Document:

STOCK PURCHASE AGREEMENT

 

between

 

AIR INDUSTRIES GROUP

 

and

 

CPI AEROSTRUCTURES, INC.

 

Dated as of March 21,
2018

 

    

    

    

 

TABLE OF CONTENTS

 

Page

 

	ARTICLE  I    DEFINITIONS	1
	ARTICLE II   PURCHASE AND SALE	11
	Section 2.01   Purchase and Sale	11
	Section 2.02   Total Purchase Price	11
	Section 2.03   Transactions to be Effected at the Closing	12
	Section 2.04   Initial Purchase Price Adjustment	14
	Section 2.05   Closing	16
	Section 2.06   Withholding Tax	16
	ARTICLE  III    REPRESENTATIONS AND WARRANTIES OF SELLER	17
	Section 3.01   Organization and Authority of Seller	17
	Section 3.02   Organization, Authority and Qualification of the Acquired Companies	17
	Section 3.03   Capitalization	17
	Section 3.04   No Conflicts; Consents	18
	Section 3.05   Unaudited Financial Statements	19
	Section 3.06   Undisclosed Liabilities	19
	Section 3.07   Absence of Certain Changes, Events and Conditions	19
	Section 3.08   Material Contracts	22
	Section 3.09   Title to Assets; Real Property	23
	Section 3.10   Condition and Sufficiency of Assets	23
	Section 3.11   Intellectual Property	24
	Section 3.12   Inventory	25
	Section 3.13   Accounts Receivable	25
	Section 3.14   Customers and Suppliers	25
	Section 3.15   Insurance	26
	Section 3.16   Legal Proceedings; Governmental Orders	27
	Section 3.17   Compliance With Laws; Permits	27
	Section 3.18   Environmental Matters	27
	Section 3.19   Employee Benefit Matters	29
	Section 3.20   Employment Matters	32
	Section 3.21   Taxes.	34
	Section 3.22   Intercompany Arrangements	36
	Section 3.23   Books and Records	36
	Section 3.24   Brokers	36
	Section 3.25   Full Disclosure	36
	ARTICLE IV   REPRESENTATIONS AND WARRANTIES OF BUYER	37
	Section 4.01   Organization and Authority of Buyer	37
	Section 4.02   No Conflicts; Consents	37
	Section 4.03   Investment Purpose	37
	Section 4.04   Brokers	38
	Section 4.05   Legal Proceedings	38
	ARTICLE V   COVENANTS	38
	Section 5.01   Conduct of Business Prior to the Closing	38
	Section 5.02   Access to Information	39
	Section 5.03   No Solicitation of Other Bids	39
	Section 5.04   Notice of Certain Events	40
	Section 5.05   Resignations	40

 

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	Section 5.06   Confidentiality	40
	Section 5.07   Non-Competition; Non-Solicitation	41
	Section 5.08   Governmental Approvals and Consents	42
	Section 5.09   Closing Financial Statements	44
	Section 5.10   Inventory Adjustment	44
	Section 5.11   Intercompany Accounts	44
	Section 5.12   Termination of Intercompany Arrangements	44
	Section 5.13   Termination of Indebtedness	45
	Section 5.14   Payments	45
	Section 5.15   Books and Records	45
	Section 5.16   Financing	46
	Section 5.17   Closing Conditions	46
	Section 5.18   Public Announcements	46
	Section 5.19   Further Assurances	46
	ARTICLE VI   TAX MATTERS	46
	Section 6.01   Tax Covenants	46
	Section 6.02   Termination of Existing Tax Sharing Agreements	47
	Section 6.03   Tax Indemnification	47
	Section 6.04   Straddle Period	48
	Section 6.05   Section 338(h)(10) Election	48
	Section 6.06   Contests	50
	Section 6.07   Cooperation and Exchange of Information	50
	Section 6.08   Tax Treatment of Indemnification Payments	50
	Section 6.09   Payments to Buyer	50
	Section 6.10   Survival	50
	Section 6.11   Overlap	51
	ARTICLE VII   CONDITIONS TO CLOSING	51
	Section 7.01   Conditions to Obligations of All Parties	51
	Section 7.02   Conditions to Obligations of Buyer	51
	Section 7.03   Conditions to Obligations of Seller	53
	ARTICLE VIII   INDEMNIFICATION	55
	Section 8.01   Survival	55
	Section 8.02   Indemnification by Seller	55
	Section 8.03   Indemnification by Buyer	56
	Section 8.04   Certain Limitations	56
	Section 8.05   Indemnification Procedures	57
	Section 8.06   Payments; Indemnification Escrow Fund	59
	Section 8.07   Tax Treatment of Indemnification Payments	60
	Section 8.08   Effect of Investigation	60
	Section 8.09   Exclusive Remedies	60
	ARTICLE IX   TERMINATION	60
	Section 9.01   Termination	60
	Section 9.02   Effect of Termination	61
	ARTICLE X   MISCELLANEOUS	62
	Section 10.01   Expenses	62
	Section 10.02   Notices	62

 

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	Section 10.03   Interpretation	63
	Section 10.04   Headings	63
	Section 10.05   Severability	63
	Section 10.06   Entire Agreement	64
	Section 10.07   Successors and Assigns	64
	Section 10.08   No Third-party Beneficiaries	64
	Section 10.09   Amendment and Modification; Waiver	64
	Section 10.10   Governing Law; Submission to Jurisdiction; Waiver of Jury Trial	64
	Section 10.11   Specific Performance	65
	Section 10.12   Counterparts	65

 

EXHIBITS

 

Exhibit A – Escrow
Agreement

Exhibit B – Sublease

Exhibit C – Transition
Services Agreement

 

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STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement
(this “Agreement”), dated as of March 21, 2018, is entered into between AIR INDUSTRIES GROUP, a Nevada corporation
(“Seller”) and CPI AEROSTRUCTURES, INC., a New York corporation (“Buyer”).

 

RECITALS

 

WHEREAS, Seller owns
all of the issued and outstanding shares of common stock, no par value (the “Shares”), of Welding Metallurgy, Inc.,
a New York corporation (the “Company”);

 

WHEREAS, Seller wishes
to sell to Buyer, and Buyer wishes to purchase from Seller, the Shares, subject to the terms and conditions set forth herein; and

 

WHEREAS, a portion
of the purchase price payable by Buyer to Seller shall be placed in escrow by Buyer, the release of which shall be contingent upon
certain events and conditions, all as set forth in this Agreement and the Escrow Agreement (as defined herein).

 

NOW, THEREFORE, in
consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE
I

DEFINITIONS

 

The following terms
have the meanings specified or referred to in this ARTICLE I:

 

“Acquired Companies”
has the meaning set forth in Section 3.02.

 

“Acquired Company”
has the meaning set forth in Section 3.02.

 

“Acquired Company
Intellectual Property” means all Intellectual Property that is owned by an Acquired Company.

 

“Acquired Company
IP Agreements” means all licenses, sublicenses, consent to use agreements, settlements, coexistence agreements, covenants
not to sue, waivers, releases, permissions and other Contracts, whether written or oral, relating to Intellectual Property to which
an Acquired Company is a party, beneficiary or otherwise bound.

 

“Acquired Company
IP Registrations” means all Acquired Company Intellectual Property that is subject to any issuance, registration or application
by, to or with any Governmental Authority or authorized private registrar in any jurisdiction, including issued patents, registered
trademarks, domain names and copyrights, and pending applications for any of the foregoing.

 

    1

    

    

 

“Acquired Company
Systems” has the meaning set forth in Section 3.11(e).

 

“Acquisition Proposal”
has the meaning set forth in Section 5.03(a).

 

“Action”
means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation,
citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at
law or in equity.

 

“Affiliate”
of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such Person. The term “control” (including the terms “controlled by” and
“under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Agreement”
has the meaning set forth in the preamble.

 

“Allocation”
has the meaning set forth in Section 6.05(d)(ii).

 

“Ancillary Documents”
means the Escrow Agreement, the Sublease and the Transition Services Agreement.

 

“Balance Sheet”
means the balance sheet of the Acquired Companies as of December 31, 2017 included in the Unaudited Financial Statements.

 

“Balance Sheet
Date” means December 31, 2017.

 

“Basket Amount”
has the meaning set forth in Section 8.04(a).

 

“Benefit Plan”
has the meaning set forth in Section 3.19(a).

 

“Business Day”
means any day except Saturday, Sunday or any other day on which commercial banks located in New York are authorized or required
by Law to be closed for business.

 

“Buyer” has
the meaning set forth in the preamble.

 

“Buyer Indemnitees”
has the meaning set forth in Section 8.02.

 

“Buyer’s
Accountants” means CohnReznick LLP.

 

“CERCLA”
means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.

 

“Closing”
has the meaning set forth in Section 2.05.

 

    2

    

    

 

“Closing Date”
has the meaning set forth in Section 2.05.

 

“Closing Date Payment”
has the meaning set forth in Section 2.04(a)(i).

 

“Closing Financial
Statements” has the meaning set forth in Section 5.09.

 

“Closing Indebtedness
Certificate” means a certificate executed by the Chief Financial Officer of each of the Acquired Companies certifying on
behalf of the Acquired Companies an itemized list of all outstanding Indebtedness as of the open of business on the Closing Date
and the Person to whom such outstanding Indebtedness is owed and an aggregate total of such outstanding Indebtedness.

 

“Closing Transaction
Expenses Certificate” means a certificate executed by the Chief Financial Officer of each of the Acquired Companies, certifying
the amount of Transaction Expenses remaining unpaid as of the open of business on the Closing Date (including an itemized list
of each such unpaid Transaction Expense with a description of the nature of such expense and the person to whom such expense is
owed).

 

“Closing Working
Capital” means on a consolidated basis: (a) the Current Assets of the Acquired Companies, less (b) the Current Liabilities
of the Acquired Companies, determined as of the open of business on the Closing Date.

 

“Closing Working
Capital Statement” has the meaning set forth in Section 2.04(b)(i).

 

“Code” means
the Internal Revenue Code of 1986, as amended.

 

“Common Stock”
has the meaning set forth in Section 3.03(a).

 

“Company”
has the meaning set forth in the recitals.

 

“Contingent Payment”
has the meaning set forth in Section 2.02(a).

 

“Contingent Payments”
has the meaning set forth in Section 2.02(a).

 

“Contracts”
means all contracts, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures
and all other agreements, commitments and legally binding arrangements, whether written or oral.

 

“Current Assets”
means accounts receivable (less an allowance for doubtful accounts as defined by GAAP for old, uncollected accounts), inventory
and prepaid expenses (defined as amounts paid by an Acquired Company for goods or services to be delivered, or performed, on or
after the Closing Date), in each case, determined in accordance with GAAP applied using the same accounting methods, practices,
principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that
were used in the preparation of the Closing Financial Statements as if such accounts were being prepared and as of a fiscal year
end.

 

    3

    

    

 

“Current Liabilities”
means accounts payable (defined as goods and/or services, receipt or performance of which occurs prior to Closing Date, for which
an Acquired Company has received an invoice prior to the Closing Date), accrued expenses (defined as goods or services, receipt
or performance of which occurred prior to the Closing Date, for which an Acquired Company has not received an invoice but is determinable
and evidenced by independent shipping documentation or performance report) and customer deposits (defined as cash received by an
Acquired Company prior to the Closing Date, for which delivery of product will occur on or after the Closing Date), in each case,
determined in accordance with GAAP applied using the same accounting methods, practices, principles, policies and procedures, with
consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Closing
Financial Statements as if such accounts were being prepared and as of a fiscal year end.

 

“Direct Claim”
has the meaning set forth in Section 8.05(c).

 

“Disclosure Schedules”
means the Disclosure Schedules delivered by Seller and Buyer concurrently with the execution and delivery of this Agreement.

 

“Disputed Amounts”
has the meaning set forth in Section 2.04(c)(iii).

 

“Dollars or $”
means the lawful currency of the United States.

 

“Encumbrance”
means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option,
security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including
any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership, except for such non-monetary
items as individually or in the aggregate do not prevent any real property from being used for the purposes intended.

 

“Environmental
Attributes” means any emissions and renewable energy credits, energy conservation credits, benefits, offsets and allowances,
emission reduction credits or words of similar import or regulatory effect (including emissions reduction credits or allowances
under all applicable emission trading, compliance or budget programs, or any other federal, state or regional emission, renewable
energy or energy conservation trading or budget program) that have been held, allocated to or acquired for the development, construction,
ownership, lease, operation, use or maintenance of an Acquired Company as of: (i) the date of this Agreement; and (ii) future years
for which allocations have been established and are in effect as of the date of this Agreement.

 

“Environmental
Claim” means any Action, Governmental Order, lien, fine, penalty, or, as to each, any settlement or judgment arising therefrom,
by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement
proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages,
personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on
or resulting from: (a) the presence, Release of, or exposure to, any Hazardous Materials; or (b) any actual or alleged non-compliance
with any Environmental Law or term or condition of any Environmental Permit.

 

    4

    

    

 

“Environmental
Law” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating
to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or
safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning
the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment,
generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental
Law” includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act
of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water
Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances
Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C.
§§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.

 

“Environmental
Notice” means any written directive, notice of violation or infraction, or notice respecting any Environmental Claim relating
to actual or alleged non-compliance with any Environmental Law or any term or condition of any Environmental Permit.

 

“Environmental
Permit” means any Permit, letter, clearance, consent, waiver, closure, exemption, decision or other action required under
or issued, granted, given, authorized by or made pursuant to Environmental Law.

 

“ERISA” means
the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

 

“ERISA Affiliate”
means all employers (whether or not incorporated) that would be treated together with an Acquired Company or any of its Affiliates
as a “single employer” within the meaning of Section 414 of the Code or Section 4001 of ERISA.

 

“Escrow Agent”
means Continental Stock Transfer & Trust Company.

 

“Escrow Agreement”
means the Escrow Agreement to be entered into by Buyer, Seller and Escrow Agent at the Closing, substantially in the form of Exhibit
A.

 

“Estimated Closing
Working Capital” has the meaning set forth in Section 2.04(a)(ii).

 

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“Estimated Closing
Working Capital Statement” has the meaning set forth in Section 2.04(a)(ii).

 

“GAAP” means
United States generally accepted accounting principles in effect from time to time.

 

“Government Contract”
has the meaning set forth in Section 3.08(a)(viii).

 

“Governmental Authority”
means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such
government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental
authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any
arbitrator, court or tribunal of competent jurisdiction.

 

“Governmental Order”
means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

 

“Hazardous Materials”
means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in
each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory
effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos
in any form, lead or lead-containing materials, urea formaldehyde foam insulation, and polychlorinated biphenyls.

 

“Indebtedness”
means, without duplication and with respect to each Acquired Company, all (a) indebtedness for borrowed money; (b) obligations
for the deferred purchase price of property or services (other than Current Liabilities taken into account in the calculation of
Closing Working Capital), (c) long or short-term obligations evidenced by notes, bonds, debentures or other similar instruments;
(d) obligations under any interest rate, currency swap or other hedging agreement or arrangement; (e) capital lease obligations;
(f) reimbursement obligations under any letter of credit, banker’s acceptance or similar credit transactions; (g) guarantees
made by an Acquired Company on behalf of any third party in respect of obligations of the kind referred to in the foregoing clauses
(a) through (f); and (h) any unpaid interest, prepayment penalties, premiums, costs and fees that would arise or become due as
a result of the prepayment of any of the obligations referred to in the foregoing clauses (a) through (g).

 

“Indemnification
Escrow Amount” means $1,500,000.

 

“Indemnification
Escrow Fund” has the meaning set forth in Section 2.03(a)(iii)(B).

 

“Indemnified Party”
has the meaning set forth in Section 8.05.

 

“Indemnifying Party”
has the meaning set forth in Section 8.05.

 

“Independent Accountant”
has the meaning set forth in Section 2.04(c)(iii).

 

    6

    

    

 

“Initial Purchase
Price” has the meaning set forth in Section 2.02.

 

“Insurance Policies”
has the meaning set forth in Section 3.15.

 

“Intellectual Property”
means any and all rights in, arising out of, or associated with any of the following in any jurisdiction throughout the world:
(a) issued patents and patent applications (whether provisional or non-provisional), including divisionals, continuations, continuations-in-part,
substitutions, reissues, reexaminations, extensions, or restorations of any of the foregoing, and other Governmental Authority-issued
indicia of invention ownership (including certificates of invention, petty patents, and patent utility models) (“Patents”);
(b) trademarks, service marks, brands, certification marks, logos, trade dress, trade names, and other similar indicia of source
or origin, together with the goodwill connected with the use of and symbolized by, and all registrations, applications for registration,
and renewals of, any of the foregoing (“Trademarks”); (c) copyrights and works of authorship, whether or not copyrightable,
and all registrations, applications for registration, and renewals of any of the foregoing (“Copyrights”); (d) internet
domain names and social media account or user names (including “handles”), whether or not Trademarks, all associated
web addresses, URLs, websites and web pages, social media accounts and pages, and all content and data thereon or relating thereto,
whether or not Copyrights; (e) mask works, and all registrations, applications for registration, and renewals thereof; (f) industrial
designs, and all Patents, registrations, applications for registration, and renewals thereof; (g) trade secrets, know-how, inventions
(whether or not patentable), discoveries, improvements, technology, business and technical information, databases, data compilations
and collections, tools, methods, processes, techniques, and other confidential and proprietary information and all rights therein
(“Trade Secrets”); (h) computer programs, operating systems, applications, firmware, and other code, including all
source code, object code, application programming interfaces, data files, databases, protocols, specifications, and other documentation
thereof; and (i) all other intellectual or industrial property and proprietary rights.

 

“Inventory Adjustment
Amount” has the meaning set forth in Section 5.10.

 

“Inventory Analysis”
has the meaning set forth in Section 5.10.

 

“Knowledge of Seller”
or “Seller’s Knowledge” or any other similar knowledge qualification, means the actual or constructive knowledge
of any director or officer of Seller or an Acquired Company, after due inquiry.

 

“Law” means
any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement
or rule of law of any Governmental Authority.

 

“Liabilities”
has the meaning set forth in Section 3.06.

 

“Losses”
means losses, damages, liabilities, deficiencies, Actions, judgments, interest, awards, penalties, fines, costs or expenses of
whatever kind, including reasonable attorneys’ fees and the cost of enforcing any right to indemnification hereunder and
the cost of pursuing any insurance providers.

 

    7

    

    

 

“Material Adverse
Effect” means any event, occurrence, fact, condition or change that is, or could reasonably be expected to become, individually
or in the aggregate, materially adverse to (a) the business, results of operations, condition (financial or otherwise), assets
or prospects of an Acquired Company, or (b) the ability of Seller to consummate the transactions contemplated hereby on a timely
basis; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition or
change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions; (ii) conditions
generally affecting the industries in which the Acquired Companies operate; (iii) any changes in financial or securities markets
in general; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof;
(v) any action required or permitted by this Agreement, except pursuant to Section 3.04 and Section 5.08; (vi) any changes in applicable
Laws or accounting rules, including GAAP; or (vii) the public announcement, pendency or completion of the transactions contemplated
by this Agreement; provided further, however, that any event, occurrence, fact, condition or change referred to in clauses (i)
through (iv) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or could
reasonably be expected to occur to the extent that such event, occurrence, fact, condition or change has a disproportionate effect
on an Acquired Company compared to other participants in the industries in which an Acquired Company conducts its businesses.

 

“Material Contracts”
has the meaning set forth in Section 3.08(a).

 

“Material Customers”
has the meaning set forth in Section 3.14(a).

 

“Material Suppliers”
has the meaning set forth in Section 3.14(b).

 

“Multiemployer
Plan” has the meaning set forth in Section 3.19(c).

 

“Non-U.S. Benefit
Plan” has the meaning set forth in Section 3.19(a).

 

“Permits”
means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained,
or required to be obtained, from Governmental Authorities.

 

“Permitted Encumbrances”
means (a) any Encumbrance for Taxes which are not yet due, (b) any carrier’s, warehouseman’s, mechanic’s, materialman’s,
repairman’s, landlord’s or similar statutory or inchoate Encumbrance incidental to the ordinary conduct of business
which involves an obligation that is not yet due, (c) any Encumbrance set forth in any of the financial statements of the Acquired
Companies delivered to Buyer in connection with the transactions contemplated hereby, (d) those items set forth in the Disclosure
Schedules, including without limitation, Section 3.09(a) of the Disclosure Schedules or (e) minor encroachments and defects in
title which, in the aggregate, would not have a material impact on the value or intended use of any of the Acquired Companies’
properties.

 

    8

    

    

 

“Person”
means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated
organization, trust, association or other entity.

 

“Post-Closing Adjustment”
has the meaning set forth in Section 2.04(b)(ii).

 

“Post-Closing Tax
Period” means any taxable period beginning on the Closing Date and, with respect to any taxable period beginning before and
ending after the Closing Date, the portion of such taxable period beginning on the Closing Date.

 

“Post-Closing Taxes”
means Taxes of an Acquired Company for any Post-Closing Tax Period.

 

“Pre-Closing Tax
Period” means any taxable period ending on the day immediately prior to the Closing Date and, with respect to any taxable
period beginning before and ending after the Closing Date, the portion of such taxable period ending on and including the day immediately
prior to the Closing Date.

 

“Pre-Closing Taxes”
means Taxes of an Acquired Company for any Pre-Closing Tax Period.

 

“Pricing Adjustment”
has the meaning set forth in Section 5.10.

 

“Purchase Price
Adjustment Escrow Amount” means $500,000.

 

“Purchase Price
Adjustment Escrow Fund” has the meaning set forth in Section 2.03(a)(iii)(A).

 

“Qualified Benefit
Plan” has the meaning set forth in Section 3.19(c).

 

“Real Property”
means the real property owned, leased or subleased by an Acquired Company, together with all buildings, structures and facilities
located thereon.

 

“Release”
means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without
limitation, ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building,
structure, facility or fixture).

 

“Representative”
means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants
and other agents of such Person.

 

“Resolution Period”
has the meaning set forth in Section 2.04(c)(ii).

 

    9

    

    

 

“Restricted Business”
means the business of designing, manufacturing, marketing, selling, servicing, supporting, repairing, overhauling and/or maintaining
(a) build to print electronic assemblies or (b) fusion or spot welded assemblies.

 

“Restricted Period”
has the meaning set forth in Section 5.07(a).

 

“Review Period”
has the meaning set forth in Section 2.04(c)(i).

 

“Section 338(h)(10)
Election” has the meaning set forth in Section 6.05(a).

 

“Securities Act”
means the Securities Act of 1933, as amended.

 

“Seller”
has the meaning set forth in the preamble.

 

“Seller Indemnitees”
has the meaning set forth in Section 8.03.

 

“Seller’s
Accountants” means Rotenberg Meril Solomon Bertiger & Guttilla, P.C.

 

“Seller’s
Fees” has the meaning set forth in Section 5.09.

 

“Seller Fundamental
Representations” means the representations and warranties set forth in Section 3.01 (Organization and Authority of Seller),
Section 3.02 (Organization, Authority and Qualification of the Acquired Companies), Section 3.03 (Capitalization), Section 3.09(a)
(Title to Assets; Real Property), Section 3.11 (Intellectual Property) and Section 3.24 (Brokers).

