closing Date (the "Restricted Period"), it shall not and
each shall cause its respective Affiliates to not:
(i) engage in or support any new business competing with the
Restricted Business; or
(ii) hold directly any ownership or equity interest in any business
entity or enterprise that engages a business competing with the Restricted
Business; and
(iii) Notwithstanding the foregoing, in the event any of Buyer's
customers requires that Buyer utilize a second source to manufacture
products provided by the Restricted Business, then and in that event only,
Buyer shall be allowed to use the services of a second source to engage in
the Restricted Business so long as NewCo
25
continues to be the primary source for the manufacturing of products
provided by the Restricted Business.
7.2 For a period of two (2) years after the Closing Date, neither
Seller nor Buyer, nor any of their respective Affiliates, will solicit any
member of senior management of the Companies for employment, provided that
such Party shall not be restricted from advertising for employment in any
newspaper, trade journal or other publication available for general
distribution to the public without specific reference to any particular
employees.
ARTICLE VIII
GENERAL PROVISIONS
------------------
8.1 Expenses and Stamp Duty
-----------------------
Except as otherwise expressly provided for in this Agreement, each
Party to this Agreement covenants to pay all expenses incurred by it in
connection with the preparation, execution, and performance of this
Agreement and the transactions contemplated hereby, including all fees and
expenses of its representatives, whether or not the Closing shall have
occurred. All stamp duty payable in relation to the sale and purchase of the
Shares shall be borne by the Buyer.
8.2 Public Announcements
--------------------
Unless otherwise required by applicable law or by obligations of the
Parties or their affiliates pursuant to any listing agreement with or rules
of any securities exchange, the Parties shall consult with each other before
issuing any press release or otherwise making any public statement with
respect to this Agreement, the transactions contemplated hereby or the
activities and operations of the other Party and shall not issue any such
release or make any such statement without the prior written consent of the
other Party (such consent not to be unreasonably withheld or delayed).
8.3 Notices
-------
All notices, consents, waivers, and other communications under this
Agreement must be in writing and shall be deemed to have been duly given
when: (a) delivered by hand (with written confirmation of receipt), (b) sent
by facsimile (with written confirmation of receipt), or (c) when received by
the addressee, if sent by a delivery service (prepaid, receipt requested) or
(d) when received by the addressee, if sent by registered or certified mail
(postage prepaid, return receipt requested), in each case to the appropriate
addresses, representative (if applicable) and facsimile numbers set forth
below (or to such other addresses, representative and facsimile numbers as a
Party may designate by notice to the other Parties):
26
(i) If to Seller, to:
Peter J. Murphy
President
Parlex Corporation
One Parlex Place
Methuen, MA 01844
Facsimile: (978) 685-7867
with a copy (which shall not constitute notice) to:
Edward D. Kutchin, Esq.
Kutchin & Rufo, P.C.
155 Federal Street
Boston, MA 02110
Facsimile: (617) 542-3001
(ii) If to Buyer, to:
Infineon Technologies AG
Klaus Hau
Leibnizstrasse 6
93055 Regensburg
with a copy (which shall not constitute notice) to:
Infineon Technologies AG
Legal Department
p.o. box 800949
81609 Munich, Germany
Fax: + 49 89 234 26993
8.4 Entire Agreement
----------------
This Agreement (including the Exhibits), the other Transaction
Documents and all other certificates, documents, agreements and deliveries
in connection contemplated hereby or thereby, supersede all prior agreements
(including without limitation that certain Term Sheet between certain of the
Parties hereto, dated August 16, 2004), arrangements, covenants, promises,
conditions, undertakings, inducements, representations, warranties and
negotiations, express or implied, oral or written, between the Parties with
respect to its subject matter and constitutes a complete and exclusive
statement of the terms of the agreement between the Parties with respect to
its subject matter. Each of the Parties hereby acknowledges that (a) none of
the Parties has relied or will rely in respect of this Agreement or the
transactions contemplated hereby upon any document or written or oral
information previously furnished to or discovered by it or its
representatives, other than the Transaction Documents and all other
certificates, documents, agreements and deliveries contemplated
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hereby or thereby, (b) there are no covenants or agreements by or on behalf
of any Party or any of its respective Affiliates or representatives other
than those expressly set forth in the Transaction Documents, and (c) the
Parties' respective rights and obligations with respect to this Agreement
and the events giving rise thereto will be solely as set forth in the
Transaction Documents and the related documents. Without limiting the
generality of the foregoing, each Party hereto agrees that, except for the
representations and warranties contained in this Agreement and any related
document, none of the Parties makes any other representations or warranties,
and each hereby disclaims any of the representations or warranties made by
itself or any of its officers, directors, employees, agents, financial and
legal advisors or other representatives, with respect to the execution and
delivery of this Agreement or the transactions contemplated hereby,
notwithstanding the delivery or disclosure to the other or the other's
representatives of any documentation or other information (other than the
Transaction Documents) with respect to any one or more of the foregoing.
8.5 Amendments
----------
This Agreement may not be amended except by a written agreement
executed by the Parties hereto.