 

“Shares”
has the meaning set forth in the recitals.

 

“Single Employer
Plan” has the meaning set forth in Section 3.19(c).

 

“Statement of Objections”
has the meaning set forth in Section 2.04(c)(ii).

 

“Straddle Period”
has the meaning set forth in Section 6.04.

 

“Sublease”
means the Sublease to be entered into by the Company and Seller, substantially in the form of Exhibit B.

 

“Subsidiary”
means Compac Development Corp., a New York corporation.

 

“Subsidiary Shares”
has the meaning set forth in Section 3.03(d).

 

“Target Working
Capital” means an amount equal to $9,500,000 less the Inventory Adjustment Amount, if any.

 

“Tax” or
“Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem,
transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment,
estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall
profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions
or penalties with respect thereto and any interest in respect of such additions or penalties.

 

    10

    

    

 

“Tax Claim”
has the meaning set forth in Section 6.06.

 

“Tax Return”
means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.

 

“Territory”
means the United States of America.

 

“Third Party Claim”
has the meaning set forth in Section 8.05(a).

 

“Total Escrow Amount”
is the sum of the Indemnification Escrow Amount and the Purchase Price Escrow Amount.

 

“Total Purchase
Price” has the meaning set forth in Section 2.02.

 

“Total Purchase
Price Allocation Schedule” has the meaning set forth in Section 6.05(d).

 

“Transition Services
Agreement” means the Transition Services Agreement to be entered into by Buyer and Seller at the Closing, substantially in
the form of Exhibit C.

 

“Transaction Expenses”
means all fees and expenses incurred by an Acquired Company at or prior to the Closing in connection with the preparation, negotiation
and execution of this Agreement and the Ancillary Documents, and the performance and consummation of the transactions contemplated
hereby and thereby.

 

“Unaudited Financial
Statements” has the meaning set forth in Section 3.05.

 

“Undisputed Amounts”
has the meaning set forth in Section 2.04(c)(iii).

 

“Union” has
the meaning set forth in Section 3.20(b).

 

“WARN Act”
means the federal Worker Adjustment and Retraining Notification Act of 1988, and similar state, local and foreign laws related
to plant closings, relocations, mass layoffs and employment losses.

 

“Working Capital
Schedule” has the meaning set forth in Section 2.04(a)(ii)

 

ARTICLE
II 

 

PURCHASE
AND SALE

 

Section 2.01      
Purchase and Sale. Subject to the terms and conditions set forth herein, at the Closing, Seller shall sell to
Buyer, and Buyer shall purchase from Seller, the Shares, free and clear of all Encumbrances, except those imposed by applicable
securities laws, for the consideration specified in Section 2.02.

 

    11

    

    

 

Section 2.02      
Total Purchase Price. The aggregate purchase price for the Shares (the “Total Purchase Price”) shall
be $9,000,000 (the “Initial Purchase Price”), subject to adjustment pursuant to Section 2.04 hereof, plus the Contingent
Payments, if any. If a Section 338(h)(10) Election is made, the parties agree to allocate the Total Purchase Price for tax purposes
as provided in Section 6.05(d).

 

(a)              
Contingent Payments. Amounts due and owing by Buyer to Seller pursuant to this Section 2.02(a), if any, shall be
the “Contingent Payments” and individually a “Contingent Payment.” The Contingent Payments shall be calculated
as follows:

 

(i)                $500,000
if the agreement described in item (a)(i) of Section 2.02 of the Disclosure Schedule is signed by the Company and the identified
counterparty (on the terms set forth on such schedule) on or before May 31, 2018;

 

(ii)             
$500,000 if the agreement described in item (a)(ii) of Section 2.02 of the Disclosure Schedule is signed by the Company
and the identified counterparty (on the terms set forth on such schedule) on or before July 31, 2018;

 

(iii)           
if the agreement described in item (a)(i) of Section 2.02 of the Disclosure Schedule is signed by the Company and the identified
counterparty (on the terms set forth on such schedule) after May 31, 2018, an amount equal to $500,000 reduced by $100,000 on the
first day of each month (commencing June 1, 2018), on a cumulative basis, while such agreement is unsigned;

 

(iv)            if
the agreement described in item (a)(ii) of Section 2.02 of the Disclosure Schedule is signed by the Company and the identified
counterparty (on the terms set forth on such schedule) after July 31, 2018, an amount equal to $500,000 reduced by $100,000 on
the first day of each month (commencing August 1, 2018), on a cumulative basis, while such agreement is unsigned.

 

By means of example,
if the agreement described on item (a)(i) of Section 2.02 of the Disclosure Schedule is signed by the Company and the identified
counterparty (on the terms set forth on such schedule) on July 15, 2018, the respective Contingent Payment will be $300,000 ($500,000
-$200,000).

 

Any Contingent Payment
payable pursuant to this Section 2.02(a) will be paid by Buyer to Seller (i) at Closing (as part of the Closing Date Payment) if
the signing of the respective agreement occurs prior to the Closing Date or (ii) within five Business Days following the signing
of the respective agreement if such signing occurs on or after the Closing Date, by wire transfer of immediately available funds,
to an account or accounts designated in a written notice to Buyer by Seller.

 

    12

    

    

 

Section 2.03      
Transactions to be Effected at the Closing.

 

(a)              
At the Closing, Buyer shall:

 

(i)                deliver
to Seller:

 

		(A)	the Closing Date Payment by wire transfer of immediately available funds to an account designated
in writing by Seller to Buyer no later than five Business Days prior to the Closing Date; and

 

		(B)	the Ancillary Documents and all other agreements, documents, instruments or certificates required
to be delivered by Buyer at or prior to the Closing pursuant to Section 7.03 of this Agreement.

 

(ii)             
pay, on behalf of the Acquired Companies or Seller, the following amounts:

 

		(A)	Indebtedness of the Acquired Companies to be paid at Closing, by wire transfer of immediately available
funds to the accounts and in the amounts specified on the Closing Indebtedness Certificate;

 

		(B)	any Transaction Expenses unpaid at Closing, by wire transfer of immediately available funds to
the accounts and in the amounts specified on the Closing Transaction Expenses Certificate; and

 

		(C)	Seller’s Fees.

 

(iii)           
deliver to the Escrow Agent:

 

		(A)	the Purchase Price Adjustment Escrow Amount (such amount, including any interest or other amounts
earned thereon, if any, and less any disbursements therefrom in accordance with the Escrow Agreement, the “Purchase Price
Adjustment Escrow Fund”) by wire transfer of immediately available funds to an account designated by the Escrow Agent, to
be held for the purpose of securing the obligations of Seller in Section 2.04(d);

 

		(B)	the Indemnification Escrow Amount (such amount, including any interest or other amounts earned
thereon and less any disbursements therefrom in accordance with the Escrow Agreement, the “Indemnification Escrow Fund”)
for the purpose of securing the indemnification obligations of Seller set forth in ARTICLE VIII and the obligations of Seller in
Section 2.04(d) and Section 6.09 and;

 

		(C)	the Escrow Agreement.

 

    13

    

    

 

(b)              
At the Closing, Seller shall:

 

(i)                deliver
to Buyer:

 

		(A)	stock certificates evidencing the Shares, free and clear of all Encumbrances, other than those
imposed by applicable securities laws, duly endorsed in blank or accompanied by stock powers or other instruments of transfer duly
executed in blank, with all required stock transfer tax stamps affixed thereto; and

 

		(B)	the Ancillary Documents and all other agreements, documents, instruments or certificates required
to be delivered by Seller or the Company at or prior to the Closing pursuant to Section 7.02 of this Agreement.

 

(ii)             
deliver to the Escrow Agreement to the Escrow Agent.

 

Section 2.04      
Initial Purchase Price Adjustment.

 

(a)              
Closing Adjustment.

 

(i)                At
the Closing, the Initial Purchase Price shall be adjusted in the following manner:

 

		(A)	either (1) an increase by the amount, if any, by which the Estimated Closing Working Capital (as
determined in accordance with Section 2.04(a)(ii)) is greater than the Target Working Capital, or (2) a decrease by the amount,
if any, by which the Estimated Closing Working Capital is less than the Target Working Capital;

 

		(B)	a decrease by the outstanding Indebtedness of the Acquired Companies as of the open of business
on the Closing Date; and

 

		(C)	a decrease by the amount of unpaid Transaction Expenses of the Acquired Companies as of the open
of business on the Closing Date.

 

The net amount after
giving effect to the adjustments listed above plus any Contingent Payment payable at Closing, less the Total Escrow Amount and
less the Seller’s Fees shall be the “Closing Date Payment.”

 

(ii)             
At least three Business Days before the Closing, Seller shall prepare and deliver to Buyer a statement setting forth its
good faith estimate of Closing Working Capital (the “Estimated Closing Working Capital”) prepared in accordance with
Section 2.04(a)(ii) of the Disclosure Schedule (the “Working Capital Schedule”), which statement shall contain an estimated
balance sheet of the Acquired Companies as of the Closing Date (without giving effect to the transactions contemplated herein,
except as specifically contemplated hereby), a calculation of Estimated Closing Working Capital (the “Estimated Closing Working
Capital Statement”), and a certificate of the Chief Financial Officer of Seller that the Estimated Closing Working Capital
Statement was prepared in accordance with GAAP to apply the same accounting methods, practices, principles, policies and procedures,
with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the
Closing Financial Statements for the most recent fiscal year end as if such Estimated Closing Working Capital Statement was being
prepared as of a fiscal year end.

 

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(b)              
Post-Closing Adjustment.

 

(i)                Within
90 calendar days after the Closing Date, Buyer shall prepare and deliver to Seller a statement setting forth its calculation of
Closing Working Capital prepared in accordance with the Working Capital Schedule, which statement shall contain an unaudited consolidated
balance sheet of the Acquired Companies as of the Closing Date (without giving effect to the transactions contemplated herein,
except as specifically contemplated hereby) (the “Closing Working Capital Statement”) and a certificate of the Chief
Financial Officer of Buyer that the Closing Working Capital Statement was prepared in accordance with GAAP to apply the same accounting
methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation
methodologies that were used in the preparation of the Closing Financial Statements for the most recent fiscal year end as if
such Closing Working Capital Statement was being prepared as of a fiscal year end.

 

(ii)             
The post-closing adjustment shall be an amount equal to the Closing Working Capital minus the Estimated Closing Working
Capital (the “Post-Closing Adjustment”). If the Post-Closing Adjustment amount is a positive number, such amount will
be paid by Buyer to Seller and if the Post-Closing Adjustment Amount is a negative number, the absolute value of such amount will
be paid by Seller to Buyer, in each case in accordance with Section 2.04(d).

 

(c)              
Examination and Review.

 

(i)               
Examination. After receipt of the Closing Working Capital Statement, Seller shall have 30 calendar days (the “Review
Period”) to review the Closing Working Capital Statement. During the Review Period, Seller and Seller’s Accountants
shall have full access to the books and records of the Acquired Companies, the personnel of, and work papers prepared by, Buyer
and/or Buyer’s Accountants to the extent that they relate to the Closing Working Capital Statement and to such historical
financial information (to the extent in Buyer’s possession) relating to the Closing Working Capital Statement as Seller may
reasonably request for the purpose of reviewing the Closing Working Capital Statement and to prepare a Statement of Objections
(defined below), provided, that such access shall be in a manner that does not interfere with the normal business operations of
Buyer or the Acquired Companies.

 

    15

    

    

 

(ii)             
Objection. On or prior to the last day of the Review Period, Seller may object to the Closing Working Capital Statement
by delivering to Buyer a written statement setting forth Seller’s objections in reasonable detail, indicating each disputed
item or amount and the basis for Seller’s disagreement therewith (the “Statement of Objections”). If Seller fails
to deliver the Statement of Objections before the expiration of the Review Period, the Closing Working Capital Statement and the
Post-Closing Adjustment, as the case may be, reflected in the Closing Working Capital Statement shall be deemed to have been accepted
by Seller, unless such failure results from Buyer’s failure to provide reasonable cooperation to Seller in its review of
the information underlying the Closing Working Capital Statement. If Seller delivers the Statement of Objections before the expiration
of the Review Period, Buyer and Seller shall negotiate in good faith to resolve such objections within 30 calendar days after the
delivery of the Statement of Objections (the “Resolution Period”) and, if the same are so resolved within the Resolution
Period, the Post-Closing Adjustment and the Closing Working Capital Statement with such changes as may have been agreed in writing
by Buyer and Seller, shall be final and binding and the Working Capital Statement shall be deemed accepted as of the date of such
resolution.

 

(iii)           
Resolution of Disputes. If Seller and Buyer fail to reach an agreement with respect to all of the matters set forth
in the Statement of Objections before expiration of the Resolution Period, then any amounts remaining in dispute (“Disputed
Amounts” with any amounts not so disputed, the “Undisputed Amounts”) shall be submitted for resolution to EisnerAmper
LLP or, if EisnerAmper LLP is unable to serve, Buyer and Seller shall appoint by mutual agreement an impartial nationally recognized
firm of independent certified public accountants other than Seller’s Accountants or Buyer’s Accountants (the “Independent
Accountant”) who, acting as experts and not arbitrators, shall resolve the Disputed Amounts only and make any adjustments
to the Post-Closing Adjustment, as the case may be, and the Closing Working Capital Statement. The parties hereto agree that all
adjustments shall be made without regard to materiality. The Independent Accountant shall only decide the specific items under
dispute by the parties and their decision for each Disputed Amount must be within the range of values assigned to each such item
in the Closing Working Capital Statement and the Statement of Objections, respectively.

 

(iv)            Fees of the Independent Accountant. The fees and expenses of the Independent Accountant shall be paid by Seller,
on the one hand, and by Buyer, on the other hand, based upon the percentage that the amount actually contested but not awarded
to Seller or Buyer, respectively, bears to the aggregate amount actually contested by Seller and Buyer.

 

(v)           
Determination by Independent Accountant. The Independent Accountant shall make a determination as soon as practicable
within 30 calendar days (or such other time as the parties hereto shall agree in writing) after their engagement, and their resolution
of the Disputed Amounts and their adjustments to the Closing Working Capital Statement and/or the Post-Closing Adjustment shall
be conclusive and binding upon the parties hereto.

 

(d)              
Payments of Post-Closing Adjustment. Except as otherwise provided herein, any payment of the Post-Closing Adjustment
shall (A) be due (x) within five Business Days of acceptance of the applicable Closing Working Capital Statement or (y) if there
are Disputed Amounts, then within five Business Days of the resolution described in Section 2.04(c)(v) above; and (B) be paid by
wire transfer of immediately available funds to such account as is directed by Buyer or Seller, as the case may be. Any payment
of the Post-Closing Adjustment owed by Seller to Buyer shall be paid by the Escrow Agent pursuant to the terms of the Escrow Agreement
from the Purchase Price Escrow Fund and to the extent the amount of the Purchase Price Adjustment exceeds the amount available
to Buyer in the Purchase Price Adjustment Escrow Fund, from the Indemnification Escrow Fund.

 

    16

    

    

 

(e)              
Adjustments for Tax Purposes. Any payments made pursuant to Section 2.04 shall be treated as an adjustment to the
Total Purchase Price by the parties for Tax purposes, unless otherwise required by Law.

 

Section 2.05      
Closing. Subject to the terms and conditions of this Agreement, the purchase and sale of the Shares contemplated
hereby shall take place at a closing (the “Closing”) to be held at 10:00 a.m., Eastern time, no later than two Business
Days after the last of the conditions to Closing set forth in ARTICLE VII have been satisfied or waived (other than conditions
which, by their nature, are to be satisfied on the Closing Date), at the offices of Graubard Miller, 405 Lexington Avenue 11th
Floor, New York, New York 10174, or at such other time or on such other date or at such other place as Seller and Buyer may mutually
agree upon in writing (the day on which the Closing takes place being the “Closing Date”).

 

Section 2.06      
Withholding Tax. Buyer and the Acquired Companies shall be entitled to deduct and withhold from the Total Purchase
Price all Taxes that Buyer and the Acquired Companies may be required to deduct and withhold under any provision of Tax Law. All
such withheld amounts shall be treated as delivered to Seller hereunder.

 

ARTICLE
III

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Except as set forth
in the correspondingly numbered Section of the Disclosure Schedules, Seller represents and warrants to Buyer that the statements
contained in this ARTICLE III are true and correct as of the date hereof and as of the Closing Date.

 

Section 3.01      
Organization and Authority of Seller. Seller is a corporation duly organized, validly existing and in good standing
under the Laws of the state of Nevada. Seller has full corporate power and authority to enter into this Agreement and the Ancillary
Documents to which Seller is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by Seller of this Agreement and Ancillary Document to which Seller
is a party, the performance by Seller of its obligations hereunder and thereunder, and the consummation by Seller of the transactions
contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Seller. This Agreement
has been duly executed and delivered by Seller, and (assuming due authorization, execution and delivery by Buyer) this Agreement
constitutes a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms. When an Ancillary
Document to which Seller is or will be a party has been duly executed and delivered by Seller (assuming due authorization, execution
and delivery by each other party thereto), the Ancillary Document will constitute a legal and binding obligation of Seller enforceable
against it in accordance with its terms.

 

    17

    

    

 

Section 3.02      
Organization, Authority and Qualification of the Acquired Companies. Each of the Company and the Subsidiary (together,
the “Acquired Companies” and individually an “Acquired Company”) is a corporation duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its incorporation and has full corporate power and authority
to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as it has been
and is currently conducted. Each Acquired Company has full corporate power and authority to enter into the Ancillary Documents
to which it is a party, to carry out its obligations thereunder and to consummate the transactions contemplated thereby. Section
3.02 of the Disclosure Schedules sets forth each jurisdiction in which each of the Acquired Companies is licensed or qualified
to do business, and each of the Acquired Companies is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of its business as currently conducted makes such licensing
or qualification necessary, except where the failure to so qualify would not have a Material Adverse Effect. Complete and correct
copies of the Certificate of Incorporation and By-laws of each of the Acquired Companies and all amendments thereto have been heretofore
delivered to Buyer. All corporate actions taken by an Acquired Company in connection with this Agreement and the Ancillary Documents
will be duly authorized on or prior to the Closing.

 

Section 3.03      
Capitalization.

 

(a)              
The authorized capital stock of the Company consists of 200 shares of common stock, no par value per (“Common Stock”),
of which 100 shares are issued and outstanding and constitute the Shares. All of the Shares have been duly authorized, are validly
issued, fully paid and non-assessable, and are owned of record and beneficially by Seller, free and clear of all Encumbrances other
than those set forth in Section 3.03 of the Disclosure Schedule. Upon consummation of the transactions contemplated by this Agreement,
Buyer shall own all of the Shares, free and clear of all Encumbrances other than those imposed by applicable securities laws and
resulting from the acts of Buyer.

 

(b)              
 All of the Shares were issued in compliance with applicable Laws. None of the Shares were issued in violation of any agreement,
arrangement or commitment to which Seller or the Company is a party or is subject to or in violation of any preemptive or similar
rights of any Person.

 

(c)              
Except for the Subsidiary Shares, the Company does not own any capital stock or other equity interest in any other Person.
The Subsidiary does not own any capital stock or other equity interest in any other Person.

 

(d)              
The authorized capital stock of the Subsidiary consists of 1,000 shares of common stock, par value $.001 per share, of which
100 shares are issued and outstanding (the “Subsidiary Shares”). All of the Subsidiary Shares have been duly authorized,
are validly issued, fully paid and non-assessable, and are owned of record and beneficially by the Company, free and clear of all
Encumbrances other than those set forth in Section 3.03 of the Disclosure Schedule.

 

    18

    

    

 

(e)              
There are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements
or commitments of any character relating to the capital stock of the Acquired Companies or obligating Seller or the Acquired Companies
to issue or sell any shares of capital stock of, or any other interest in, the Acquired Companies other than those set forth in
Section 3.03 of the Disclosure Schedule. None of the Acquired Companies have outstanding or authorized any stock appreciation,
phantom stock, profit participation or similar rights. Except as disclosed in Section 3.03 of the Disclosure Schedule, there are
no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or
transfer of any of the Shares or Subsidiary Shares.

 

Section 3.04      
No Conflicts; Consents. The execution, delivery and performance by Seller of this Agreement and the Ancillary
Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not:
(a) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation, by-laws
or other organizational documents of Seller or an Acquired Company; (b) conflict with or result in a violation or breach of any
provision of any Law or Governmental Order applicable to Seller or an Acquired Company; (c) except as set forth in Section 3.04
of the Disclosure Schedules, require the consent, notice or other action by any Person under, conflict with, result in a violation
or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default
under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any Contract to
which Seller or an Acquired Company is a party or by which Seller or an Acquired Company is bound or to which any of their respective
properties and assets are subject (including any Material Contract) or any Permit affecting the properties, assets or business
of an Acquired Company; or (d) result in the creation or imposition of any Encumbrance other than Permitted Encumbrances on any
properties or assets of an Acquired Company. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice
to, any Governmental Authority is required by or with respect to Seller or an Acquired Company in connection with the execution
and delivery of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby.

 

Section 3.05      
Unaudited Financial Statements. Attached hereto as Section 3.05 of the Disclosure Schedule are true and complete
copies of unaudited consolidated financial statements of the Acquired Companies consisting of the balance sheet of the Acquired
Companies as at December 31st in each of the years 2016 and 2017 and the related statements of operations and retained
earnings and cash flow for the years then ended (the “Unaudited Financial Statements”). The Unaudited Financial Statements
have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved except that the Unaudited
Financial Statements do not have any footnotes. The Unaudited Financial Statements are based on the books and records of the Acquired
Companies, and fairly present the financial condition of the Acquired Companies as of the respective dates they were prepared and
the results of the operations of the Acquired Companies for the periods indicated. Each of the Acquired Companies maintain a standard
system of accounting established and administered in accordance with GAAP.

 

Section 3.06      
Undisclosed Liabilities. Neither of the Acquired Companies has any liabilities, obligations or commitments of
any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured
or otherwise (“Liabilities”), except (a) those which are adequately reflected or reserved against in the Balance Sheet
as of the Balance Sheet Date, and (b) those which have been incurred in the ordinary course of business consistent with past practice
since the Balance Sheet Date and which are not, individually or in the aggregate, material in amount.

 

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Section 3.07      
Absence of Certain Changes, Events and Conditions. Since the Balance Sheet Date, and other than in the ordinary
course of business consistent with past practice, except as set forth on Section 3.07 of the Disclosure Schedules there has not
been, with respect to either of the Acquired Companies, any:

 

(a)              
event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect;

 

(b)              
amendment of the charter, by-laws or other organizational documents of an Acquired Company;

 

(c)              
split, combination or reclassification of any shares of its capital stock;

 

(d)              
issuance, sale or other disposition of any of its capital stock, or grant of any options, warrants or other rights to purchase
or obtain (including upon conversion, exchange or exercise) any of its capital stock;

 

(e)              
declaration or payment of any dividends or distributions on or in respect of any of its capital stock or redemption, purchase
or acquisition of its capital stock;

 

(f)               
material change in any method of accounting or accounting practice, except as required by GAAP;

 

(g)              
material change in cash management practices and its policies, practices and procedures with respect to collection of accounts
receivable, establishment of reserves for uncollectible accounts, accrual of accounts receivable, inventory control, prepayment
of expenses, payment of trade accounts payable, accrual of other expenses, deferral of revenue and acceptance of customer deposits;

 

(h)              
entry into any Contract that would constitute a Material Contract;

 

(i)                
incurrence, assumption or guarantee of any indebtedness for borrowed money except unsecured current obligations and Liabilities
incurred in the ordinary course of business consistent with past practice;

 

(j)                
transfer, assignment, sale or other disposition of any of the assets shown or reflected in the Balance Sheet, except for
inventory sold in the ordinary course of business, or cancellation or compromise of any debts or claims;

 

(k)              
transfer or assignment of or grant of any license or sublicense under or with respect to any Acquired Company Intellectual
Property or Acquired Company IP Agreements;

 

    20

    

    

 

(l)                abandonment
or lapse of or failure to maintain in full force and effect any Acquired Company IP Registration, or failure to take or maintain
reasonable measures to protect the confidentiality or value of any Trade Secrets included in the Acquired Company Intellectual
Property;

 

(m)             
material damage, destruction or loss (whether or not covered by insurance) to its property;

 

(n)              
any capital investment in, or any loan to, any other Person;

 

(o)              
acceleration, termination, material modification to or cancellation of any material Contract (including, but not limited
to, any Material Contract) to which an Acquired Company is a party or by which it is bound;

 

(p)              
any material capital expenditures;

 

(q)              
imposition of any Encumbrance upon any of an Acquired Company properties, capital stock or assets, tangible or intangible;

 

(r)               
(i) grant of any bonuses, whether monetary or otherwise, or increase in any wages, salary, severance, pension or other compensation
or benefits in respect of its current or former employees, officers, directors, independent contractors or consultants, other than
as provided for in any written agreements or required by applicable Law, (ii) change in the terms of employment for any employee
or any termination of any employees for which the aggregate annual costs and expenses exceed $2,500, or (iii) action to accelerate
the vesting or payment of any compensation or benefit for any current or former employee, officer, director, independent contractor
or consultant;

 

(s)              
hiring or promoting any person as or to (as the case may be) a position of manager or higher level;

 

(t)                adoption,
modification or termination of any: (i) employment, severance, retention or other agreement with any current or former employee,
officer, director, independent contractor or consultant, (ii) Benefit Plan or (iii) collective bargaining or other agreement with
a Union, in each case whether written or oral;

 

(u)              
any loan to (or forgiveness of any loan to), or entry into any other transaction with, any of its stockholders or current
or former directors, officers and employees;

 

(v)              
entry into a new line of business or abandonment or discontinuance of existing lines of business;

 

(w)            
adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy
under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any
similar Law;

 

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(x)              
purchase, lease or other acquisition of the right to own, use or lease any property or assets for an amount in excess of
$2,500, individually (in the case of a lease, per annum) or $5,000 in the aggregate (in the case of a lease, for the entire term
of the lease, not including any option term), except for purchases of inventory or supplies in the ordinary course of business
consistent with past practice;

 

(y)              
acquisition by merger or consolidation with, or by purchase of a substantial portion of the assets or stock of, or by any
other manner, any business or any Person or any division thereof;

 

(z)              
action to make, change or rescind any Tax election, amend any Tax Return or take any position on any Tax Return, take any
action, omit to take any action or enter into any other transaction that would have the effect of increasing the Tax liability
or reducing any Tax asset of Buyer in respect of any Post-Closing Tax Period; or

 

(aa)           
any Contract to do any of the foregoing, or any action or omission that would result in any of the foregoing.

 

Section 3.08      
Material Contracts.

 

(a)              
Section 3.08(a) of the Disclosure Schedules lists each of the following Contracts of the Acquired Companies (such Contracts,
together with all Contracts concerning the occupancy, management or operation of any Real Property (including without limitation,
brokerage contracts) listed or otherwise disclosed in Section 3.09(b) of the Disclosure Schedules, being “Material Contracts”):

 

(i)             
each Contract of an Acquired Company involving aggregate consideration in excess of $25,000 and which, in each case, cannot
be cancelled by the Acquired Company without penalty or without more than 60 calendar days’ notice;

 

(ii)             
all Contracts that require an Acquired Company to purchase its total requirements of any product or service from a third
party or that contain “take or pay” provisions;

 

(iii)           
all Contracts that provide for the indemnification by an Acquired Company of any Person or the assumption of any Tax, environmental
or other Liability of any Person;

 

(iv)          
all Contracts that relate to the acquisition or disposition of any business, a material amount of stock or assets of any
other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise);

 

(v)           
all broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising Contracts to which an Acquired Company is a party;

 

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(vi)          
all employment agreements and Contracts with independent contractors or consultants (or similar arrangements) to which an
Acquired Company is a party and which are not cancellable without material penalty or without more than 60 calendar days’
notice;

 

(vii)         
except for Contracts relating to trade receivables, all Contracts relating to Indebtedness (including, without limitation,
guarantees) of an Acquired Company;

 

(viii)       all
Contracts with any Governmental Authority to which an Acquired Company is a party, including any closing agreement with a Tax
authority (each a “Government Contract”);

 

(ix)         all
Contracts that limit or purport to limit the ability of an Acquired Company to compete in any line of business or with any Person
or in any geographic area or during any period of time;

 

(x)         
any Contracts to which an Acquired Company is a party that provide for any joint venture, partnership or similar arrangement
by the Acquired Company;

 

(xi)         all
Contracts between or among an Acquired Company on the one hand and Seller or any Affiliate of Seller (other than the Acquired
Company) on the other hand;

 

(xii)       
all collective bargaining agreements or Contracts with any Union to which an Acquired Company is a party; and

 

(xiii)      
any other Contract that is material to an Acquired Company and not previously disclosed pursuant to this Section 3.08.

 

(b)              
Each Material Contract is valid and binding on the Acquired Company party thereto in accordance with its terms and is in
full force and effect. None of the Acquired Company party thereto or, to Seller’s Knowledge, any other party thereto is in
breach of or default under (or is alleged to be in breach of or default under) in any material respect, or has provided or received
any notice of any intention to terminate, any Material Contract. No event or circumstance has occurred that, with notice or lapse
of time or both, would constitute an event of default under any Material Contract or result in a termination thereof or would cause
or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder. Complete and correct
copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) have
been made available to Buyer.

 

Section 3.09      
Title to Assets; Real Property.

 

(a)              
The Acquired Companies do not own any Real Property. The Company has an oral month-to-month sublease to use all Real Property
and the Acquired Companies have good and valid title to, or a valid leasehold interest in, all personal property and other assets
reflected in the Unaudited Financial Statements or acquired after the Balance Sheet Date (other than properties and assets sold
or otherwise disposed of in the ordinary course of business consistent with past practice since the Balance Sheet Date). All such
Real Property leasehold interests and personal property and other assets (including leasehold interests) are free and clear of
Encumbrances except for Permitted Encumbrances and those items set forth in Section 3.09(a) of the Disclosure Schedules.

 

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(b)              
Section 3.09(b) of the Disclosure Schedules lists (i) the street address of each parcel of Real Property leased or subleased
by an Acquired Company; (ii) the landlord under the lease or sublease, the rental amount currently being paid, and the expiration
of the term of such lease or sublease for each leased or subleased property; and (iii) the current use of such property. With respect
to leased or subleased Real Property, Seller has delivered or made available to Buyer true, complete and correct copies of any
leases affecting the Real Property. Neither Acquired Company is a sublessor or grantor under any sublease or other instrument granting
to any other Person any right to the possession, lease, occupancy or enjoyment of any leased Real Property. The use and operation
of the Real Property in the conduct of an Acquired Company’s business do not violate in any material respect any Law, covenant,
condition, restriction, easement, license, permit or agreement.

 

Section 3.10      
Condition and Sufficiency of Assets. The buildings, plants, structures, furniture, fixtures, machinery, equipment,
vehicles and other items of tangible personal property of the Acquired Companies are structurally sound, are in good operating
condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures,
furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. The buildings, plants, structures,
furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property currently owned or leased by
the Acquired Companies, together with all other properties and assets of the Acquired Companies, are sufficient for the continued
conduct of the Acquired Companies’ businesses after the Closing in substantially the same manner as conducted prior to the
Closing and constitute all of the rights, property and assets necessary to conduct the business of the Acquired Companies as currently
conducted.

 

Section 3.11      
Intellectual Property.

 

(a)              
Section 3.11(a) of the Disclosure Schedules contains a correct, current, and complete list of all Acquired Company IP Registrations.
The Acquired Companies own or have the valid and enforceable right to use all Acquired Company Intellectual Property, free and
clear of all Encumbrances other than Permitted Encumbrances and those set forth in Section 3.11(a) of the Disclosure Schedules.
All of the Acquired Company Intellectual Property is valid and enforceable, and all Acquired Company IP Registrations are subsisting
and in full force and effect. The Companies have taken all reasonable and necessary steps to maintain and enforce the Acquired
Company Intellectual Property and to preserve the confidentiality of all Trade Secrets included in the Acquired Company Intellectual
Property.

 

(b)              
Except for off-the-shelf computer software used in the Acquired Companies’ ordinary course of business, the Acquired
Companies do not use Intellectual Property that is owned by or is licensed from any third party.

 

    24

    

    

 

(c)              
The conduct of each Acquired Company’s business as currently and formerly conducted, and the products, processes and
services of each Acquired Company, have not infringed, misappropriated or otherwise violated the Intellectual Property or other
rights of any Person. To Seller’s Knowledge, no Person has infringed, misappropriated or otherwise violated any Acquired
Company Intellectual Property.

 

(d)              
There are no Actions (including any opposition, cancellation, revocation, review, or other proceeding) settled, pending
or threatened (including in the form of offers to obtain a license): (i) alleging any infringement, misappropriation, or other
violation by an Acquired Company of the Intellectual Property of any Person; (ii) challenging the validity, enforceability, registrability,
patentability, or ownership of any Acquired Company Intellectual Property; or (iii) by an Acquired Company or any other Person
alleging any infringement, misappropriation, or violation by any Person of the Acquired Company Intellectual Property. Neither
Seller nor an Acquired Company is aware of any facts or circumstances that could reasonably be expected to give rise to any such
Action. The Acquired Companies are not subject to any outstanding or prospective Governmental Order (including any motion or petition
therefor) that does or could reasonably be expected to restrict or impair the use of any Acquired Company Intellectual Property.

 

(e)              
The computer hardware, servers, networks, platforms, peripherals, data communication lines, and other information technology
equipment and related systems, including any outsourced systems and processes, that are owned or used by the Acquired Companies
(“Acquired Company Systems”) are reasonably sufficient for the immediate and anticipated needs of the Acquired Companies’
businesses. To the Knowledge of Seller, in the past 18 months, there has been no unauthorized access, use, intrusion, or breach
of security, or material failure, breakdown, performance reduction, or other adverse event affecting any Acquired Company Systems,
that has caused or could reasonably be expected to cause any: (i) substantial disruption of or interruption in or to the use of
such Acquired Company Systems or the conduct of the Acquired Companies’ business; (ii) material loss, destruction, damage,
or harm of or to an Acquired Company or its operations, personnel, property, or other assets; or (iii) material liability of any
kind to an Acquired Company. The Acquired Companies have taken reasonable actions, consistent those taken with companies in the
applicable industry similar in size to the Acquired Companies, to protect the integrity and security of the Acquired Company Systems
and the data and other information stored or processed thereon. The Acquired Companies (i) maintain commercially reasonable backup
and data recovery, disaster recovery, and business continuity plans, procedures, and facilities; (ii) act in material compliance
therewith; and (iii) tests such plans and procedures on a regular basis, and such plans and procedures have been proven effective
in all material respects upon such testing.

 

Section 3.12      
Inventory. All inventory of the Acquired Companies, whether or not reflected in the Balance Sheet, consists of
a quality and quantity usable and salable in the ordinary course of business consistent with past practice, except for obsolete,
damaged, defective or slow-moving items that have been written off or written down to fair market value or for which adequate reserves
have been established. All such inventory is owned by an Acquired Company free and clear of all Encumbrances except for Permitted
Encumbrances and those set forth in Section 3.03 of the Disclosure Schedule, and inventory held on a consignment basis is not included
in the Balance Sheet. The quantities of each item of inventory (whether raw materials, work-in-process or finished goods) are not
excessive, but are reasonable in the present circumstances of an Acquired Company.

 

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Section 3.13      
Accounts Receivable. The accounts receivable reflected on the Balance Sheet and the accounts receivable arising
after the date thereof (a) have arisen from bona fide transactions entered into by an Acquired Company involving the sale of goods
or the rendering of services in the ordinary course of business consistent with past practice; (b) constitute only valid, undisputed
claims of an Acquired Company not subject to claims of set-off or other defenses or counterclaims other than normal cash discounts,
or provision of replacement goods accrued in the ordinary course of business consistent with past practice; and (c) subject to
a reserve for bad debts shown on the Balance Sheet or, with respect to accounts receivable arising after the Balance Sheet Date,
on the accounting records of Acquired Companies, are collectible in full within 90 calendar days after billing. The reserve for
bad debts shown on the Balance Sheet or, with respect to accounts receivable arising after the Balance Sheet Date, on the accounting
records of the Acquired Companies have been determined in accordance with GAAP, consistently applied, subject to normal year-end
adjustments and the absence of disclosures normally made in footnotes.

 

Section 3.14      
Customers and Suppliers.

 

(a)              
Section 3.14(a) of the Disclosure Schedules sets forth (i) each customer who has paid aggregate consideration to the Acquired
Companies for goods or services rendered in an amount greater than or equal to $200,000 for each of the two most recent fiscal
years (collectively, the “Material Customers”); and (ii) the amount of consideration paid by each Material Customer
during such periods. Neither Acquired Company has received any notice, and has no reason to believe, that any of its Material Customers
has ceased, or intends to cease after the Closing, to use its goods or services or to otherwise terminate or materially reduce
its relationship with the Acquired Company.

 

(b)              
Section 3.14(b) of the Disclosure Schedules sets forth (i) each supplier to whom an Acquired Company has paid consideration
for goods or services rendered in an amount greater than or equal to $100,000 for each of the two most recent fiscal years (collectively,
the “Material Suppliers”); and (ii) the amount of purchases from each Material Supplier during such periods. Neither
Acquired Company has received any notice, and has no reason to believe, that any of its Material Suppliers has ceased, or intends
to cease, to supply goods or services to the Acquired Company or to otherwise terminate or materially reduce its relationship with
the Acquired Company.

 

Section 3.15      
Insurance. Section 3.15 of the Disclosure Schedules sets forth a true and complete list of all current policies
or binders of fire, liability, product liability, umbrella liability, real and personal property, workers’ compensation,
vehicular, directors’ and officers’ liability, fiduciary liability and other casualty and property insurance maintained
by Seller or its Affiliates (including the Acquired Companies) and relating to the assets, business, operations, employees, officers
and directors of the Acquired Companies (collectively, the “Insurance Policies”) and true and complete copies of such
Insurance Policies have been made available to Buyer. Such Insurance Policies are in full force and effect and shall remain in
full force and effect following the consummation of the transactions contemplated by this Agreement, provided that the Acquired
Companies and their assets will no longer be covered by such policies. Neither the Seller nor any of its Affiliates (including
the Acquired Companies) has received any written notice of cancellation of, premium increase with respect to, or alteration of
coverage under, any of such Insurance Policies. All premiums due on such Insurance Policies have either been paid or, if due and
payable prior to Closing, will be paid prior to Closing in accordance with the payment terms of each Insurance Policy. The Insurance
Policies do not provide for any retrospective premium adjustment or other experience-based liability on the part of the Acquired
Companies. All such Insurance Policies (a) are valid and binding in accordance with their terms and (b) have not been subject to
any lapse in coverage. Except as set forth on Section 3.15 of the Disclosure Schedules, there are no claims related to the businesses
of Acquired Companies pending under any such Insurance Policies as to which coverage has been questioned, denied or disputed or
in respect of which there is an outstanding reservation of rights. None of Seller or any of its Affiliates (including the Acquired
Companies) is in default under, or has otherwise failed to comply with, in any material respect, any provision contained in any
such Insurance Policy. The Insurance Policies are of the type and in the amounts customarily carried by Persons conducting a business
similar to the Acquired Companies and are sufficient for compliance with all applicable Laws and Contracts to which an Acquired
Company is a party or by which it is bound. Seller has made available to Buyer prior to the date hereof a listing of all pending
claims under the Insurance Policies (to the extent relating to the Acquired Companies) as of the date of this Agreement.

 

    26

    

    

 

Section 3.16      
Legal Proceedings; Governmental Orders.

 

(a)              
Except as set forth in Section 3.16 of the Disclosure Schedule, there are no Actions pending or, to Seller’s Knowledge,
threatened (i) against or by an Acquired Company (or by or against Seller or any Affiliate thereof and relating to an Acquired
Company); (ii) against any current or former director or employee of an Acquired Company with respect to which an Acquired Company
has, or is reasonably likely to have, an indemnification obligation; or (iii) against or by an Acquired Company, Seller or any
Affiliate of Seller that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
No event has occurred or circumstances exist that may give rise to, or serve as a basis for, any such Action.

 

(b)              
There are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against or affecting an Acquired
Company or any of its properties or assets.

 

Section 3.17      
Compliance With Laws; Permits.

 

(a)              
Each Acquired Company has complied, and is now complying, with all Laws applicable to it or its business, properties or
assets, other than for such instances where the cure would not require a material change or substantially interfere with the operations
of the Acquired Company.

 

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(b)              
To the Knowledge of Seller, all Permits required for each Acquired Company to conduct its business have been obtained by
it and are valid and in full force and effect. All fees and charges with respect to such Permits as of the date hereof have been
paid in full. Section 3.17(b) of the Disclosure Schedules lists all current Permits issued to an Acquired Company, including the
names of the Permits and their respective dates of issuance and expiration. No event has occurred that, with or without notice
or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Permit
set forth in Section 3.17(b) of the Disclosure Schedules.

 

Section 3.18      
Environmental Matters.

 

(a)              
Each Acquired Company is currently and has been in compliance with all Environmental Laws and has not received from any
Person any: (i) Environmental Notice or Environmental Claim; or (ii) written request for information pursuant to Environmental
Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the
Closing Date.

 

(b)              
Each Acquired Company has obtained and is in material compliance with all Environmental Permits (each of which is disclosed
in Section 3.18(b) of the Disclosure Schedules) necessary for the ownership, lease, operation or use of the business or assets
of the Acquired Company and all such Environmental Permits are in full force and effect and shall be maintained in full force and
effect by the Acquired Company through the Closing Date in accordance with Environmental Law, and neither Seller nor either Acquired
Company is aware of any condition, event or circumstance that might prevent or impede, after the Closing Date, the ownership, lease,
operation or use of the business or assets of an Acquired Company as currently carried out. With respect to any such Environmental
Permits, Seller has undertaken, or will undertake prior to the Closing Date, all measures necessary to facilitate transferability
of the same, and neither an Acquired Company nor the Seller is aware of any condition, event or circumstance that might prevent
or impede the transferability of the same, nor have they received any Environmental Notice or written communication regarding any
material adverse change in the status or terms and conditions of the same.

 

(c)              
No real property currently or formerly owned, operated or leased by an Acquired Company is listed on, or has been proposed
for listing on, the National Priorities List (or CERCLIS) under CERCLA, or any similar state list.

 

(d)              
There has been no Release of Hazardous Materials in contravention of Environmental Law with respect to the business or assets
of an Acquired Company or any real property currently or formerly owned, operated or leased by an Acquired Company, and neither
an Acquired Company nor Seller has received an Environmental Notice that any real property currently or formerly owned, operated
or leased in connection with the business of an Acquired Company (including soils, groundwater, surface water, buildings and other
structure located on any such real property) has been contaminated with any Hazardous Material which could reasonably be expected
to result in an Environmental Claim against, or a violation of Environmental Law or term of any Environmental Permit by, Seller
or an Acquired Company.

 

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(e)              
Section 3.18(e) of the Disclosure Schedules contains a complete and accurate list of all active or abandoned aboveground
or underground storage tanks owned or operated by an Acquired Company.

 

(f)               
Section 3.18(f) of the Disclosure Schedules contains a complete and accurate list of all off-site Hazardous Materials treatment,
storage, or disposal facilities or locations used by an Acquired Company or Seller and any predecessors as to which an Acquired
Company may retain liability, and none of these facilities or locations has been placed or proposed for placement on the National
Priorities List (or CERCLIS) under CERCLA, or any similar state list, and neither Seller nor an Acquired Company has received any
Environmental Notice regarding potential liabilities with respect to such off-site Hazardous Materials treatment, storage, or disposal
facilities or locations used by an Acquired Company.

 

(g)              
Neither Acquired Company has retained or assumed, by contract or operation of Law, any liabilities or obligations of third
parties under Environmental Law.

 

(h)              
Seller has provided or otherwise made available to Buyer and listed in Section 3.18(h) of the Disclosure Schedules: (i)
any and all environmental reports, studies, audits, records, sampling data, site assessments, risk assessments, economic models
and other similar documents with respect to the business or assets of an Acquired Company or any currently or formerly owned, operated
or leased real property which are in the possession or control of the Seller or Company related to compliance with Environmental
Laws, Environmental Claims or an Environmental Notice or the Release of Hazardous Materials; and (ii) any and all material documents
concerning planned or anticipated capital expenditures required to reduce, offset, limit or otherwise control pollution and/or
emissions, manage waste or otherwise ensure compliance with current or future Environmental Laws (including, without limitation,
costs of remediation, pollution control equipment and operational changes).

 

(i)                
Neither the Seller nor an Acquired Company is aware of or reasonably anticipates, as of the Closing Date, any condition,
event or circumstance concerning the Release or regulation of Hazardous Materials that might, after the Closing Date, prevent,
impede or materially increase the costs associated with the ownership, lease, operation, performance or use of the business or
assets of an Acquired Company as currently carried out.

 

(j)                
Seller owns and controls all Environmental Attributes (a complete and accurate list of which is set forth in Section 3.18(j)
of the Disclosure Schedules) and has not entered into any contract or pledge to transfer, lease, license, guarantee, sell, mortgage,
pledge or otherwise dispose of or encumber any Environmental Attributes as of the date hereof. Neither Seller nor an Acquired Company
is aware of any condition, event or circumstance that might prevent, impede or materially increase the costs associated with the
transfer (if required) to Buyer of any Environmental Attributes after the Closing Date.

 

Section 3.19      
Employee Benefit Matters.