8.6 Binding Agreement; Assignments
------------------------------
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns. This Agreement, and the rights, interests and obligations
hereunder, shall not be assigned by any Warrantor without the prior written
consent of the Seller (in the case of an assignment by Warrantor) or Buyer
without the prior written consent of Seller (in the case of an assignment by
Buyer) (which consents may be granted or withheld in the sole discretion of
the Person whose consent is required).
8.7 Severability
------------
If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to
any Party in any material respect. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
Parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the Parties as closely as possible in a
mutually acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the greatest extent
possible.
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8.8 Clause Headings, Construction
-----------------------------
The headings of Clauses in this Agreement are provided for convenience
only and shall not affect its construction or interpretation. All references
to "Article," "Clause" or "Clauses" refer to the corresponding Article,
Clause or Clauses of this Agreement. All words used in this Agreement shall
be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
8.9 Dispute Resolution
------------------
Any controversy or claim arising out of or relating to this Agreement
(other than injunctive relief, including, without limitation, specific
performance), or the negotiation or breach thereof, shall be settled using
the following procedure prior to either Party pursuing other available
remedies:
(a) Negotiation. A meeting shall be held promptly (in no event
more than fourteen (14) days after either Seller or Buyer has notified
the other in writing that it considers that a dispute has arisen)
between the CEO of Seller and the CEO of Buyer's Secure Mobile
Solutions Group, to attempt in good faith to negotiate a resolution of
the dispute (the "Negotiation").
(b) Mediation. If, within fifteen (15) days after such
meeting, the Parties have not succeeded in negotiating a resolution of
the dispute, they will jointly appoint a mutually acceptable neutral
person not affiliated with either of the Parties (the "Neutral"),
seeking assistance in such regard from the Singapore Mediation Centre
if they have been unable to agree upon such appointment within thirty
(30) days from the initial meeting under Clause 8.9(a). The fees of
the Neutral shall be shared equally by the Parties, one half by Buyer
and one half by the Seller. In consultation with the Neutral, the
Parties will select or devise a mediation procedure ("Mediation") by
which they will attempt to resolve the dispute, and a time and place
for the Mediation to be held, with the neutral making the decision as
to the procedure, and/or place and time (but not later than twenty
(20) days after selection of the Neutral), if the Parties have been
unable to agree on any such matters within fifteen (15) days after
initial consultation with the Neutral. The Parties agree to
participate in good faith in the Mediation to its conclusion as
designated by the Neutral, but in no event shall this obligation
extend for more than sixty (60) days after selection of the Neutral,
after which the Parties shall be entitled to seek all remedies
available to them hereunder, at law, in equity or otherwise.
(c) Arbitration. If the Parties are not successful in
resolving the dispute through the Negotiation or the Mediation within
90 days after the initial notice pursuant to Clause 8.9(a), any
controversy or claim arising out of or relating to this Agreement
(other than injunctive relief, including, without limitation, specific
performance), or the negotiation or breach thereof, shall be subject
to final and binding arbitration in accordance with the Rules of the
Singapore International Arbitration Centre ("SIAC Rules") for the time
being in force which SIAC Rules are deemed to be
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incorporated by reference to this Agreement, and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The language to be used in the arbitration
proceedings shall be English. The provisions of this Clause 6.9 shall
not be deemed to preclude any Party hereto from seeking preliminary
injunctive or other equitable relief to protect or enforce its rights
hereunder, or to prohibit any court from making preliminary findings
of fact in connection with granting or denying such preliminary
injunctive relief pending arbitration, or to preclude any Party hereto
from seeking permanent injunctive or other equitable relief after and
in accordance with the decision of the arbitrators.
8.10 Governing Law
-------------
This Agreement shall be governed by, and construed in accordance with,
the laws of Singapore.
8.11 Counterparts
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original of this Agreement and all of which,
when taken together, shall be deemed to constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by facsimile shall be effective as delivery of a manually executed
counterpart of this Agreement.
8.12 Time of Essence
---------------
Time is of the essence in this Agreement.
8.13 No Third Party Beneficiaries
----------------------------
This Agreement is for the sole benefit of the Parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable benefit, claim,
cause of action, remedy or right of any kind. The Parties further agree that
the Contracts (Rights of Third Parties) Act (Chapter 53B) is hereby
expressly excluded.
8.14 No Strict Construction
----------------------
The language used in this Agreement shall be deemed to be the language
chosen by the parties to express their mutual intent. Each provision hereof
has been subject to the mutual consultation, negotiation and agreement of
the parties, and there shall be no construction against any Party based on
any presumption of that Party's involvement in the drafting thereof.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be executed the day and year first written above.
PARLEX ASIA PACIFIC LTD
By: /s/ Peter J. Murphy
-------------------------------
Name: Peter J. Murphy
Title: Director
PARLEX CORPORATION
By: /s/ Peter J. Murphy
-------------------------------
Name: Peter J. Murphy
Title: Chief Executive Officer
INFINEON TECHNOLOGIES ASIA PACIFIC
PTE LTD
By: /s/ Loh Kin Wah
-------------------------------
Name: Mr. Loh Kin Wah
Title: President and Managing
Director
By: /s/ Klaus Gohlke
-------------------------------
Name: Dr. Klaus Gohlke
Title: Vice President, AP
Corporate Finance and
Company Director
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