 

(a)              
Section 3.19(a) of the Disclosure Schedules contains a true and complete list of each pension, benefit, retirement, compensation,
employment, consulting, profit-sharing, deferred compensation, incentive, bonus, performance award, phantom equity, stock or stock-based,
change in control, retention, severance, vacation, paid time off (PTO), medical, vision, dental, disability, welfare, Code Section
125 cafeteria, fringe benefit and other similar agreement, plan, policy, program or arrangement (and any amendments thereto), in
each case whether or not reduced to writing and whether funded or unfunded, including each “employee benefit plan”
within the meaning of Section 3(3) of ERISA, whether or not tax-qualified and whether or not subject to ERISA, which is or has
been maintained, sponsored, contributed to, or required to be contributed to by an Acquired Company for the benefit of any current
or former employee, officer, director, retiree, independent contractor or consultant of an Acquired Company or any spouse or dependent
of such individual, or under which an Acquired Company or any of its ERISA Affiliates has or may have any Liability, or with respect
to which Buyer or any of its Affiliates would reasonably be expected to have any Liability, contingent or otherwise (as listed
on Section 3.19(a) of the Disclosure Schedules, each, a “Benefit Plan”). The Seller has separately identified in Section
3.19(a) of the Disclosure Schedules (i) each Benefit Plan that contains a change in control provision and (ii) each Benefit Plan
that is maintained, sponsored, contributed to, or required to be contributed to by an Acquired Company primarily for the benefit
of employees outside of the United States (a “Non-U.S. Benefit Plan”).

 

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(b)              
With respect to each Benefit Plan, Seller has made available to Buyer accurate, current and complete copies of each of the
following: (i) where the Benefit Plan has been reduced to writing, the plan document together with all amendments; (ii) where the
Benefit Plan has not been reduced to writing, a written summary of all material plan terms; (iii) where applicable, copies of any
trust agreements or other funding arrangements, custodial agreements, insurance policies and contracts, administration agreements
and similar agreements, and investment management or investment advisory agreements, now in effect or required in the future as
a result of the transactions contemplated by this Agreement or otherwise; (iv) copies of any summary plan descriptions, summaries
of material modifications, summaries of benefits and coverage, COBRA communications, employee handbooks and any other written communications
(or a description of any oral communications) relating to any Benefit Plan; (v) in the case of any Benefit Plan that is intended
to be qualified under Section 401(a) of the Code, a copy of the most recent determination, opinion or advisory letter from the
Internal Revenue Service and any legal opinions issued thereafter with respect to such Benefit Plan’s continued qualification;
(vi) in the case of any Benefit Plan for which a Form 5500 must be filed, a copy of the two most recently filed Forms 5500, with
all corresponding schedules and financial statements attached; (vii) actuarial valuations and reports related to any Benefit Plans
with respect to the two most recently completed plan years; (viii) the most recent nondiscrimination tests performed under the
Code; and (ix) copies of material notices, letters or other correspondence from the Internal Revenue Service, Department of Labor,
Department of Health and Human Services, Pension Benefit Guaranty Corporation or other Governmental Authority relating to the Benefit
Plan.

 

(c)              
Each Benefit Plan and any related trust (other than any multiemployer plan within the meaning of Section 3(37) of ERISA
(each a “Multiemployer Plan”)) has been established, administered and maintained in accordance with its terms and in
compliance with all applicable Laws (including ERISA and the Code and any applicable local Laws). Each Benefit Plan that is intended
to be qualified within the meaning of Section 401(a) of the Code (a “Qualified Benefit Plan”) is so qualified and received
a favorable and current determination letter from the Internal Revenue Service with respect to the most recent five year filing
cycle, or with respect to a prototype or volume submitter plan, can rely on an opinion letter from the Internal Revenue Service
to the prototype plan or volume submitter plan sponsor, to the effect that such Qualified Benefit Plan is so qualified and that
the plan and the trust related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of
the Code, and nothing has occurred that could reasonably be expected to adversely affect the qualified status of any Qualified
Benefit Plan. Nothing has occurred with respect to any Benefit Plan that has subjected or could reasonably be expected to subject
an Acquired Company or any of its ERISA Affiliates or, with respect to any period on or after the Closing Date, Buyer or any of
its Affiliates, to a penalty under Section 502 of ERISA or to tax or penalty under Sections 4975 or 4980H of the Code.

 

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No pension plan (other
than a Multiemployer Plan) which is subject to minimum funding requirements, including any multiple employer plan, (each, a “Single
Employer Plan”) in which employees of an Acquired Company or any ERISA Affiliate participate or have participated has an
“accumulated funding deficiency”, whether or not waived, or is subject to a lien for unpaid contributions under Section
303(k) of ERISA or Section 430(k) of the Code. No Single Employer Plan covering employees of an Acquired Company which is a defined
benefit plan has an “adjusted funding target attainment percentage,” as defined in Section 436 of the Code, less than
80%. All benefits, contributions and premiums relating to each Benefit Plan have been timely paid in accordance with the terms
of such Benefit Plan and all applicable Laws and accounting principles, and all benefits accrued under any unfunded Benefit Plan
have been paid, accrued or otherwise adequately reserved to the extent required by, and in accordance with, GAAP. All Non-U.S.
Benefit Plans that are intended to be funded and/or book-reserved are funded and/or book-reserved, as appropriate, based upon reasonable
actuarial assumptions.

 

(d)              
Neither an Acquired Company nor any of its ERISA Affiliates has (i) incurred or reasonably expects to incur, either directly
or indirectly, any material Liability under Title I or Title IV of ERISA or related provisions of the Code or applicable local
Law relating to employee benefit plans; (ii) failed to timely pay premiums to the Pension Benefit Guaranty Corporation; (iii) withdrawn
from any Benefit Plan; (iv) engaged in any transaction which would give rise to liability under Section 4069 or Section 4212(c)
of ERISA; (v) incurred taxes under Section 4971 of the Code with respect to any Single Employer Plan; or (vi) participated in a
multiple employer welfare arrangements (MEWAs).

 

(e)              
With respect to each Benefit Plan (i) no such plan is a Multiemployer Plan; (ii) no such plan is a “multiple employer
plan” within the meaning of Section 413(c) of the Code or a “multiple employer welfare arrangement” (as defined
in Section 3(40) of ERISA); (iii) no Action has been initiated by the Pension Benefit Guaranty Corporation to terminate any such
plan or to appoint a trustee for any such plan; (iv) no such plan or the plan of any ERISA Affiliate maintained or contributed
to within the last six years is a Single Employer Plan subject to Title IV of ERISA; and (v) no “reportable event,”
as defined in Section 4043 of ERISA, with respect to which the reporting requirement has not been waiver has occurred with respect
to any such plan.

 

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(f)               
Each Benefit Plan can be amended, terminated or otherwise discontinued after the Closing in accordance with its terms, without
material liabilities to Buyer, an Acquired Company or any of their Affiliates other than ordinary administrative expenses typically
incurred in a termination event. The Acquired Companies have no commitment or obligation and have not made any representations
to any employee, officer, director, independent contractor or consultant, whether or not legally binding, to adopt, amend, modify
or terminate any Benefit Plan or any collective bargaining agreement, in connection with the consummation of the transactions contemplated
by this Agreement or otherwise.

 

(g)              
Other than as required under Sections 601 to 608 of ERISA or other applicable Law, no Benefit Plan provides post-termination
or retiree health benefits to any individual for any reason, and neither an Acquired Company nor any of its ERISA Affiliates has
any Liability to provide post-termination or retiree health benefits to any individual or ever represented, promised or contracted
to any individual that such individual would be provided with post-termination or retiree health benefits.

 

(h)              
There is no pending or, to Seller’s Knowledge, threatened Action relating to a Benefit Plan (other than routine claims
for benefits), and no Benefit Plan has within the three years prior to the date hereof been the subject of an examination or audit
by a Governmental Authority or the subject of an application or filing under or is a participant in, an amnesty, voluntary compliance,
self-correction or similar program sponsored by any Governmental Authority.

 

(i)                
There has been no amendment to, announcement by Seller, an Acquired Company or any of their Affiliates relating to, or change
in employee participation or coverage under, any Benefit Plan or collective bargaining agreement that would increase the annual
expense of maintaining such plan above the level of the expense incurred for the most recently completed fiscal year (other than
on a de minimis basis) with respect to any director, officer, employee, independent contractor or consultant, as applicable, of
an Acquired Company. None of Seller, an Acquired Company, nor any of their Affiliates has any commitment or obligation or has made
any representations to any director, officer, employee, independent contractor or consultant, whether or not legally binding, to
adopt, amend, modify or terminate any Benefit Plan or any collective bargaining agreement relating to an Acquired Company.

 

(j)                
Each Benefit Plan that is subject to Section 409A of the Code has been administered in compliance with its terms and the
operational and documentary requirements of Section 409A of the Code and all applicable regulatory guidance (including notices,
rulings and proposed and final regulations) thereunder. An Acquired Company does not have any obligation to gross up, indemnify
or otherwise reimburse any individual for any excise taxes, interest or penalties incurred pursuant to Section 409A of the Code.

 

(k)              
Each individual who is classified by an Acquired Company as an independent contractor has been properly classified for purposes
of participation and benefit accrual under each Benefit Plan.

 

    32

    

    

 

(l)                
Neither the execution of this Agreement nor any of the transactions contemplated by this Agreement will (either alone or
upon the occurrence of any additional or subsequent events): (i) entitle any current or former director, officer, employee, independent
contractor or consultant of an Acquired Company to severance pay or any other payment (including payments resulting from a change
in control of an Acquired Company; (ii) accelerate the time of payment, funding or vesting, or increase the amount of compensation
(including stock-based compensation) due to any such individual; (iii) limit or restrict the right of an Acquired Company to merge,
amend, or terminate any Benefit Plan; (iv) increase the amount payable under or result in any other material obligation pursuant
to any Benefit Plan; (v) result in “excess parachute payments” within the meaning of Section 280G(b) of the Code; or
(vi) require a “gross-up” or other payment to any “disqualified individual” within the meaning of Section
280G(c) of the Code.

 

Section 3.20      
Employment Matters.

 

(a)              
Section 3.20(a) of the Disclosure Schedules contains a list of all persons who are employees, independent contractors or
consultants of an Acquired Company as of the date hereof, including any employee who is on a leave of absence of any nature, paid
or unpaid, authorized or unauthorized, and sets forth for each such individual the following: (i) name; (ii) title or position
(including whether full-time or part-time); (iii) hire or retention date; (iv) current annual base compensation rate or contract
fee; (v) commission, bonus or other incentive-based compensation; and (vi) a description of the fringe benefits provided to each
such individual as of the date hereof. All compensation, including wages, commissions, bonuses, fees and other compensation, payable
to all employees, independent contractors or consultants of an Acquired Company for services performed have been paid in full or
will be paid prior to the Closing Date (or will be accrued in full on the balance sheet contained in the Closing Working Capital
Statement) and there are no outstanding agreements, understandings or commitments of an Acquired Company with respect to any compensation,
commissions, bonuses or fees not disclosed in Section 3.20 of the Disclosure Schedule.

 

(b)              
Each Acquired Company is not, and has not been a party to, bound by, or negotiating any collective bargaining agreement
or other Contract with a union, works council or labor organization (collectively, “Union”), and there is not, and
has not been, any Union representing or purporting to represent any employee of an Acquired Company, and, to Seller’s Knowledge,
no Union or group of employees is seeking or has sought to organize employees for the purpose of collective bargaining. There has
never been, nor has there been any threat of, any strike, slowdown, work stoppage, lockout, concerted refusal to work overtime
or other similar labor disruption or dispute affecting an Acquired Company or any of its employees. Neither Acquired Company has
a duty to bargain with any Union.

 

(c)              
Each Acquired Company is and has been in compliance in all material respects with all applicable Laws pertaining to employment
and employment practices, including all Laws relating to labor relations, equal employment opportunities, fair employment practices,
employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits, immigration, wages,
hours, overtime compensation, child labor, hiring, promotion and termination of employees, working conditions, meal and break periods,
privacy, health and safety, workers’ compensation, leaves of absence, paid sick leave and unemployment insurance. All individuals
characterized and treated by an Acquired Company as independent contractors or consultants are properly treated as independent
contractors under all applicable Laws. All employees of an Acquired Company classified as exempt under the Fair Labor Standards
Act and state and local wage and hour laws are properly classified in all material respects. Each Acquired Company is in compliance
with and has complied with all immigration laws, including Form I-9 requirements and any applicable mandatory E-Verify obligations.
Except as set forth in Section 3.20(c), there are no Actions against an Acquired Company pending, or to the Seller’s Knowledge,
threatened to be brought or filed, by or with any Governmental Authority or arbitrator in connection with the employment of any
current or former applicant, employee, consultant, volunteer, intern or independent contractor of an Acquired Company, including,
without limitation, any charge, investigation or claim relating to unfair labor practices, equal employment opportunities, fair
employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits,
immigration, wages, hours, overtime compensation, employee classification, child labor, hiring, promotion and termination of employees,
working conditions, meal and break periods, privacy, health and safety, workers’ compensation, leaves of absence, paid sick
leave, unemployment insurance or any other employment related matter arising under applicable Laws.

 

    33

    

    

 

(d)              
Each Acquired Company has complied with the WARN Act, and neither Acquired Company has any plans to undertake any action
in the future that would trigger the application of the WARN Act.

 

(e)              
With respect to each Government Contract, each Acquired Company is and has been in compliance with Executive Order No. 11246
of 1965 (“E.O. 11246”), Section 503 of the Rehabilitation Act of 1973 (“Section 503”) and the Vietnam Era
Veterans’ Readjustment Assistance Act of 1974 (“VEVRAA”), including all implementing regulations. Each Acquired
Company maintains and complies with affirmative action plans in compliance with E.O. 11246, Section 503 and VEVRAA, including all
implementing regulations. Each Acquired Company is not, and has not been for the past five years, the subject of any audit, investigation
or enforcement action by any Governmental Authority in connection with any Government Contract or related compliance with E.O.
11246, Section 503 or VEVRAA. Neither Acquired Company has been debarred, suspended or otherwise made ineligible from doing business
with the United States government or any government contractor.

 

Section 3.21      
Taxes.

 

(a)              
All Tax Returns required to be filed by, or with respect to, an Acquired Company on or before the Closing Date have been,
or will be, timely filed. Such Tax Returns are, or will be, true, complete and correct in all respects. All Taxes due and owing
by an Acquired Company (whether or not shown on any Tax Return) have been, or will be, timely paid by the due date thereof.

 

(b)              
Each Acquired Company has withheld and paid each Tax required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, customer, shareholder or other party, and complied with all information
reporting and backup withholding provisions of applicable Law.

 

    34

    

    

 

(c)              
No claim has been made by any taxing authority in any jurisdiction where an Acquired Company does not file Tax Returns that
it is, or may be, subject to Tax by that jurisdiction.

 

(d)              
No extensions or waivers of statutes of limitations have been given or requested with respect to any Taxes of an Acquired
Company.

 

(e)              
The amount of an Acquired Company’s Liability for unpaid Taxes for all periods ending on or before December 31, 2017
does not, in the aggregate, exceed the amount of accruals for Taxes (excluding reserves for deferred Taxes) reflected on the Unaudited
Financial Statements. The amount of an Acquired Company’s Liability for unpaid Taxes for all periods following the end of
the recent period covered by the Unaudited Financial Statements shall not, in the aggregate, exceed the amount of accruals for
Taxes (excluding reserves for deferred Taxes) as adjusted for the passage of time in accordance with the past custom and practice
of an Acquired Company (and which accruals shall not exceed comparable amounts incurred in similar periods in prior years).

 

(f)               
Section 3.21(f) of the Disclosure Schedules sets forth:

 

(i)               the
taxable years of an Acquired Company as to which the applicable statutes of limitations on the assessment and collection of Taxes
have not expired;

 

(ii)             
those years for which examinations by the taxing authorities have been completed; and

 

(iii)            
those taxable years for which examinations by taxing authorities are presently being conducted.

 

(g)              
All deficiencies asserted, or assessments made, against an Acquired Company as a result of any examinations by any taxing
authority have been fully paid.

 

(h)              
Neither Acquired Company is a party to any Action by any taxing authority. There are no pending or threatened Actions by
any taxing authority.

 

(i)                
Seller has delivered to Buyer copies of all federal, state, local and foreign income, franchise and similar Tax Returns,
examination reports, and statements of deficiencies assessed against, or agreed to by, an Acquired Company for all Tax periods
ending after December 31, 2014.

 

(j)                
There are no Encumbrances for Taxes (other than for current Taxes not yet due and payable) upon the assets of an Acquired
Company.

 

(k)              
Neither Acquired Company is a party to, nor bound by, any Tax indemnity, Tax sharing or Tax allocation agreement.

 

    35

    

    

 

(l)               
No private letter rulings, technical advice memoranda or similar agreement or rulings have been requested, entered into
or issued by any taxing authority with respect to an Acquired Company.

 

(m)            
Neither Acquired Company has any Liability for Taxes of any Person (other than the Acquired Company) under Treasury Regulations
Section 1.1502-6 (or any corresponding provision of state, local or foreign Law), as transferee or successor, by contract or otherwise.

 

(n)            
Neither Acquired Company will be required to include any item of income in, or exclude any item or deduction from, taxable
income for any taxable period or portion thereof ending after the Closing Date as a result of:

 

(i)             
any change in a method of accounting under Section 481 of the Code (or any comparable provision of state, local or foreign
Tax Laws), or use of an improper method of accounting, for a taxable period ending on or prior to the Closing Date;

 

(ii)             an
installment sale or open transaction occurring on or prior to the Closing Date;

 

(iii)           
a prepaid amount received on or before the Closing Date;

 

(iv)            any
closing agreement under Section 7121 of the Code, or similar provision of state, local or foreign Law; or

 

(v)             any
election under Section 108(i) of the Code.

 

(o)              
Seller is not a “foreign person” as that term is used in Treasury Regulations Section 1.1445-2. Neither Acquired
Company is, nor has it been, a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during
the applicable period specified in Section 897(c)(1)(a) of the Code.

 

(p)              
Neither Acquired Company is, or has been a “distributing corporation” or a “controlled corporation”
in connection with a distribution described in Section 355 of the Code.

 

(q)              
Neither Acquired Company is, or has been, a party to, or a promoter of, a “reportable transaction” within the
meaning of Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011-4(b).

 

(r)               
There is currently no limitation on the utilization of net operating losses, capital losses, built-in losses, tax credits
or similar items of an Acquired Company under Sections 269, 382, 383, 384 or 1502 of the Code and the Treasury Regulations thereunder
(and comparable provisions of state, local or foreign Law).

 

(s)               
Section 3.21(s) of the Disclosure Schedules sets forth all foreign jurisdictions in which an Acquired Company is subject
to Tax, is engaged in business or has a permanent establishment. Neither Acquired Company has entered into a gain recognition agreement
pursuant to Treasury Regulations Section 1.367(a)-8. Neither Acquired Company has transferred an intangible the transfer of which
would be subject to the rules of Section 367(d) of the Code.

 

    36

    

    

 

(t)                
No property owned by an Acquired Company is (i) required to be treated as being owned by another person pursuant to the
so-called “safe harbor lease” provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954, as amended,
(ii) subject to Section 168(g)(1)(A) of the Code, or (iii) subject to a disqualified leaseback or long-term agreement as defined
in Section 467 of the Code.

 

(u)              
Seller is eligible to make an election pursuant to Section 338(h)(10) of the Code with respect to the sale of the Acquired
Companies.

 

Section 3.22      
Intercompany Arrangements. Except for any Contracts to provide the products or services that are to be provided
in accordance with an Ancillary Agreement, there are no Contracts for products or services between or among an Acquired Company,
on the one hand, and Seller or any Affiliate of Seller, on the other hand, pursuant to which an Acquired Company receives or obtains
any product or service.

 

Section 3.23      
Books and Records. The minute books and stock record books of the Acquired Companies, all of which have been
made available to Buyer, are complete and correct and have been maintained in accordance with sound business practices. The minute
books of the Acquired Companies contain accurate and complete records of all meetings, and actions taken by written consent of,
the stockholders, the board of directors and any committees of the board of directors of the Acquired Companies, and no meeting,
or action taken by written consent, of any such stockholders, board of directors or committee has been held for which minutes have
not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession
of the Company.

 

Section 3.24      
Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or
commission in connection with the transactions contemplated by this Agreement or any Ancillary Document based upon arrangements
made by or on behalf of Seller.

 

Section 3.25      
Full Disclosure. No representation or warranty by Seller in this Agreement and no statement contained in the
Disclosure Schedules to this Agreement or any certificate or other document furnished or to be furnished to Buyer pursuant to this
Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they are made, not misleading.

 

ARTICLE
IV 

 

REPRESENTATIONS
AND WARRANTIES OF BUYER

 

Buyer represents and
warrants to Seller that the statements contained in this ARTICLE IV are true and correct as of the date hereof.

 

Section 4.01      
Organization and Authority of Buyer. Buyer is a corporation duly organized, validly existing and in good standing
under the Laws of the state of New York. Buyer has full corporate power and authority to enter into this Agreement and the Ancillary
Documents to which Buyer is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by Buyer of this Agreement and the Ancillary Document to which Buyer is a party,
the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer, and (assuming due authorization, execution and delivery by Seller) this Agreement constitutes
a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms. When each Ancillary Document
to which Buyer is or will be a party has been duly executed and delivered by Buyer (assuming due authorization, execution and delivery
by each other party thereto), such Ancillary Document will constitute a legal and binding obligation of Buyer enforceable against
it in accordance with its terms.

 

    37

    

    

 

Section 4.02      
No Conflicts; Consents. The execution, delivery and performance by Buyer of this Agreement and the Ancillary
Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not:
(a) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation, by-laws
or other organizational documents of Buyer; (b) conflict with or result in a violation or breach of any provision of any Law or
Governmental Order applicable to Buyer; or (c) require the consent, notice or other action by any Person under any Contract to
which Buyer is a party. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental
Authority is required by or with respect to Buyer in connection with the execution and delivery of this Agreement and the Ancillary
Documents and the consummation of the transactions contemplated hereby and thereby, except for such consents, approvals, Permits,
Governmental Orders, declarations, filings or notices which, in the aggregate, would not have a Material Adverse Effect.

 

Section 4.03      
Investment Purpose. Buyer is acquiring the Shares solely for its own account for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution thereof. Buyer acknowledges that the Shares are not registered
under the Securities Act of 1933, as amended, or any state securities laws, and that the Shares may not be transferred or sold
except pursuant to the registration provisions of the Securities Act of 1933, as amended or pursuant to an applicable exemption
therefrom and subject to state securities laws and regulations, as applicable.

 

Section 4.04      
Brokers. Except for Canaccord Genuity Inc., no broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any Ancillary Document
based upon arrangements made by or on behalf of Buyer.

 

Section 4.05      
Legal Proceedings. There are no Actions pending or, to Buyer’s knowledge, threatened against or by Buyer
or any Affiliate of Buyer that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
No event has occurred or circumstances exist that may give rise or serve as a basis for any such Action.

 

    38

    

    

 

ARTICLE
V 

 

COVENANTS

 

Section 5.01      
Conduct of Business Prior to the Closing. From the date hereof until the Closing, except as otherwise provided
in this Agreement or consented to in writing by Buyer, Seller shall, and shall cause the Acquired Companies to, (x) conduct the
business of the Acquired Companies in the ordinary course of business consistent with past practice; and (y) use reasonable efforts
to maintain and preserve intact the current organization, business and franchise of the Acquired Companies and to preserve the
rights, franchises, goodwill and relationships of its employees, customers, lenders, suppliers, regulators and others having business
relationships with the Acquired Companies. Without limiting the foregoing, from the date hereof until the Closing Date, Seller
shall:

 

(a)              
cause each Acquired Company to preserve and maintain all of its Permits;

 

(b)              
cause each Acquired Company to pay its debts, Taxes and other obligations when due, other than those subject to bone fide
disputes or protest;

 

(c)              
cause each Acquired Company to maintain the properties and assets owned, operated or used by the Acquired Company in the
same condition as they were on the date of this Agreement, subject to reasonable wear and tear and such transfers of cash between
Seller and the Acquired Companies as are consistent with past practice;

 

(d)              
cause each Acquired Company to continue in full force and effect without modification all Insurance Policies, except as
required by applicable Law;

 

(e)              
cause each Acquired Company to defend and protect its properties and assets from infringement or usurpation;

 

(f)              
cause each Acquired Company to perform all of its obligations under all Contracts relating to or affecting its properties,
assets or business;

 

(g)              
cause each Acquired Company to maintain its books and records in accordance with past practice;

 

(h)              
cause each Acquired Company to comply in all material respects with all applicable Laws; and

 

(i)                cause
each Acquired Company not to take or permit any action that would cause any of the changes, events or conditions described in
Section 3.07 to occur.

 

Section 5.02      
Access to Information. From the date hereof until the Closing, Seller shall, and shall cause each Acquired Company
to, (a) afford Buyer and its Representatives full and free access to and the right to inspect all of the Real Property, properties,
assets, premises, books and records, Contracts and other documents and data related to the Acquired Company; (b) furnish Buyer
and its Representatives with such financial, operating and other data and information related to the Acquired Company as Buyer
or any of its Representatives may reasonably request, including such data and information as may be required by Buyer’s Accountant
to prepare the Closing Financial Statements and to prepare audited financial statements to comply with Rule 3.05 of Regulation
S-X under the Securities Act; and (c) instruct the Representatives of Seller and the Acquired Company to cooperate with Buyer in
its investigation of the Acquired Companies. Without limiting the foregoing, Seller shall permit Buyer and its Representatives,
subject in the case of the Real Property, to the consent of Seller’s lessor, to conduct environmental due diligence of the
Acquired Companies and the Real Property, including the collecting and analysis of samples of indoor or outdoor air, surface water,
groundwater or surface or subsurface land on, at, in, under or from the Acquired Companies and the Real Property. Any investigation
pursuant to this Section 5.02 shall be conducted in such manner as not to interfere unreasonably with the conduct of the business
of Seller or the Acquired Companies. No investigation by Buyer or other information received by Buyer shall operate as a waiver
or otherwise affect any representation, warranty or agreement given or made by Seller in this Agreement.

 

    39

    

    

 

Section 5.03      
No Solicitation of Other Bids.

 

(a)              
Seller shall not, and shall not authorize or permit any of its Affiliates (including the Acquired Companies) or any of its
or their Representatives to, directly or indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding
an Acquisition Proposal; (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning
a possible Acquisition Proposal; or (iii) enter into any agreements or other instruments (whether or not binding) regarding an
Acquisition Proposal. Seller shall immediately cease and cause to be terminated, and shall cause its Affiliates (including the
Acquired Companies) and all of its and their Representatives to immediately cease and cause to be terminated, all existing discussions
or negotiations with any Persons conducted heretofore with respect to, or that could lead to, an Acquisition Proposal. For purposes
hereof, “Acquisition Proposal” shall mean any inquiry, proposal or offer from any Person (other than Buyer or any of
its Affiliates) concerning (i) a merger, consolidation, liquidation, recapitalization, share exchange or other business combination
transaction involving an Acquired Company; (ii) the issuance or acquisition of shares of capital stock or other equity securities
of an Acquired Company; or (iii) the sale, lease, exchange or other disposition of any significant portion of an Acquired Company’s
properties or assets.

 

(b)              
In addition to the other obligations under this Section 5.03, Seller shall promptly (and in any event within three Business
Days after receipt thereof by Seller or its Representatives) advise Buyer orally and in writing of any Acquisition Proposal, any
request for information with respect to any Acquisition Proposal, or any inquiry with respect to or which could reasonably be expected
to result in an Acquisition Proposal, the material terms and conditions of such request, Acquisition Proposal or inquiry, and the
identity of the Person making the same.

 

(c)              
Seller agrees that the rights and remedies for noncompliance with this Section 5.03 shall include having such provision
specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened
breach shall cause irreparable injury to Buyer and that money damages would not provide an adequate remedy to Buyer.

 

    40

    

    

 

Section 5.04      
Notice of Certain Events.

 

(a)              
From the date hereof until the Closing, Seller shall promptly notify Buyer in writing of:

 

(i)              
 any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect, (B) has resulted in, or could reasonably be expected
to result in, any representation or warranty made by Seller hereunder not being true and correct or (C) has resulted in, or could
reasonably be expected to result in, the failure of any of the conditions set forth in Section 7.01 or Section 7.02 to be satisfied;

 

(ii)             
any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;

 

(iii)           
any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this
Agreement; and

 

(iv)           
any Actions commenced or, to Seller’s Knowledge, threatened against, relating to or involving or otherwise affecting
Seller or an Acquired Company that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant
to Section 3.16 or that relates to the consummation of the transactions contemplated by this Agreement.

 

(b)              
Buyer’s receipt of information pursuant to this Section 5.04 shall not operate as a waiver or otherwise affect any
representation, warranty or agreement given or made by Seller in this Agreement (including Section 8.02 and Section 9.01(b)) and
shall not be deemed to amend or supplement the Disclosure Schedules.

 

Section 5.05      
Resignations. Seller shall deliver to Buyer written resignations, effective as of the Closing Date, of the officers
and directors of the Acquired Companies.

 

Section 5.06      
Confidentiality. From and after the Closing, Seller shall, and shall cause its Affiliates to, hold, and shall
use its reasonable best efforts to cause its or their respective Representatives to hold, in confidence any and all information,
whether written or oral, concerning an Acquired Company, except to the extent that Seller can show that such information (a) is
generally available to and known by the public through no fault of Seller, any of its Affiliates or their respective Representatives;
or (b) is lawfully acquired by Seller, any of its Affiliates or their respective Representatives from and after the Closing from
sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If Seller or
any of its Affiliates or their respective Representatives are compelled to disclose any information by judicial or administrative
process or by other requirements of Law, Seller shall promptly notify Buyer in writing and shall disclose only that portion of
such information which Seller is advised by its counsel in writing is legally required to be disclosed, provided that, at Buyer’s
expense, Seller shall use reasonable efforts to obtain an appropriate protective order or other reasonable assurance that confidential
treatment will be accorded such information.

 

    41

    

    

 

Section 5.07      
Non-Competition; Non-Solicitation.

 

(a)              
For a period of five years commencing on the Closing Date (the “Restricted Period”), Seller shall not, and shall
not permit any of its Affiliates to, directly or indirectly, (i) engage in or assist others in engaging in the Restricted Business
in the Territory; (ii) have an interest in any Person that engages directly or indirectly in the Restricted Business in the Territory
in any capacity, including as a partner, shareholder, member, employee, principal, agent, trustee or consultant; or (iii) intentionally
interfere in any material respect with the business relationships (whether formed prior to or after the date of this Agreement)
between an Acquired Company and customers or suppliers of an Acquired Company. Notwithstanding the foregoing, Seller may own, directly
or indirectly, solely as an investment, securities of any Person traded on any national securities exchange if Seller is not a
controlling Person of, or a member of a group which controls, such Person and does not, directly or indirectly, own two percent
or more of any class of securities of such Person. Buyer acknowledges that Seller and its Affiliates engage in business with Northrop
Grumman Corporation, Sikorsky Aircraft Corporation and GKN Aerospace and that contracts between such Persons and Seller and/or
its Affiliates may provide for ancillary work which may be characterized as Restricted Business. Buyer agrees that so long as such
work is not performed by Seller or its Affiliates (i.e., is contracted to Persons other than Seller or its Affiliates), such activity
shall not be a breach of Section 5.07(a)(i).

 

(b)              
During the Restricted Period, Seller shall not, and shall not permit any of its Affiliates to, directly or indirectly, hire
or solicit any employee of an Acquired Company or encourage any such employee to leave such employment or hire any such employee
who has left such employment, except pursuant to a general solicitation which is not directed specifically to any such employees;
provided, that nothing in this Section 5.07(b) shall prevent Seller or any of its Affiliates from hiring (i) any employee whose
employment has been terminated by an Acquired Company or Buyer or (ii) after 180 calendar days from the date of termination of
employment, any employee whose employment has been terminated by the employee.

 

(c)              
During the Restricted Period, Seller shall not, and shall not permit any of its Affiliates to, directly or indirectly, solicit
or entice, or attempt to solicit or entice, any clients or customers of an Acquired Company or potential clients or customers of
an Acquired Company for purposes of diverting their business or services from an Acquired Company.

 

(d)              
Seller acknowledges that a breach or threatened breach of this Section 5.07 would give rise to irreparable harm to Buyer,
for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach
by Seller of any such obligations, Buyer shall, in addition to any and all other rights and remedies that may be available to it
in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance
and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

 

    42

    

    

 

(e)              
Seller acknowledges that the restrictions contained in this Section 5.07 are reasonable and necessary to protect the legitimate
interests of Buyer and constitute a material inducement to Buyer to enter into this Agreement and consummate the transactions contemplated
by this Agreement. In the event that any covenant contained in this Section 5.07 should ever be adjudicated to exceed the time,
geographic, product or service, or other limitations permitted by applicable Law in any jurisdiction, then any court is expressly
empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic,
product or service, or other limitations permitted by applicable Law. The covenants contained in this Section 5.07 and each provision
hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision
as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.

 

Section 5.08      
Governmental Approvals and Consents.

 

(a)              
Each party hereto shall, as promptly as possible, (i) make, or cause or be made, all filings and submissions required under
any Law applicable to such party or any of its Affiliates; and (ii) use reasonable best efforts to obtain, or cause to be obtained
(without the obligation to pay any money to obtain or cause to be obtained), all consents, authorizations, orders and approvals
from all Governmental Authorities that may be or become necessary for its execution and delivery of this Agreement and the performance
of its obligations pursuant to this Agreement and the Ancillary Documents. Each party shall cooperate fully with the other party
and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The parties hereto shall
not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents,
authorizations, orders and approvals.

 

(b)              
Seller shall use reasonable best efforts to give all notices to, and obtain (without the obligation to pay any money to
obtain or cause to be obtained) all consents from, all third parties under all Contracts of the Acquired Companies which require
such notice or consent. Buyer shall cooperate with and use commercially reasonable efforts to assist Seller with obtaining such
consents prior to April 30, 2018.

 

(c)              
Without limiting the generality of the parties’ undertakings pursuant to subsections (a) and (b) above, each of the
parties hereto shall use reasonable best efforts (without the obligation to pay any money) to:

 

(i)               respond
to any inquiries by any Governmental Authority with respect to the transactions contemplated by this Agreement or any Ancillary
Document;

 

(ii)             
avoid the imposition of any order or the taking of any action that would restrain, alter or enjoin the transactions contemplated
by this Agreement or any Ancillary Document; and

 

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(iii)           
in the event any Governmental Order adversely affecting the ability of the parties to consummate the transactions contemplated
by this Agreement or any Ancillary Document has been issued, to have such Governmental Order vacated or lifted.

 

(d)              
If any consent, approval or authorization necessary to preserve any right or benefit under any Contract to which an Acquired
Company is a party is not obtained prior to the Closing, Seller shall, subsequent to the Closing, cooperate with Buyer and the
Acquired Company in attempting to obtain such consent, approval or authorization as promptly thereafter as practicable. If such
consent, approval or authorization cannot be obtained, Seller shall use its commercially reasonable efforts to provide the Acquired
Company with the rights and benefits of the affected Contract for the term thereof, and, if Seller provides such rights and benefits,
the Acquired Company shall assume all obligations and burdens thereunder.

 

(e)              
All analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals made
by or on behalf of either party before any Governmental Authority or the staff or regulators of any Governmental Authority, in
connection with the transactions contemplated hereunder (but, for the avoidance of doubt, not including any interactions between
Seller or an Acquired Company with Governmental Authorities in the ordinary course of business, any disclosure which is not permitted
by Law or any disclosure containing confidential information) shall be disclosed to the other party hereunder in advance of any
filing, submission or attendance, it being the intent that the parties will consult and cooperate with one another, and consider
in good faith the views of one another, in connection with any such analyses, appearances, meetings, discussions, presentations,
memoranda, briefs, filings, arguments, and proposals. Each party shall give notice to the other party with respect to any meeting,
discussion, appearance or contact with any Governmental Authority or the staff or regulators of any Governmental Authority, with
such notice being sufficient to provide the other party with the opportunity to attend and participate in such meeting, discussion,
appearance or contact.

 

(f)               
Notwithstanding the foregoing, nothing in this Section 5.08 shall require, or be construed to require, Buyer or any of its
Affiliates to agree to (i) sell, hold, divest, discontinue or limit, before or after the Closing Date, any assets, businesses or
interests of Buyer, an Acquired Company or any of their respective Affiliates; (ii) any conditions relating to, or changes or restrictions
in, the operations of any such assets, businesses or interests which, in either case, could reasonably be expected to result in
a Material Adverse Effect or materially and adversely impact the economic or business benefits to Buyer of the transactions contemplated
by this Agreement; or (iii) any material modification or waiver of the terms and conditions of this Agreement.

 

Section 5.09      
Closing Financial Statements. Buyer will cause Buyer’s Accountants to prepare and deliver to Buyer (with
a copy to Seller) consolidated financial statements of the Acquired Companies consisting of the balance sheet of the Acquired Companies
as at December 31, 2017 and the related statements of income and cash flow for the year then ended (the “Closing Financial
Statements”). Seller and Buyer shall share equally the cost and expense of Buyer’s Accountants in connection with the
preparation of the Closing Financial Statements. Seller’s portion of such fees and expenses (“Seller’s Fees”)
will be paid by Seller at Closing.

 

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Section 5.10      
Inventory Adjustment. In connection with its preparation of the Closing Financial Statements, Buyer’s Accountant
will conduct a physical inventory observation of and will perform an analysis of inventory pricing on the Acquired Companies’
raw materials, work-in-process and finished goods inventory (the “Inventory Analysis”). If and to the extent that the
Inventory Analysis indicates that inventory pricing is not fairly stated in accordance with the principles of GAAP chosen to be
applied by Buyer’s Accountant, Buyer’s Accountant will provide to Buyer (and copy Seller) with a proposed aggregate
adjustment to inventory pricing (the “Pricing Adjustment”) which would fairly state inventory pricing in accordance
with GAAP using the principles selected by Buyer’s Accountant (ex., to account for and reflect overvalued, unusable, unsalable,
obsolete, damaged, defective or slow-moving items). At Buyers request, Seller will cause the Acquired Companies to reduce inventory
pricing on the Acquired Company’s financial records in an amount equal to the Pricing Adjustment prior to Buyer’s Accountant’s
delivery of the Closing Financial Statements so that such reduction is reflected in the Closing Financial Statements. The amount
of such inventory pricing reduction is referred to as the “Inventory Adjustment Amount.”

 

Section 5.11      
Intercompany Accounts. At or prior to the Closing, all intercompany accounts, between Seller or its Affiliates
(other than the Acquired Companies), on the one hand, and an Acquired Company, on the other hand, shall be settled or otherwise
eliminated, and as of and following the Closing, the Acquired Companies shall not have any further Liability with respect to such
intercompany accounts; provided, that no such intercompany account shall be settled or otherwise eliminated, if doing so would
create or give rise to any Liability (other than a Liability for Taxes) to an Acquired Company as of or following the Closing,
unless such Liability is fully reflected as a payable in calculating Closing Working Capital or as Indebtedness and, following
the timely payment thereof, no Acquired Company will have any further Liability with respect to thereto. For the avoidance of doubt,
intercompany accounts between the Acquired Companies shall not be affected by this provision.

 

Section 5.12      
Termination of Intercompany Arrangements. Effective at the Closing, other than any intercompany accounts governed
by Section 5.11, all arrangements, understandings or Contracts, including all obligations to provide goods, services or other benefits,
by Seller or its Affiliates, on the one hand, and a Acquired Company on the other hand, shall be terminated without any party having
any continuing obligations or Liabilities to the other (and in a manner that does not result in any Liability (other than a Liability
for Taxes) to an Acquired Company as of or following the Closing, unless such Liability, (a) is owed solely by one Acquired Company
the other Acquired Company or (b) is fully reflected as a payable in calculating Closing Working Capital or as Indebtedness and,
following the timely payment of such payable, no Acquired Company will have any further Liability with respect thereto), except
for this Agreement and the Ancillary Agreements.

 

Section 5.13      
Termination of Indebtedness; Liens; Judgments. As of or prior to the Closing, Seller shall, or shall cause the
Acquired Companies to (a) fully discharge all of the Acquired Companies’ Indebtedness and to obtain the release of all liens
in favor of the holders thereof, (b) use commercially reasonable efforts to deliver to Buyer payoff letters evidencing the discharge
of such Indebtedness and release of such liens, as applicable and (c) cause the discharge or termination of all recorded liens,
judgments and Uniform Commercial Code financing statements with respect to the Acquired Companies, Decimal Industries Inc., Miller
Stuart Inc. and Woodbine Products, Inc. which have not lapsed.

 

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Section 5.14      
Payments. Seller shall promptly pay or deliver to the appropriate Acquired Company any monies or checks that
have been sent to Seller or its Affiliates after the Closing Date to the extent they are due to an Acquired Company, including
by customers, suppliers or other contracting parties of an Acquired Company for goods or services provided by an Acquired Company.

 

Section 5.15      
Books and Records.

 

(a)              
 In order to facilitate the resolution of any claims made against or incurred by Seller prior to the Closing, or for any
other reasonable purpose, for a period of three years after the Closing, Buyer shall:

 

(i)                retain the books and records (including personnel files) of the Acquired Companies relating to periods prior to the Closing
in a manner reasonably consistent with the prior practices of the Acquired Companies; and

 

(ii)             
upon reasonable notice, afford the Representatives of Seller reasonable access (including the right to make, at Seller’s
expense, photocopies), during normal business hours, to such books and records;

 

provided, however, that
any books and records related to Tax matters shall be retained pursuant to the periods set forth in ARTICLE VI.

 

(b)              
In order to facilitate the resolution of any claims made by or against or incurred by Buyer or the Acquired Companies after
the Closing, or for any other reasonable purpose, for a period of three years following the Closing, Seller shall:

 

(i)               retain
the books and records (including personnel files) of Seller which relate to the Acquired Companies and their operations for periods
prior to the Closing; and

 

(ii)            
upon reasonable notice, afford the Representatives of Buyer or an Acquired Company reasonable access (including the right
to make, at Buyer’s expense, photocopies), during normal business hours, to such books and records;

 

provided, however, that
any books and records related to Tax matters shall be retained pursuant to the periods set forth in ARTICLE VI.

 

(c)              
Neither Buyer nor Seller shall be obligated to provide the other party with access to any books or records (including personnel
files) pursuant to this Section 5.11 where such access would violate any Law.

 

Section 5.16      
Financing. Prior to the Closing, Seller shall, and shall cause the Acquired Companies to, and shall use their
commercially reasonable efforts to cause their Representatives (including auditors) to, provide all cooperation that is necessary,
customary or advisable and reasonably requested by Buyer to assist Buyer in the arrangement of financing in connection with the
transactions contemplated by this Agreement.

 

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Section 5.17      
Closing Conditions. From the date hereof until the Closing, each party hereto shall, and Seller shall cause the
Acquired Companies to, use reasonable best efforts (without the obligation to pay any money) to take such actions as are necessary
to expeditiously satisfy the closing conditions set forth in ARTICLE VII hereof.

 

Section 5.18      
Public Announcements. Unless otherwise required by applicable Law or securities exchange requirements (based
upon the reasonable advice of counsel), no party to this Agreement shall make any public announcements in respect of this Agreement
or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other
party (which consent shall not be unreasonably withheld or delayed). The parties shall cooperate as to the timing and contents
of any such announcement including providing as much written notice and opportunity to review and comment to the other party as
is practical under the circumstances.

 

Section 5.19      
Further Assurances. Following the Closing, each of the parties hereto shall, and shall cause their respective
Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions
as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.

 

ARTICLE
VI 

 

TAX
MATTERS

 

Section 6.01      
Tax Covenants.

 

(a)              
Without the prior written consent of Buyer, Seller (and, prior to the Closing, each Acquired Company, its Affiliates and
their respective Representatives) shall not, to the extent it may affect, or relate to, an Acquired Company, make, change or rescind
any Tax election, amend any Tax Return or take any position on any Tax Return, take any action, omit to take any action or enter
into any other transaction that would have the effect of increasing the Tax liability or reducing any Tax asset of Buyer or an
Acquired Company in respect of any Post-Closing Tax Period. Seller agrees that Buyer is to have no liability for any Tax resulting
from any action prior to the Closing Date of Seller, an Acquired Company, its Affiliates or any of their respective Representatives,
and agrees to indemnify and hold harmless Buyer (and, after the Closing Date, the Acquired Companies) against any such Tax or reduction
of any Tax asset.

 

(b)              
All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties
and interest) incurred in connection with this Agreement and the Ancillary Documents (including any real property transfer Tax
and any other similar Tax) shall be borne and paid by Seller when due. Seller shall, at its own expense, timely file any Tax Return
or other document with respect to such Taxes or fees (and Buyer shall cooperate with respect thereto as necessary).

 

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(c)              
Seller shall prepare, or cause to be prepared, all Tax Returns required to be filed by an Acquired Company or Seller and/or
its Affiliates with respect to an Acquired Company after the Closing Date relating to a Pre-Closing Tax Period. Any such Tax Return
shall be prepared in a manner consistent with past practice (unless otherwise required by Law) and without a change of any election
or any accounting method and shall be submitted by Seller to Buyer (together with schedules, statements and, to the extent requested
by Buyer, supporting documentation) at least 45 calendar days prior to the due date (including extensions) of such Tax Return.
If Buyer objects to any item on any such Tax Return, it shall, within ten calendar days after delivery of such Tax Return, notify
Seller in writing that it so objects, specifying with particularity any such item and stating the specific factual or legal basis
for any such objection. If a notice of objection shall be duly delivered, Seller and Buyer shall negotiate in good faith and use
their reasonable best efforts to resolve such items. If Seller and Buyer are unable to reach such agreement within ten calendar
days after receipt by Seller of such notice, the disputed items shall be resolved by the Independent Accountant and any determination
by the Independent Accountant shall be final. The Independent Accountant shall resolve any disputed items within 20 calendar days
of having the item referred to it pursuant to such procedures as it may require. If the Independent Accountant is unable to resolve
any disputed items before the due date for such Tax Return, the Tax Return shall be filed as prepared by Seller and then amended
to reflect the Independent Accountant’s resolution. The costs, fees and expenses of the Independent Accountant shall be borne
equally by Seller and Buyer. The preparation and filing of any Tax Return of an Acquired Company that does not relate to a Pre-Closing
Tax Period shall be exclusively within the control of Buyer.

 

Section 6.02      
Termination of Existing Tax Sharing Agreements. Any and all existing Tax sharing agreements (whether written
or not) binding upon an Acquired Company shall be terminated as of the Closing Date. After such date none of the Acquired Companies,
Seller nor any of Seller’s Affiliates and their respective Representatives shall have any further rights or liabilities thereunder.

 

Section 6.03      
Tax Indemnification. Except to the extent treated as a liability in the calculation of Closing Working Capital,
Seller shall indemnify each of the Acquired Companies, Buyer, and each Buyer Indemnitee and hold them harmless from and against
(a) any Loss attributable to any breach of or inaccuracy in any representation or warranty made in Section 3.21; (b) any Loss attributable
to any breach or violation of, or failure to fully perform, any covenant, agreement, undertaking or obligation in ARTICLE VI; (c)
all Taxes of an Acquired Company or relating to the business of an Acquired Company for all Pre-Closing Tax Periods; (d) all Taxes
of any member of an affiliated, consolidated, combined or unitary group of which an Acquired Company (or any predecessor of an
Acquired Company) is or was a member on or prior to the Closing Date by reason of a liability under Treasury Regulation Section
1.1502-6 or any comparable provisions of foreign, state or local Law; and (e) any and all Taxes of any person imposed on an Acquired
Company arising under the principles of transferee or successor liability or by contract, relating to an event or transaction occurring
before the Closing Date. In each of the above cases, together with any out-of-pocket fees and expenses (including attorneys’
and accountants’ fees) incurred in connection therewith. Seller shall reimburse Buyer for any Taxes of an Acquired Company
that are the responsibility of Seller pursuant to this Section 6.03 within ten Business Days after payment of such Taxes by Buyer
or an Acquired Company.

 

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Section 6.04      
Straddle Period. In the case of Taxes that are payable with respect to a taxable period that begins before and
ends after the Closing Date (each such period, a “Straddle Period”), the portion of any such Taxes that are treated
as Pre-Closing Taxes for purposes of this Agreement shall be:

 

(a)              
in the case of Taxes (i) based upon, or related to, income, receipts, profits, wages, capital or net worth, (ii) imposed
in connection with the sale, transfer or assignment of property, or (iii) required to be withheld, deemed equal to the amount which
would be payable if the taxable year ended with the Closing Date; and

 

(b)              
in the case of other Taxes, deemed to be the amount of such Taxes for the entire period multiplied by a fraction the numerator
of which is the number of calendar days in the period ending on the Closing Date and the denominator of which is the number of
calendar days in the entire period.

 

Section 6.05      
Section 338(h)(10) Election.

 

(a)              
At Buyer’s option, exercised at any time on or prior to September 30, 2018, Seller shall join with Buyer in making
a timely election under Section 338(h)(10) of the Code (and any corresponding election under state, local, and foreign Law) with
respect to the purchase and sale of the Shares of the Company hereunder (collectively, a “Section 338(h)(10) Election”).
Seller shall pay any Tax attributable to the making of the Section 338(h)(10) Election and Seller shall indemnify Buyer and the
Acquired Companies against any adverse consequences arising out of any failure to pay any such Taxes.

 

(b)              
If a Section 338(h)(10) Election is made, Seller and Buyer shall (and shall cause their relevant Affiliates to) cooperate
in the preparation of all forms, attachments and schedules necessary to effectuate the Section 338(h)(10) Election, including IRS
Forms 8023 and 8883 and any similar forms under applicable state and local income Tax Laws (collectively, the “Section 338(h)(10)
Forms”) in a manner consistent with the Total Purchase Price Allocation Schedule and, if any, the Allocation. Seller and
Buyer shall (or shall cause their relevant Affiliates to) timely file such Section 338(h)(10) Forms with the applicable taxing
authorities. Each of Seller and Buyer agrees that it shall not, and shall not permit any of its Affiliates to, revoke the Section
338(h)(10) Elections following the filing of the Section 338(h)(10) Forms without the prior written consent of Buyer and Seller,
respectively.

 

(c)              
[Intentionally omitted]

 

(d)              
Total Purchase Price Allocation.

 

(i)              
If a Section 338(h)(10) Election is made, for Tax purposes, Seller and Buyer agree to (and agree to cause their respective
Affiliates to) allocate the Total Purchase Price and any other amounts treated as consideration for such Tax purposes among the
assets and shares deemed sold for U.S. federal income tax purposes in accordance with Section 6.05(d) of the Disclosure Schedule
(such schedule, the “Total Purchase Price Allocation Schedule”).

 

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(ii)             
If a Section 338(h)(10) Election is made, no later than 60 calendar days after the Total Purchase Price is finally determined
hereunder (i.e., following adjustments made pursuant to Section 2.04 and payment of any Contingent Payment or expiration of the
period during which an event could occur that would give rise to a Contingent Payment), Buyer shall deliver to Seller a proposed
allocation of the Total Purchase Price and other relevant amounts as of the Closing Date, which allocation shall incorporate, reflect
and be consistent with the Total Purchase Price Allocation Schedule, and be determined in a manner consistent with Sections 338
and 1060 of the Code and the Treasury Regulations promulgated thereunder (the “Buyer’s Draft Allocation”). If
Seller disagrees with Buyer’s Draft Allocation, Seller may, within 30 calendar days after delivery of Buyer’s Draft
Allocation, deliver a notice (the “Seller’s Allocation Notice”) to Buyer to such effect, specifying those items
as to which Seller disagrees and setting forth Seller’s proposed allocation of the Total Purchase Price (and other relevant
amounts). If the Seller’s Allocation Notice is duly delivered, Seller and Buyer shall, during the 20 calendar days following
such delivery, negotiate in good faith to reach agreement on the disputed items or amounts in order to determine the allocation
of the Total Purchase Price (and other relevant amounts). If Seller and Buyer are unable to reach such agreement, each of Seller
and Buyer may separately determine the allocation of the Total Purchase Price (and other relevant amounts); provided, that any
such allocation shall incorporate, reflect and be consistent with the Total Purchase Price Allocation Schedule. The allocation
of the Total Purchase Price (and other relevant amounts) as prepared by Buyer if no Seller’s Allocation Notice has been timely
delivered, as adjusted pursuant to any agreement reached by Seller and Buyer, if any (the “Allocation”), shall be conclusive
and binding on all parties. The Allocation, if any, shall be adjusted, as necessary, to reflect any subsequent payments treated
as adjustment (if any) to the Total Purchase Price pursuant to Section 2.04, ARTICLE VI and ARTICLE VIII. Any such adjustment shall
be allocated, consistent with this Section 6.05(d), to the asset, assets, or shares (if any) to which such adjustment is attributable.

 

(iii)           
If a Section 338(h)(10) Election is made, Seller and Buyer shall (and shall cause their Affiliates to) (A) prepare and file
all Tax Returns (including the Section 338(h)(10) Forms), in a manner consistent with the Section 338(h)(10) Election, the Total
Purchase Price Allocation Schedule and, if any, the Allocation and (B) not take any position inconsistent therewith on any Tax
Return, in connection with any Tax Proceeding or otherwise, in each case, except to the extent otherwise required pursuant to a
“determination” within the meaning of Section 1313(a) of the Code (or any similar provision of applicable state, local
or foreign Law).

 

Section 6.06      
Contests. Buyer agrees to give written notice to Seller of the receipt of any written notice by an Acquired Company
or Buyer which involves the assertion of any claim, or the commencement of any Action, in respect of which an indemnity may be
sought by Buyer pursuant to this ARTICLE VI (a “Tax Claim”); provided, that failure to comply with this provision shall
not affect Buyer’s right to indemnification hereunder except to the extent Seller’s ability to defend such claim is
compromised by such failure. Buyer shall control the contest or resolution of any Tax Claim; provided, however, that Buyer shall
obtain the prior written consent of Seller (which consent shall not be unreasonably withheld or delayed) before entering into any
settlement of a claim or ceasing to defend such claim; and, provided further, that Seller shall be entitled to participate in the
defense of such claim and to employ counsel of its choice for such purpose, the fees and expenses of which separate counsel shall
be borne solely by Seller.

 

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Section 6.07      
Cooperation and Exchange of Information. Seller and Buyer shall provide each other with such cooperation and
information as either of them reasonably may request of the other in filing any Tax Return pursuant to this ARTICLE VI or in connection
with any audit or other proceeding in respect of Taxes of an Acquired Company. Such cooperation and information shall include providing
copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating
to rulings or other determinations by tax authorities. Each of Seller and Buyer shall retain all Tax Returns, schedules and work
papers, records and other documents in its possession relating to Tax matters of an Acquired Company for any taxable period beginning
before the Closing Date until the expiration of the statute of limitations of the taxable periods to which such Tax Returns and
other documents relate, without regard to extensions except to the extent notified by the other party in writing of such extensions
for the respective Tax periods. Prior to transferring, destroying or discarding any Tax Returns, schedules and work papers, records
and other documents in its possession relating to Tax matters of an Acquired Company for any taxable period beginning before the
Closing Date, Seller or Buyer (as the case may be) shall provide the other party with reasonable written notice and offer the other
party the opportunity to take custody of such materials.

 

Section 6.08      
Tax Treatment of Indemnification Payments. Any indemnification payments pursuant to this ARTICLE VI shall be
treated as an adjustment to the Total Purchase Price by the parties for Tax purposes, unless otherwise required by Law.

 

Section 6.09      
Payments to Buyer. Any amounts payable to Buyer pursuant to this ARTICLE VI shall be paid by the Escrow Agent
pursuant to the terms of the Escrow Agreement from the Indemnification Escrow Fund and to the extent such amounts exceed the amount
available to Buyer in the Indemnification Escrow Fund, by Seller within 15 Business Days by wire transfer of immediately available
funds. Should a party not make full payment of any obligation arising under this Article VI within 15 Business Days of a demand
therefore, any amount payable shall accrue interest at a rate per annum equal to five percent. Such interest shall be calculated
daily on the basis of a 365 day year and the actual number of calendar days elapsed, without compounding.

 

Section 6.10      
Survival. Notwithstanding anything in this Agreement to the contrary, the provisions of Section 3.21 and this
ARTICLE VI shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation
or extension thereof) plus 60 calendar days and shall not be subject to any limitation set forth in Section 8.04; provided, however,
that obligations to indemnify and hold harmless shall not terminate with respect to any specific matter as to which a Person to
be indemnified shall have, before expiration of the applicable period, previously made a claim by delivering a written notice thereof
(stating in reasonable detail the basis of such claim) to the indemnifying person.

 

Section 6.11      
Overlap. To the extent that any obligation or responsibility pursuant to ARTICLE VIII may overlap with an obligation
or responsibility pursuant to this ARTICLE VI, the provisions of this ARTICLE VI shall govern.

 

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ARTICLE
VII 

 

CONDITIONS
TO CLOSING

 

Section 7.01      
Conditions to Obligations of All Parties. The obligations of each party to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of the following condition:

 

(a)              
No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is in
effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting
consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion
thereof.

 

Section 7.02      
Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or Buyer’s waiver, at or prior to the Closing, of each of the following conditions:

 

(a)              
Other than the Seller Fundamental Representations and the representations and warranties in Section 3.05, the representations
and warranties of Seller contained in this Agreement, the Ancillary Documents and any certificate or other writing delivered pursuant
hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material
Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material
Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of
such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which
shall be determined as of that specified date in all respects). The representations and warranties in the Seller Fundamental Representations
and the representations and warranties in Section 3.05 shall be true and correct in all respects on and as of the date hereof and
on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties
that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects).

 

(b)              
Seller shall have duly performed and complied in all material respects with all agreements, covenants and conditions required
by this Agreement and each of the Ancillary Documents to be performed or complied with by it prior to or on the Closing Date; provided,
that, with respect to agreements, covenants and conditions that are qualified by materiality, Seller shall have performed such
agreements, covenants and conditions, as so qualified, in all respects.

 

(c)              
No Action shall have been commenced against Buyer, Seller or an Acquired Company, which would prevent the Closing. No injunction
or restraining order shall have been issued by any Governmental Authority, and be in effect, which restrains or prohibits any transaction
contemplated hereby.

 

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(d)              
All approvals, consents and waivers that are listed on Section 7.02(d) of the Disclosure Schedules shall have been received,
and executed counterparts thereof shall have been delivered to Buyer at or prior to the Closing.

 

(e)              
From the date of this Agreement, there shall not have occurred any Material Adverse Effect, nor shall any event or events
have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result
in a Material Adverse Effect.

 

(f)               
Buyer shall have obtained sufficient cash proceeds from financing transactions to enable Buyer to pay the Total Purchase
Price and consummate the transactions contemplated by this Agreement.

 

(g)              
Buyer shall have received the Closing Financial Statements from Buyer’s Accountants in accordance with Section 5.09.

 

(h)              
The Ancillary Documents shall have been executed and delivered by the parties thereto and true and complete copies thereof
shall have been delivered to Buyer.

 

(i)                
Buyer shall have received resignations of the directors and officers of the Acquired Companies pursuant to Section 5.05.

 

(j)                
At least three Business Days before Closing, Seller shall have delivered to Buyer the Closing Indebtedness Certificate and
the Closing Transaction Expenses Certificate.

 

(k)              
Seller shall have delivered to Buyer the Estimated Closing Working Capital Statement contemplated in Section 2.04(a)(ii).

 

(l)                
Seller shall have delivered to Buyer a good standing certificate (or its equivalent) for each Acquired Company from the
secretary of state or similar Governmental Authority of the jurisdiction under the Laws in which the Acquired Company is organized.

 

(m)            
Seller shall have delivered to Buyer pay-off letters relating to all Indebtedness of the Acquired Companies, in form and
substance reasonably acceptable to Buyer.

 

(n)              
Seller and the Company shall have signed the Sublease.

 

(o)              
Seller shall have delivered to Buyer a certificate pursuant to Treasury Regulations Section 1.1445-2(b) that Seller is not
a foreign person within the meaning of Section 1445 of the Code.

 

(p)              
Seller shall have delivered, or caused to be delivered, to Buyer stock certificates evidencing the Shares, free and clear
of Encumbrances, duly endorsed in blank or accompanied by stock powers or other instruments of transfer duly executed in blank
and with all required stock transfer tax stamps affixed.

 

    53

    

    

 

(q)              
Buyer shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Seller that each
of the conditions set forth in Section 7.02(a) and Section 7.02(b) have been satisfied.

 

(r)               
Buyer shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Seller certifying
that attached thereto are true and complete copies of all resolutions adopted by the board of directors of Seller authorizing the
execution, delivery and performance of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated
hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection
with the transactions contemplated hereby and thereby.

 

(s)               
Buyer shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Seller certifying
the names and signatures of the officers of Seller authorized to sign this Agreement, the Ancillary Documents and the other documents
to be delivered hereunder and thereunder.

 

(t)                
Seller shall have delivered to Buyer such other documents or instruments as Buyer reasonably requests and are reasonably
necessary to consummate the transactions contemplated by this Agreement.

 

Section 7.03      
Conditions to Obligations of Seller. The obligations of Seller to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment or Seller’s waiver, at or prior to the Closing, of each of the following
conditions:

 

(a)              
Other than the representations and warranties of Buyer contained in Section 4.01 and Section 4.04, the representations and
warranties of Buyer contained in this Agreement, the Ancillary Documents and any certificate or other writing delivered pursuant
hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material
Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material
Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of
such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which
shall be determined as of that specified date in all respects). The representations and warranties of Buyer contained in Section
4.01 and Section 4.04 shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date
with the same effect as though made at and as of such date.

 

(b)              
Buyer shall have duly performed and complied in all material respects with all agreements, covenants and conditions required
by this Agreement and the Ancillary Documents to be performed or complied with by it prior to or on the Closing Date; provided,
that, with respect to agreements, covenants and conditions that are qualified by materiality, Buyer shall have performed such agreements,
covenants and conditions, as so qualified, in all respects.

 

    54

    

    

 

(c)              
No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which restrains
or prohibits any material transaction contemplated hereby.

 

(d)              
The Ancillary Documents shall have been executed and delivered by the parties thereto and true and complete copies thereof
shall have been delivered to Seller.

 

(e)              
Buyer shall have delivered to Seller cash in an amount equal to the Closing Date Payment by wire transfer of immediately
available funds, to an account or accounts designated at least two Business Days prior to the Closing Date by Seller in a written
notice to Buyer.

 

(f)               
Buyer shall have delivered to the Escrow Agent by wire transfer of immediately available funds the Total Escrow Amount.

 

(g)              
Buyer shall have delivered to third parties by wire transfer of immediately available fund that amount of money due and
owing from Seller to such third parties as Transaction Expenses as set forth on the Closing Transaction Expenses Certificate.

 

(h)              
Buyer shall have delivered to holders of outstanding Indebtedness, if any, by wire transfer of immediately available funds
that amount of money due and owing from the Acquired Companies to such holder of outstanding Indebtedness as set forth on the Closing
Indebtedness Certificate.

 

(i)                
Seller shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Buyer that each
of the conditions set forth in Section 7.03(a) and Section 7.03(b) have been satisfied.

 

(j)                
Seller shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying
that attached thereto are true and complete copies of all resolutions adopted by the board of directors of Buyer authorizing the
execution, delivery and performance of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated
hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection
with the transactions contemplated hereby and thereby.

 

(k)              
Seller shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying
the names and signatures of the officers of Buyer authorized to sign this Agreement, the Ancillary Documents and the other documents
to be delivered hereunder and thereunder.

 

(l)                
Buyer shall have delivered to Seller such other documents or instruments as Seller reasonably requests and are reasonably
necessary to consummate the transactions contemplated by this Agreement.

 

    55

    

    

 

ARTICLE
VIII

 

INDEMNIFICATION

 

Section 8.01      
Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties
contained herein (other than any representations or warranties contained in Section 3.21 (Taxes) which are subject to ARTICLE VI)
shall survive the Closing and shall remain in full force and effect until the date that is eighteen months from the Closing Date;
provided, that (a) the representations and warranties in the Seller Fundamental Representations, Section 4.01 (Organization and
Authority of Buyer) and Section 4.04 (Brokers) shall survive indefinitely, (b) the representations and warranties in Section 3.18
(Environmental Matters), Section 3.19 (Employee Benefit Matters) and Section 3.20 (Employment Matters) shall survive until 60 calendar
days after the expiration of the applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof)
related to the matter(s) underlying such representations and warranties, (c) claims with respect to the matters set forth in Section
8.02(d) of the Disclosure Schedule shall survive indefinitely. All covenants and agreements of the parties contained herein (other
than any covenants or agreements contained in ARTICLE VI which are subject to ARTICLE VI) shall survive the Closing indefinitely
or for the period explicitly specified therein. Notwithstanding the foregoing, any claims asserted in good faith with reasonable
specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior
to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation
or warranty and such claims shall survive until finally resolved.

 

Section 8.02      
Indemnification by Seller. Subject to the other terms and conditions of this ARTICLE VIII, Seller shall indemnify
and defend each of Buyer and its Affiliates (including the Acquired Companies) and their respective Representatives (collectively,
the “Buyer Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse
each of them for, any and all Losses incurred or sustained by, or imposed upon, the Buyer Indemnitees based upon, arising out of,
with respect to or by reason of:

 

(a)              
any inaccuracy in or breach, or any third party allegation that if true would constitute a breach or inaccuracy of any of
the representations or warranties of Seller contained in this Agreement or in any certificate or instrument delivered by or on
behalf of Seller pursuant to this Agreement (other than in respect of Section 3.21, it being understood that the sole remedy for
any such inaccuracy in or breach thereof shall be pursuant to ARTICLE VI), as of the date such representation or warranty was made
or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that
expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified
date);

 

(b)              
any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Seller pursuant to this Agreement
(other than any breach or violation of, or failure to fully perform, any covenant, agreement, undertaking or obligation in ARTICLE
VI, it being understood that the sole remedy for any such breach, violation or failure shall be pursuant to ARTICLE VI);

 

    56

    

    

 

(c)              
any Transaction Expenses or Indebtedness of an Acquired Company outstanding as of the Closing to the extent not deducted
from the Initial Purchase Price in the determination of the Closing Date Payment pursuant to Section 2.04(a)(i); and

 

(d)              
the matters set forth on Section 8.02(d) of the Disclosure Schedule, with the limitations set forth therein.

 

Section 8.03      
Indemnification by Buyer. Subject to the other terms and conditions of this ARTICLE VIII, Buyer shall indemnify
and defend each of Seller and its Affiliates and their respective Representatives (collectively, the “Seller Indemnitees”)
against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses
incurred or sustained by, or imposed upon, the Seller Indemnitees based upon, arising out of, with respect to or by reason of:

 

(a)              
any inaccuracy in or breach, or any third party allegation that if true would constitute a breach or inaccuracy of any of
the representations or warranties of Buyer contained in this Agreement or in any certificate or instrument delivered by or on behalf
of Buyer pursuant to this Agreement, as of the date such representation or warranty was made or as if such representation or warranty
was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the
inaccuracy in or breach of which will be determined with reference to such specified date); or

 

(b)              
any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer pursuant to this Agreement
(other than ARTICLE VI, it being understood that the sole remedy for any such breach thereof shall be pursuant to ARTICLE VI).

 

Section 8.04      
Certain Limitations. The indemnification provided for in Section 8.02 and Section 8.03 shall be subject to the
following limitations:

 

(a)              
Seller shall not be liable to the Buyer Indemnitees for indemnification under Section 8.02(a) until the aggregate amount
of all Losses in respect of indemnification under Section 8.02(a) exceeds $150,000 (the “Basket Amount”), in which
event Seller shall be required to pay or be liable for all such Losses in excess of $75,000. The aggregate amount of all Losses
for which Seller shall be liable pursuant to Section 8.02(a) shall not exceed $2,000,000.

 

(b)              
Buyer shall not be liable to the Seller Indemnitees for indemnification under Section 8.03(a) until the aggregate amount
of all Losses in respect of indemnification under Section 8.03(a) exceeds the Basket Amount, in which event Buyer shall be required
to pay or be liable for all such Losses in excess of $75,000. The aggregate amount of all Losses for which Buyer shall be liable
pursuant to Section 8.03(a) shall not exceed $2,000,000.

 

(c)              
Notwithstanding the foregoing, the limitations set forth in Section 8.04(a) shall not apply to Losses based upon, arising
out of, with respect to or by reason of any inaccuracy in or breach of any of the Seller Fundamental Representations, provided
that, the aggregate amount of all such Losses for which Seller shall be liable shall not exceed the Total Purchase Price.

 

    57

    

    

 

(d)              
 Notwithstanding the foregoing, the limitations set forth in Section 8.04(b) shall not apply to Losses based upon, arising
out of, with respect to or by reason of any inaccuracy in or breach of an inaccuracy in or breach of a representation or warranty
in Section 4.01 and Section 4.04, provided that, the aggregate amount of all such Losses for which Buyer shall be liable
shall not exceed the Total Purchase Price.

 

(e)              
Notwithstanding the foregoing, the limitations set forth in Section 8.04(a) and Section 8.04(c) shall not apply to Losses
based upon, arising out of, with respect to or by reason of any inaccuracy in or breach of a representation and warranty in Section
3.16 or Section 3.18 or with respect to indemnification provided for in Section 8.02(c) or Section 8.02(d).

 

(f)               
For purposes of this ARTICLE VIII, any inaccuracy in or breach of any representation or warranty and the calculation of
any Losses resulting therefrom shall be determined without regard to any materiality, Material Adverse Effect or other similar
qualification contained in or otherwise applicable to such representation or warranty.

 

Section 8.05      
Indemnification Procedures. The party making a claim under this ARTICLE VIII is referred to as the “Indemnified
Party,” and the party against whom such claims are asserted under this ARTICLE VIII is referred to as the “Indemnifying
Party.”

 

(a)              
Third Party Claims. If any Indemnified Party receives notice of the assertion or commencement of any Action made
or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative
of the foregoing (a “Third Party Claim”) against such Indemnified Party with respect to which the Indemnifying Party
is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party reasonably
prompt written notice thereof, but in any event not later than 30 calendar days after receipt of such notice of such Third Party
Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification
obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such
notice by the Indemnified Party shall describe the Third Party Claim in reasonable detail, shall include copies of all material
written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be
sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in, or by giving written notice
to the Indemnified Party, to assume the defense of any Third Party Claim at the Indemnifying Party’s expense and by the Indemnifying
Party’s own counsel (reasonably satisfactory to the Indemnified Party), and the Indemnified Party shall cooperate in good
faith in such defense; provided, that if the Indemnifying Party is Seller, such Indemnifying Party shall not have the right to
defend or direct the defense of any such Third Party Claim that (x) is asserted directly by or on behalf of a Person that is a
supplier or customer of an Acquired Company, or (y) seeks an injunction or other equitable relief against the Indemnified Party.
In the event that the Indemnifying Party assumes the defense of any Third Party Claim, subject to Section 8.05(b), it shall have
the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such
Third Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right to participate
in the defense of any Third Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control
the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party, provided, that
if in the reasonable opinion of counsel to the Indemnified Party, (A) there are legal defenses available to an Indemnified Party
that are different from or additional to those available to the Indemnifying Party; or (B) there exists a conflict of interest
between the Indemnifying Party and the Indemnified Party that cannot be waived, the Indemnifying Party shall be liable for the
reasonable fees and expenses of counsel to the Indemnified Party in each jurisdiction for which the Indemnified Party determines
counsel is required. If the Indemnifying Party elects not to compromise or defend such Third Party Claim, fails to promptly notify
the Indemnified Party in writing of its election to defend as provided in this Agreement, or fails to diligently prosecute the
defense of such Third Party Claim, the Indemnified Party may, subject to Section 8.05(b), pay, compromise, defend such Third Party
Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third Party Claim. Seller and
Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any Third Party Claim, including
making available (subject to the provisions of Section 5.06) records relating to such Third Party Claim and furnishing, without
expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending
party as may be reasonably necessary for the preparation of the defense of such Third Party Claim. Notwithstanding anything in
this Agreement to the contrary, Seller hereby assumes the defense of the Actions set forth on Section 8.02(d) of the Disclosure
Schedule and any Action arising out of item six (6) on such Schedule (with limitations set forth therein), and will directly pay
any and all costs, expenses and other Losses with respect thereto.

 

    58

    

    

 

(b)              
Settlement of Third Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall
not enter into settlement of any Third Party Claim without the prior written consent of the Indemnified Party, except as provided
in this Section 8.05(b)). If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of
a financial or other obligation on the part of the Indemnified Party and provides, in customary form, for the unconditional release
of each Indemnified Party from all liabilities and obligations in connection with such Third Party Claim and the Indemnifying Party
desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party.
If the Indemnified Party fails to consent to such firm offer within ten calendar days after its receipt of such notice, the Indemnified
Party may continue to contest or defend such Third Party Claim and in such event, the maximum liability of the Indemnifying Party
as to such Third Party Claim shall not exceed the amount of such settlement offer. If the Indemnified Party fails to consent to
such firm offer and also fails to assume defense of such Third Party Claim, the Indemnifying Party may settle the Third Party Claim
upon the terms set forth in such firm offer to settle such Third Party Claim. If the Indemnified Party has assumed the defense
pursuant to Section 8.05(a), it shall not agree to any settlement without the written consent of the Indemnifying Party (which
consent shall not be unreasonably withheld or delayed).

 

(c)              
Direct Claims. Any Action by an Indemnified Party on account of a Loss which does not result from a Third Party Claim
(a “Direct Claim”) shall be asserted by the Indemnified Party giving the Indemnifying Party reasonably prompt written
notice thereof. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification
obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such
notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written
evidence thereof and shall indicate the estimated amount of the Loss that has been or may be sustained by the Indemnified Party.
The Indemnifying Party shall have 20 calendar days after its receipt of such notice to respond in writing to such Direct Claim.
The Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate the matter or circumstance
alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and
the Indemnified Party shall assist the Indemnifying Party’s investigation by giving such information and assistance (including
access to an Acquired Company’s premises and personnel and the right to examine and copy any accounts, documents or records)
as the Indemnifying Party or any of its professional advisors may reasonably request. If the Indemnifying Party does not so respond
within such 20 calendar day period, the Indemnifying Party shall be deemed to have accepted such claim. If the Indemnifying Party
rejects such claim, it shall, within such 20 calendar day period, notify the Indemnified Party in writing of its rejection, specifying
with particularity the factual or legal basis therefor. If a notice of rejection shall be duly delivered, the Indemnified Party
and the Indemnifying Party shall negotiate in good faith and use their reasonable best efforts to resolve the claim. If the Indemnified
Party and the Indemnifying Party are unable to reach such agreement within ten calendar days after receipt by Indemnified Party
of the rejection notice, the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party
on the terms and subject to provisions of this Agreement.

 

    59

    

    

 

(d)              
Tax Claims. Notwithstanding any other provision of this Agreement, the control of any claim, assertion, event or
proceeding in respect of Taxes of An Acquired Company (including, but not limited to, any such claim in respect of a breach of
the representations and warranties in Section 3.21 hereof or any breach or violation of or failure to fully perform any covenant,
agreement, undertaking or obligation in ARTICLE VI) shall be governed exclusively by ARTICLE VI hereof.

 

Section 8.06      
Payments; Indemnification Escrow Fund.

 

(a)              
Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to ARTICLE VI or this ARTICLE
VIII, the Indemnifying Party shall satisfy its obligations within ten Business Days of such agreement or final, non-appealable
adjudication, as provided for by Section 8.06(b) or by wire transfer of immediately available funds. The parties hereto agree that
should an Indemnifying Party not make full payment of any such obligations within such ten Business Day period, any amount payable
shall accrue interest from and including the date of agreement of the Indemnifying Party or final, non-appealable adjudication
to and including the date such payment has been made at a rate per annum equal to five percent. Such interest shall be calculated
daily on the basis of a 365 day year and the actual number of calendar days elapsed, without compounding.

 

(b)              
Any Losses payable to a Buyer Indemnitee pursuant to this ARTICLE VIII shall be paid by the Escrow Agent pursuant to the
terms of the Escrow Agreement from the Indemnification Escrow Fund and to the extent such amounts exceed the amount available to
Buyer in the Escrow Fund, from Seller in accordance with Section 8.06(a).

 

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(c)              
In any Action relating to a dispute of a claim made for indemnification pursuant to ARTICLE IV or this ARTICLE VIII (including
claims by Buyer for payment from the Indemnification Escrow Fund in accordance with the Escrow Agreement), the prevailing party
shall be entitled to recover its reasonable attorneys' fees and other reasonable costs and expenses incurred in connection with
such Action from the other party.

 

Section 8.07      
Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated
by the parties as an adjustment to the Total Purchase Price for Tax purposes, unless otherwise required by Law.

 

Section 8.08      
Effect of Investigation. The representations, warranties and covenants of the Indemnifying Party, and the Indemnified
Party’s right to indemnification with respect thereto, shall not be affected or deemed waived by reason of any investigation
made by or on behalf of the Indemnified Party (including by any of its Representatives) or by reason of the fact that the Indemnified
Party or any of its Representatives knew or should have known that any such representation or warranty is, was or might be inaccurate
or by reason of the Indemnified Party’s waiver of any condition set forth in Section 7.02 or Section 7.03, as the case may
be.

 

Section 8.09      
Exclusive Remedies. Subject to Section 5.07 and Section 10.11, the parties acknowledge and agree that their sole
and exclusive remedy with respect to any and all claims (other than claims arising from fraud, criminal activity or willful misconduct
on the part of a party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation,
warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall
be pursuant to the indemnification provisions set forth in ARTICLE VI and this ARTICLE VIII. In furtherance of the foregoing, each
party hereby waives, to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach
of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter
of this Agreement it may have against the other parties hereto and their Affiliates and each of their respective Representatives
arising under or based upon any Law, except pursuant to the indemnification provisions set forth in ARTICLE VI and this ARTICLE
VIII. Nothing in this Section 8.09 shall limit any Person’s right to seek and obtain any equitable relief to which any Person
shall be entitled or to seek any remedy on account of any party’s fraudulent, criminal or intentional misconduct.

 

ARTICLE
IX 

 

TERMINATION

 

Section 9.01      
Termination. This Agreement may be terminated at any time prior to the Closing:

 

(a)              
by the mutual written consent of Seller and Buyer;

 

(b)              
by Buyer by written notice to Seller if:

 

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(i)                Buyer
is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform
any representation, warranty, covenant or agreement made by Seller pursuant to this Agreement that would give rise to the failure
of any of the conditions specified in ARTICLE VII and such breach, inaccuracy or failure has not been cured by Seller within ten
calendar days of Seller’s receipt of written notice of such breach from Buyer; or

 

(ii)             
any of the conditions set forth in Section 7.01 or Section 7.02 shall not have been, or if it becomes apparent that any
of such conditions will not be, fulfilled by June 19, 2018 unless such failure shall be due to the failure of Buyer to perform
or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;

 

(c)              
by Seller by written notice to Buyer if:

 

(i)                Seller
is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform
any representation, warranty, covenant or agreement made by Buyer pursuant to this Agreement that would give rise to the failure
of any of the conditions specified in ARTICLE VII and such breach, inaccuracy or failure has not been cured by Buyer within ten
calendar days of Buyer’s receipt of written notice of such breach from Seller; or

 

(ii)             
any of the conditions set forth in Section 7.01 or Section 7.03 shall not have been, or if it becomes apparent that any
of such conditions will not be, fulfilled by June 19, 2018, unless such failure shall be due to the failure of Seller to perform
or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;
or

 

(d)              
by Buyer or Seller if (i) there shall be any Law that makes consummation of the transactions contemplated by this Agreement
illegal or otherwise prohibited or (ii) any Governmental Authority shall have issued a Governmental Order restraining or enjoining
the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable.

 

Section 9.02      
Effect of Termination. If this Agreement is terminated in accordance with this Article, this Agreement shall
forthwith become void and there shall be no liability on the part of any party hereto except:

 

(a)              
as set forth in this ARTICLE IX and Section 5.06 and ARTICLE X hereof; and

 

(b)              that
nothing herein shall relieve any party hereto from liability for any willful breach of any provision hereof.

 

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ARTICLE
X 

 

MISCELLANEOUS

 

Section 10.01  
Expenses. Except as otherwise expressly provided herein, all costs and expenses, including, without limitation,
fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.

 

Section 10.02  
Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be
in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received
by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or
e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the
next Business Day if sent after normal business hours of the recipient or (d) on the third day after the date mailed, by certified
or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the
following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section
10.02):

 

If to Seller:

 

Air Industries
Group

360 Motor Pkwy
# 100

Hauppauge, New
York 11788

Facsimile: (631)
206-9206

E-mail: lou.melluzzo@airindustriesgroup.com

Attention: Luciano
Melluzzo

 

with a copy to:

 

Mandelbaum Salsburg

1270 6th
Avenue, 18th Floor

New York, New York 10020

Facsimile: (973)
325-7467

E-mail: vmcgill@lawfirm.ms

Attention: Vincent
J. McGill, Esq.

 

    63

    

    

 

If to Buyer:

 

CPI Aerostructures,
Inc.

91 Heartland Blvd,

Edgewood, New York
11717

Facsimile: (631)
586-5840

E-mail: dmccrosson@cpiaero.com

Attention: Douglas
McCrosson

 

with a copy to:

 

Graubard Miller

405 Lexington Avenue, 11th Floor

New York, New York 10174

Facsimile: (212) 818-8881

E-mail: dmiller@graubard.com and plucido@graubard.com

Attention: David Alan Miller, Esq. and Paul Lucido,
Esq.

 

Section 10.03  
Interpretation. For purposes of this Agreement, (a) the words “include,” “includes” and
“including” shall be deemed to be followed by the words “without limitation”; (b) the word “or”
is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and
“hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles,
Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and Exhibits attached to,
this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended,
supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute
as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement
shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting
an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed
with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

 

Section 10.04  
Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this
Agreement.

 

Section 10.05  
Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or
render unenforceable such term or provision in any other jurisdiction. Except as provided in Section 5.07(e), upon such determination
that any term or other provision is invalid, illegal or unenforceable, 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.

 

    64

    

    

 

Section 10.06  
Entire Agreement. This Agreement and the Ancillary Documents constitute the sole and entire agreement of the
parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous
understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between
the statements in the body of this Agreement and those in the Ancillary Documents, the Exhibits and Disclosure Schedules (other
than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.

 

Section 10.07  
Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the
prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve
the assigning party of any of its obligations hereunder.

 

Section 10.08  
No Third-party Beneficiaries. Except as provided in Section 6.03 and ARTICLE VIII, this Agreement is for the
sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied,
is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.

 

Section 10.09  
Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement
in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly
set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect
of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character,
and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or
privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise
of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.

 

Section 10.10  
Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

 

(a)              
This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction).

 

(b)              
ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE
OF NEW YORK IN EACH CASE LOCATED IN THE CITY OF NEW YORK AND COUNTY OF NEW YORK, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL
TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT
IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

    65

    

    

 

(c)              
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE ANCILLARY DOCUMENTS
IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ANCILLARY
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A)
NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE
FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10(c).

 

Section 10.11  
Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement
were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy to which they are entitled at law or in equity.

 

Section 10.12  
Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile,
e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed
copy of this Agreement.

 

[Remainder of page intentionally left
blank]

 

    66

    

    

 

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto
duly authorized.

 

	 	AIR INDUSTRIES GROUP
	 	 	 
	 	By:	/s/ Michael Recca
	 	 	Name: Michael Recca
	 	 	Title:   Chief Financial Officer
	 	 	 
	 	CPI AEROSTRUCTURES,
INC.
	 	 	 
	 	By:	/s/ Douglas McCrosson
	 	 	Name: Douglas
McCrosson
	 	 	Title:   Chief
Executive Officer

 

67Exhibit 4.3

 

 

 

DEPOSIT AGREEMENT

 

 

 

by and among

 

 

RYB EDUCATION, INC.

 

 

and

 

 

CITIBANK, N.A.,

as Depositary,

 

 

and

 

 

THE HOLDERS AND BENEFICIAL OWNERS OF

AMERICAN DEPOSITARY SHARES
 ISSUED HEREUNDER

 

 

 

Dated as of September 26, 2017

 

 

TABLE OF CONTENTS

 

	
ARTICLE I
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
DEFINITIONS
    	
 
    	
1
    
	
Section 1.1
    	
“ADS Record Date”
    	
 
    	
1
    
	
Section 1.2
    	
“Affiliate”
    	
 
    	
1
    
	
Section 1.3
    	
“American Depositary   Receipt(s)”, “ADR(s)” and “Receipt(s)”
    	
 
    	
1
    
	
Section 1.4
    	
“American Depositary   Share(s)” and “ADS(s)”
    	
 
    	
2
    
	
Section 1.5
    	
“Applicant”
    	
 
    	
2
    
	
Section 1.6
    	
“Beneficial Owner”
    	
 
    	
2
    
	
Section 1.7
    	
“Certificated ADS(s)”
    	
 
    	
3
    
	
Section 1.8
    	
“Citibank”
    	
 
    	
3
    
	
Section 1.9
    	
“Commission”
    	
 
    	
3
    
	
Section 1.10
    	
“Company”
    	
 
    	
3
    
	
Section 1.11
    	
“Custodian”
    	
 
    	
3
    
	
Section 1.12
    	
“Deliver” and “Delivery”
    	
 
    	
3
    
	
Section 1.13
    	
“Deposit Agreement”
    	
 
    	
3
    
	
Section 1.14
    	
“Depositary”
    	
 
    	
3
    
	
Section 1.15
    	
“Deposited Property”
    	
 
    	
4
    
	
Section 1.16
    	
“Deposited   Securities”
    	
 
    	
4
    
	
Section 1.17
    	
“Dollars” and “$”
    	
 
    	
4
    
	
Section 1.18
    	
“DTC”
    	
 
    	
4
    
	
Section 1.19
    	
“DTC Participant”
    	
 
    	
4
    
	
Section 1.20
    	
“Exchange Act”
    	
 
    	
4
    
	
Section 1.21
    	
“Foreign Currency”
    	
 
    	
4
    
	
Section 1.22
    	
“Full Entitlement   ADR(s)”, “Full Entitlement ADS(s)” and “Full Entitlement   Share(s)”
    	
 
    	
4
    
	
Section 1.23
    	
“Holder(s)”
    	
 
    	
4
    
	
Section 1.24
    	
“Partial Entitlement   ADR(s)”, “Partial Entitlement ADS(s)” and “Partial Entitlement   Share(s)”
    	
 
    	
5
    
	
Section 1.25
    	
“Pre-Release   Transaction”
    	
 
    	
5
    
	
Section 1.26
    	
“Principal Office”
    	
 
    	
5
    
	
Section 1.27
    	
“Registrar”
    	
 
    	
5
    
	
Section 1.28
    	
“Restricted   Securities”
    	
 
    	
5
    
	
Section 1.29
    	
“Restricted ADR(s)”,   “Restricted ADS(s)” and “Restricted Shares”
    	
 
    	
5
    
	
Section 1.30
    	
“Securities Act”
    	
 
    	
5
    
	
Section 1.31
    	
“Share Registrar”
    	
 
    	
6
    
	
Section 1.32
    	
“Shares”
    	
 
    	
6
    
	
Section 1.33
    	
“Uncertificated   ADS(s)”
    	
 
    	
6
    
	
Section 1.34
    	
“United States”   and “U.S.”
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE II
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
APPOINTMENT OF   DEPOSITARY; FORM OF RECEIPTS; DEPOSIT OF SHARES; EXECUTION AND DELIVERY,   TRANSFER AND SURRENDER OF RECEIPTS
    	
 
    	
6
    

 

i

 

	
Section 2.1
    	
Appointment of   Depositary
    	
 
    	
6
    
	
Section 2.2
    	
Form and   Transferability of ADSs
    	
 
    	
6
    
	
Section 2.3
    	
Deposit of Shares
    	
 
    	
8
    
	
Section 2.4
    	
Registration and   Safekeeping of Deposited Securities
    	
 
    	
10
    
	
Section 2.5
    	
Issuance of ADSs
    	
 
    	
10
    
	
Section 2.6
    	
Transfer, Combination   and Split-up of ADRs
    	
 
    	
11
    
	
Section 2.7
    	
Surrender of ADSs and   Withdrawal of Deposited Securities
    	
 
    	
12
    
	
Section 2.8
    	
Limitations on   Execution and Delivery, Transfer, etc. of ADSs; Suspension of Delivery,   Transfer, etc.
    	
 
    	
13
    
	
Section 2.9
    	
Lost ADRs, etc.
    	
 
    	
14
    
	
Section 2.10
    	
Cancellation and   Destruction of Surrendered ADRs; Maintenance of Records
    	
 
    	
14
    
	
Section 2.11
    	
Escheatment
    	
 
    	
14
    
	
Section 2.12
    	
Partial Entitlement   ADSs
    	
 
    	
14
    
	
Section 2.13
    	
Certificated/Uncertificated   ADSs
    	
 
    	
15
    
	
Section 2.14
    	
Restricted ADSs
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE III
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
CERTAIN OBLIGATIONS OF   HOLDERS AND BENEFICIAL OWNERS OF ADSs
    	
 
    	
18
    
	
Section 3.1
    	
Proofs, Certificates   and Other Information
    	
 
    	
18
    
	
Section 3.2
    	
Liability for Taxes and   Other Charges
    	
 
    	
19
    
	
Section 3.3
    	
Representations and   Warranties on Deposit of Shares
    	
 
    	
19
    
	
Section 3.4
    	
Compliance with   Information Requests
    	
 
    	
19
    
	
Section 3.5
    	
Ownership Restrictions
    	
 
    	
20
    
	
Section 3.6
    	
Reporting Obligations   and Regulatory Approvals
    	
 
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
THE DEPOSITED   SECURITIES
    	
 
    	
20
    
	
Section 4.1
    	
Cash Distributions
    	
 
    	
20
    
	
Section 4.2
    	
Distribution in Shares
    	
 
    	
21
    
	
Section 4.3
    	
Elective Distributions   in Cash or Shares
    	
 
    	
22
    
	
Section 4.4
    	
Distribution of Rights   to Purchase Additional ADSs
    	
 
    	
23
    
	
Section 4.5
    	
Distributions Other   Than Cash, Shares or Rights to Purchase Shares
    	
 
    	
25
    
	
Section 4.6
    	
Distributions with   Respect to Deposited Securities in Bearer Form
    	
 
    	
26
    
	
Section 4.7
    	
Redemption
    	
 
    	
26
    
	
Section 4.8
    	
Conversion of Foreign   Currency
    	
 
    	
26
    
	
Section 4.9
    	
Fixing of ADS Record   Date
    	
 
    	
27
    
	
Section 4.10
    	
Voting of Deposited Securities
    	
 
    	
28
    
	
Section 4.11
    	
Changes Affecting   Deposited Securities
    	
 
    	
30
    
	
Section 4.12
    	
Available Information
    	
 
    	
31
    
	
Section 4.13
    	
Reports
    	
 
    	
31
    
	
Section 4.14
    	
List of Holders
    	
 
    	
31
    
	
Section 4.15
    	
Taxation
    	
 
    	
31
    

 

ii

 

	
ARTICLE V
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
THE DEPOSITARY, THE   CUSTODIAN AND THE COMPANY
    	
 
    	
32
    
	
Section 5.1
    	
Maintenance of Office   and Transfer Books by the Registrar
    	
 
    	
32
    
	
Section 5.2
    	
Exoneration
    	
 
    	
33
    
	
Section 5.3
    	
Standard of Care
    	
 
    	
34
    
	
Section 5.4
    	
Resignation and Removal   of the Depositary; Appointment of Successor Depositary
    	
 
    	
34
    
	
Section 5.5
    	
The Custodian
    	
 
    	
35
    
	
Section 5.6
    	
Notices and Reports
    	
 
    	
36
    
	
Section 5.7
    	
Issuance of Additional   Shares, ADSs etc.
    	
 
    	
37
    
	
Section 5.8
    	
Indemnification
    	
 
    	
37
    
	
Section 5.9
    	
ADS Fees and Charges
    	
 
    	
38
    
	
Section 5.10
    	
Pre-Release   Transactions
    	
 
    	
39
    
	
Section 5.11
    	
Restricted Securities   Owners
    	
 
    	
40
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
AMENDMENT AND   TERMINATION
    	
 
    	
40
    
	
Section 6.1
    	
Amendment/Supplement
    	
 
    	
40
    
	
Section 6.2
    	
Termination
    	
 
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VII
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
MISCELLANEOUS
    	
 
    	
42
    
	
Section 7.1
    	
Counterparts
    	
 
    	
42
    
	
Section 7.2
    	
No Third-Party   Beneficiaries
    	
 
    	
43
    
	
Section 7.3
    	
Severability
    	
 
    	
43
    
	
Section 7.4
    	
Holders and Beneficial   Owners as Parties; Binding Effect
    	
 
    	
43
    
	
Section 7.5
    	
Notices
    	
 
    	
43
    
	
Section 7.6
    	
Governing Law and Jurisdiction
    	
 
    	
44
    
	
Section 7.7
    	
Assignment
    	
 
    	
46
    
	
Section 7.8
    	
Compliance with U.S.   Securities Laws
    	
 
    	
46
    
	
Section 7.9
    	
Cayman Islands Law   References
    	
 
    	
46
    
	
Section 7.10
    	
Titles and References
    	
 
    	
46
    
	
 
    	
 
    	
 
    	
 
    
	
EXHIBITS
    	
 
    	
 
    
	
 
    	
Form of ADR
    	
 
    	
A-1
    
	
 
    	
Fee Schedule
    	
 
    	
B-1
    

 

iii

 

DEPOSIT AGREEMENT

 

DEPOSIT AGREEMENT, dated as of September 26, 2017, by and among (i) RYB EDUCATION, INC., an exempted company with limited liability organized under the laws of the Cayman Islands, and its successors (the “Company”), (ii) CITIBANK, N.A., a national banking association organized under the laws of the United States of America (“Citibank”) acting in its capacity as depositary, and any successor depositary hereunder (Citibank in such capacity, the “Depositary”), and (iii) all Holders and Beneficial Owners of American Depositary Shares issued hereunder (all such capitalized terms as hereinafter defined).

 

W I T N E S S E T H   T H A T:

 

WHEREAS, the Company desires to establish with the Depositary an ADR facility to provide inter alia for the deposit of the Shares (as hereinafter defined) and the creation of American Depositary Shares representing the Shares so deposited and for the execution and delivery of American Depositary Receipts (as hereinafter defined) evidencing such American Depositary Shares; and

 

WHEREAS, the Depositary is willing to act as the Depositary for such ADR facility upon the terms set forth in the Deposit Agreement (as hereinafter defined); and

 

WHEREAS, any American Depositary Receipts issued pursuant to the terms of the Deposit Agreement are to be substantially in the form of Exhibit A attached hereto, with appropriate insertions, modifications and omissions, as hereinafter provided in the Deposit Agreement; and

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

All capitalized terms used, but not otherwise defined, herein shall have the meanings set forth below, unless otherwise clearly indicated:

 

Section 1.1                                   “ADS Record Date” shall have the meaning given to such term in Section 4.9.

 

Section 1.2                                   “Affiliate” shall have the meaning assigned to such term by the Commission (as hereinafter defined) under Regulation C promulgated under the Securities Act (as hereinafter defined), or under any successor regulation thereto.

 

Section 1.3                                   “American Depositary Receipt(s)”, “ADR(s)” and “Receipt(s)” shall mean the certificate(s) issued by the Depositary to evidence the American Depositary Shares issued under the terms of the Deposit Agreement in the form of Certificated ADS(s) (as hereinafter defined), as such ADRs may be amended from time to time in accordance with the

 

1

 

provisions of the Deposit Agreement.  An ADR may evidence any number of ADSs and may, in the case of ADSs held through a central depository such as DTC, be in the form of a “Balance Certificate.”

 

Section 1.4                                   “American Depositary Share(s)” and “ADS(s)” shall mean the rights and interests in the Deposited Property (as hereinafter defined) granted to the Holders and Beneficial Owners pursuant to the terms and conditions of the Deposit Agreement and, if issued as Certificated ADS(s) (as hereinafter defined), the ADR(s) issued to evidence such ADSs.  ADS(s) may be issued under the terms of the Deposit Agreement in the form of (a) Certificated ADS(s) (as hereinafter defined), in which case the ADS(s) are evidenced by ADR(s), or (b) Uncertificated ADS(s) (as hereinafter defined), in which case the ADS(s) are not evidenced by ADR(s) but are reflected on the direct registration system maintained by the Depositary for such purposes under the terms of Section 2.13.  Unless otherwise specified in the Deposit Agreement or in any ADR, or unless the context otherwise requires, any reference to ADS(s) shall include Certificated ADS(s) and Uncertificated ADS(s), individually or collectively, as the context may require.  Each ADS shall represent the right to receive, and to exercise the beneficial ownership interests in, the number of Shares specified in the form of ADR attached hereto as Exhibit A (as amended from time to time) that are on deposit with the Depositary and/or the Custodian, subject, in each case, to the terms and conditions of the Deposit Agreement and the applicable ADR (if issued as a Certificated ADS), until there shall occur a distribution upon Deposited Securities referred to in Section 4.2 or a change in Deposited Securities referred to in Section 4.11 with respect to which additional ADSs are not issued, and thereafter each ADS shall represent the right to receive, and to exercise the beneficial ownership interests in, the applicable Deposited Property on deposit with the Depositary and the Custodian determined in accordance with the terms of such Sections, subject, in each case, to the terms and conditions of the Deposit Agreement and the applicable ADR (if issued as a Certificated ADS).  In addition, the ADS(s)-to-Share(s) ratio is subject to amendment as provided in Articles IV and VI of the Deposit Agreement (which may give rise to Depositary fees).

 

Section 1.5                                   “Applicant” shall have the meaning given to such term in Section 5.10.

 

Section 1.6                                   “Beneficial Owner” shall mean, as to any ADS, any person or entity having a beneficial interest deriving from the ownership of such ADS.  Notwithstanding anything else contained in the Deposit Agreement, any ADR(s) or any other instruments or agreements relating to the ADSs and the corresponding Deposited Property, the Depositary, the Custodian and their respective nominees are intended to be, and shall at all times during the term of the Deposit Agreement be, the record holders only of the Deposited Property represented by the ADSs for the benefit of the Holders and Beneficial Owners of the corresponding ADSs.  The Depositary, on its own behalf and on behalf of the Custodian and their respective nominees, disclaims any beneficial ownership interest in the Deposited Property held on behalf of the Holders and Beneficial Owners of ADSs.  The beneficial ownership interests in the Deposited Property are intended to be, and shall at all times during the term of the Deposit Agreement continue to be, vested in the Beneficial Owners of the ADSs representing the Deposited Property.  The beneficial ownership interests in the Deposited Property shall, unless otherwise agreed by the Depositary, be exercisable by the Beneficial Owners of the ADSs only through the Holders of such ADSs, by the Holders of the ADSs (on behalf of the applicable Beneficial

 

2

 

Owners) only through the Depositary, and by the Depositary (on behalf of the Holders and Beneficial Owners of the corresponding ADSs) directly, or indirectly through the Custodian or their respective nominees, in each case upon the terms of the Deposit Agreement and, if applicable, the terms of the ADR(s) evidencing the ADSs.  A Beneficial Owner of ADSs may or may not be the Holder of such ADSs.  A Beneficial Owner shall be able to exercise any right or receive any benefit hereunder solely through the person who is the Holder of the ADSs owned by such Beneficial Owner.  Unless otherwise identified to the Depositary, a Holder shall be deemed to be the Beneficial Owner of all the ADSs registered in his/her/its name.  The manner in which a Beneficial Owner holds ADSs (e.g., in a brokerage account vs. as registered holder) may affect the rights and obligations of, the manner in which, and the extent to which, services are made available to, Beneficial Owners pursuant to the terms of the Deposit Agreement.

 

Section 1.7                                   “Certificated ADS(s)” shall have the meaning set forth in Section 2.13.

 

Section 1.8                                   “Citibank” shall mean Citibank, N.A., a national banking association organized under the laws of the United States of America, and its successors.

 

Section 1.9                                   “Commission” shall mean the Securities and Exchange Commission of the United States or any successor governmental agency thereto in the United States.

 

Section 1.10                            “Company” shall mean RYB Education, Inc., an exempted company with limited liability organized under the laws of the Cayman Islands, and its successors.

 

Section 1.11                            “Custodian” shall mean (i) as of the date hereof, Citibank, N.A. — Hong Kong, having its principal office at 9/F., Citi Tower, One Bay East, 83 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong, as the custodian of Deposited Property for the purposes of the Deposit Agreement, (ii) Citibank, N.A., acting as custodian of Deposited Property pursuant to the Deposit Agreement, and (iii) any other entity that may be appointed by the Depositary pursuant to the terms of Section 5.5 as successor, substitute or additional custodian hereunder.  The term “Custodian” shall mean any Custodian individually or all Custodians collectively, as the context requires.

 

Section 1.12                            “Deliver” and “Delivery” shall mean (x) when used in respect of Shares and other Deposited Securities, either (i) the physical delivery of the certificate(s) representing such securities, or (ii) the book-entry transfer and recordation of such securities on the books of the Share Registrar (as hereinafter defined) or in the applicable book-entry settlement system, if available, and (y) when used in respect of ADSs, either (i) the physical delivery of ADR(s) evidencing the ADSs, or (ii) the book-entry transfer and recordation of ADSs on the books of the Depositary or any book-entry settlement system in which the ADSs are settlement-eligible.

 

Section 1.13                            “Deposit Agreement” shall mean this Deposit Agreement and all exhibits hereto, as the same may from time to time be amended and supplemented from time to time in accordance with the terms of the Deposit Agreement.

 

Section 1.14                            “Depositary” shall mean Citibank, N.A., a national banking association organized under the laws of the United States, in its capacity as depositary under the terms of the Deposit Agreement, and any successor depositary hereunder.

 

3

 

Section 1.15                            “Deposited Property” shall mean the Deposited Securities and any cash and other property held on deposit by the Depositary and the Custodian in respect of the ADSs under the terms of the Deposit Agreement, subject, in the case of cash, to the provisions of Section 4.8.  All Deposited Property shall be held by the Custodian, the Depositary and their respective nominees for the benefit of the Holders and Beneficial Owners of the ADSs representing the Deposited Property.  The Deposited Property is not intended to, and shall not, constitute proprietary assets of the Depositary, the Custodian or their nominees.  Beneficial ownership in the Deposited Property is intended to be, and shall at all times during the term of the Deposit Agreement continue to be, vested in the Beneficial Owners of the ADSs representing the Deposited Property.  Notwithstanding the foregoing, the collateral delivered in connection with Pre-Release Transactions described in Section 5.10 shall not constitute Deposited Property.

 

Section 1.16                            “Deposited Securities” shall mean the Shares and any other securities held on deposit by the Custodian from time to time in respect of the ADSs under the Deposit Agreement and constituting Deposited Property.

 

Section 1.17                            “Dollars” and “$” shall refer to the lawful currency of the United States.

 

Section 1.18                            “DTC” shall mean The Depository Trust Company, a national clearinghouse and the central book-entry settlement system for securities traded in the United States and, as such, the custodian for the securities of DTC Participants (as hereinafter defined) maintained in DTC, and any successor thereto.

 

Section 1.19                            “DTC Participant” shall mean any financial institution (or any nominee of such institution) having one or more participant accounts with DTC for receiving, holding and delivering the securities and cash held in DTC.  A DTC Participant may or may not be a Beneficial Owner.  If a DTC Participant is not the Beneficial Owner of the ADSs credited to its account at DTC, or of the ADSs in respect of which the DTC Participant is otherwise acting, such DTC Participant shall be deemed, for all purposes hereunder, to have all requisite authority to act on behalf of the Beneficial Owner(s) of the ADSs credited to its account at DTC or in respect of which the DTC Participant is so acting.  A DTC Participant, upon acceptance in any one of its DTC accounts of any ADSs (or any interest therein) issued in accordance with the terms and conditions of the Deposit Agreement, shall (notwithstanding any explicit or implicit disclosure that it may be acting on behalf of another party) be deemed for all purposes to be a party to, and bound by, the terms of the Deposit Agreement and the applicable ADR(s) to the same extent as, and as if the DTC Participant were, the Holder of such ADSs.

 

Section 1.20                            “Exchange Act” shall mean the United States Securities Exchange Act of 1934, as amended from time to time.

 

Section 1.21                            “Foreign Currency” shall mean any currency other than Dollars.

 

Section 1.22                            “Full Entitlement ADR(s)”, “Full Entitlement ADS(s)” and “Full Entitlement Share(s)” shall have the respective meanings set forth in Section 2.12.

 

Section 1.23                            “Holder(s)” shall mean the person(s) in whose name the ADSs are registered on the books of the Depositary (or the Registrar, if any) maintained for such purpose.

 

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A Holder may or may not be a Beneficial Owner.  If a Holder is not the Beneficial Owner of the ADS(s) registered in its name, such person shall be deemed, for all purposes hereunder, to have all requisite authority to act on behalf of the Beneficial Owners of the ADSs registered in its name.  The manner in which a Holder holds ADSs (e.g., in certificated vs. uncertificated form) may affect the rights and obligations of, and the manner in which the services are made available to, Holders pursuant to the terms of the Deposit Agreement.

 

Section 1.24                            “Partial Entitlement ADR(s)”, “Partial Entitlement ADS(s)” and “Partial Entitlement Share(s)” shall have the respective meanings set forth in Section 2.12.

 

Section 1.25                            “Pre-Release Transaction” shall have the meaning set forth in Section 5.10.

 

Section 1.26                            “Principal Office” shall mean, when used with respect to the Depositary, the principal office of the Depositary at which at any particular time its depositary receipts business shall be administered, which, at the date of the Deposit Agreement, is located at 388 Greenwich Street, New York, New York 10013, U.S.A.

 

Section 1.27                            “Registrar” shall mean the Depositary or any bank or trust company having an office in the Borough of Manhattan, The City of New York, which shall be appointed by the Depositary to register issuances, transfers and cancellations of ADSs as herein provided, and shall include any co-registrar appointed by the Depositary for such purposes.  Registrars (other than the Depositary) may be removed and substitutes appointed by the Depositary.  Each Registrar (other than the Depositary) appointed pursuant to the Deposit Agreement shall be required to give notice in writing to the Depositary accepting such appointment and agreeing to be bound by the applicable terms of the Deposit Agreement.

 

Section 1.28                            “Restricted Securities” shall mean Shares, Deposited Securities or ADSs which (i) have been acquired directly or indirectly from the Company or any of its Affiliates in a transaction or chain of transactions not involving any public offering and are subject to resale limitations under the Securities Act or the rules issued thereunder, or (ii) are held by an executive officer or director (or persons performing similar functions) or other Affiliate of the Company, or (iii) are subject to other restrictions on sale or deposit under the laws of the United States, the Cayman Islands, or under a shareholder agreement or the Articles of Association of the Company or under the regulations of an applicable securities exchange unless, in each case, such Shares, Deposited Securities or ADSs are being transferred or sold to persons other than an Affiliate of the Company in a transaction (a) covered by an effective resale registration statement, or (b) exempt from the registration requirements of the Securities Act (as hereinafter defined), and the Shares, Deposited Securities or ADSs are not, when held by such person(s), Restricted Securities.

 

Section 1.29                            “Restricted ADR(s)”, “Restricted ADS(s)” and “Restricted Shares” shall have the respective meanings set forth in Section 2.14.

 

Section 1.30                            “Securities Act” shall mean the United States Securities Act of 1933, as amended from time to time.

 

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Section 1.31                            “Share Registrar” shall mean Maples Fund Services or any other institution appointed by the Company to carry out the duties of registrar for the Shares, and any successor thereto.

 

Section 1.32                            “Shares” shall mean the Company’s Class A ordinary shares, par value US$0.001 per share, validly issued and outstanding and fully paid and may, if the Depositary so agrees after consultation with the Company, include evidence of the right to receive Shares; provided that in no event shall Shares include evidence of the right to receive Shares with respect to which the full purchase price has not been paid or Shares as to which preemptive rights have theretofore not been validly waived or exercised; provided further, however, that, if there shall occur any change in par value, split-up, consolidation, reclassification, exchange, conversion or any other event described in Section 4.11 in respect of the Shares of the Company, the term “Shares” shall thereafter, to the maximum extent permitted by law, represent the successor securities resulting from such event.

 

Section 1.33                            “Uncertificated ADS(s)”  shall have the meaning set forth in Section 2.13.

 

Section 1.34                            “United States” and “U.S.” shall have the meaning assigned to it in Regulation S as promulgated by the Commission under the Securities Act.

 

ARTICLE II

 

APPOINTMENT OF DEPOSITARY; FORM OF RECEIPTS;
 DEPOSIT OF SHARES; EXECUTION AND
 DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS

 

Section 2.1                                   Appointment of Depositary.  The Company hereby appoints the Depositary as depositary for the Deposited Property and hereby authorizes and directs the Depositary to act in accordance with the terms and conditions set forth in the Deposit Agreement and the applicable ADRs.  Each Holder and each Beneficial Owner, upon acceptance of any ADSs (or any interest therein) issued in accordance with the terms and conditions of the Deposit Agreement shall be deemed for all purposes to (a) be a party to and bound by the terms of the Deposit Agreement and the applicable ADR(s), and (b) appoint the Depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in the Deposit Agreement and the applicable ADR(s), to adopt any and all procedures necessary to comply with applicable law and to take such action as the Depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the Deposit Agreement and the applicable ADR(s), the taking of such actions to be the conclusive determinant of the necessity and appropriateness thereof.

 

Section 2.2                                   Form and Transferability of ADSs.

 

(a)                                 Form.  Certificated ADSs shall be evidenced by definitive ADRs which shall be engraved, printed, lithographed or produced in such other manner as may be agreed upon by the Company and the Depositary.  ADRs may be issued under the Deposit Agreement in

 

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denominations of any whole number of ADSs.  The ADRs shall be substantially in the form set forth in Exhibit A to the Deposit Agreement, with any appropriate insertions, modifications and omissions, in each case as otherwise contemplated in the Deposit Agreement or required by law.  ADRs shall be (i) dated, (ii) signed by the manual or facsimile signature of a duly authorized signatory of the Depositary, (iii) countersigned by the manual or facsimile signature of a duly authorized signatory of the Registrar, and (iv) registered in the books maintained by the Registrar for the registration of issuances and transfers of ADSs.  No ADR and no Certificated ADS evidenced thereby shall be entitled to any benefits under the Deposit Agreement or be valid or enforceable for any purpose against the Depositary or the Company, unless such ADR shall have been so dated, signed, countersigned and registered.  ADRs bearing the facsimile signature of a duly-authorized signatory of the Depositary or the Registrar, who at the time of signature was a duly-authorized signatory of the Depositary or the Registrar, as the case may be, shall bind the Depositary, notwithstanding the fact that such signatory has ceased to be so authorized prior to the delivery of such ADR by the Depositary.  The ADRs shall bear a CUSIP number that is different from any CUSIP number that was, is or may be assigned to any depositary receipts previously or subsequently issued pursuant to any other arrangement between the Depositary (or any other depositary) and the Company and which are not ADRs outstanding hereunder.

 

(b)                                 Legends.  The ADRs may be endorsed with, or have incorporated in the text thereof, such legends or recitals not inconsistent with the provisions of the Deposit Agreement as may be (i) necessary to enable the Depositary and the Company to perform their respective obligations hereunder, (ii) required to comply with any applicable laws or regulations, or with the rules and regulations of any securities exchange or market upon which ADSs may be traded, listed or quoted, or to conform with any usage with respect thereto, (iii) necessary to indicate any special limitations or restrictions to which any particular ADRs or ADSs are subject by reason of the date of issuance of the Deposited Securities or otherwise, or (iv) required by any book-entry system in which the ADSs are held.  Holders and Beneficial Owners shall be deemed, for all purposes, to have notice of, and to be bound by, the terms and conditions of the legends set forth, in the case of Holders, on the ADR registered in the name of the applicable Holders or, in the case of Beneficial Owners, on the ADR representing the ADSs owned by such Beneficial Owners.

 

(c)                                  Title.  Subject to the limitations contained herein and in the ADR, title to an ADR (and to each Certificated ADS evidenced thereby) shall be transferable upon the same terms as a certificated security under the laws of the State of New York, provided that, in the case of Certificated ADSs, such ADR has been properly endorsed or is accompanied by proper instruments of transfer.  Notwithstanding any notice to the contrary, the Depositary and the Company may deem and treat the Holder of an ADS (that is, the person in whose name an ADS is registered on the books of the Depositary) as the absolute owner thereof for all purposes.  Neither the Depositary nor the Company shall have any obligation nor be subject to any liability under the Deposit Agreement or any ADR to any holder or any Beneficial Owner unless, in the case of a holder of ADSs, such holder is the Holder registered on the books of the Depositary or, in the case of a Beneficial Owner, such Beneficial Owner, or the Beneficial Owner’s representative, is the Holder registered on the books of the Depositary.

 

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(d)                                 Book-Entry Systems.  The Depositary shall make arrangements for the acceptance of the ADSs into DTC.  All ADSs held through DTC will be registered in the name of the nominee for DTC (currently “Cede & Co.”).  Unless issued by the Depositary as Uncertificated ADSs, the ADSs registered in the name of Cede & Co. will be evidenced by one or more ADR(s) in the form of a “Balance Certificate,” which will provide that it represents the aggregate number of ADSs from time to time indicated in the records of the Depositary as being issued hereunder and that the aggregate number of ADSs represented thereby may from time to time be increased or decreased by making adjustments on such records of the Depositary and of DTC or its nominee as hereinafter provided.  Citibank, N.A. (or such other entity as is appointed by DTC or its nominee) may hold the “Balance Certificate” as custodian for DTC.  Each Beneficial Owner of ADSs held through DTC must rely upon the procedures of DTC and the DTC Participants to exercise or be entitled to any rights attributable to such ADSs.  The DTC Participants shall for all purposes be deemed to have all requisite power and authority to act on behalf of the Beneficial Owners of the ADSs held in the DTC Participants’ respective accounts in DTC and the Depositary shall for all purposes be authorized to rely upon any instructions and information given to it by DTC Participants.  So long as ADSs are held through DTC or unless otherwise required by law, ownership of beneficial interests in the ADSs registered in the name of the nominee for DTC will be shown on, and transfers of such ownership will be effected only through, records maintained by (i) DTC or its nominee (with respect to the interests of DTC Participants), or (ii) DTC Participants or their nominees (with respect to the interests of clients of DTC Participants).  Any distributions made, and any notices given, by the Depositary to DTC under the terms of the Deposit Agreement shall (unless otherwise specified by the Depositary) satisfy the Depositary’s obligations under the Deposit Agreement to make such distributions, and give such notices, in respect of the ADSs held in DTC (including, for avoidance of doubt, to the DTC Participants holding the ADSs in their DTC accounts and to the Beneficial Owners of such ADSs).

 

Section 2.3                                   Deposit of Shares.  Subject to the terms and conditions of the Deposit Agreement and applicable law, Shares or evidence of rights to receive Shares (other than Restricted Securities) may be deposited by any person (including the Depositary in its individual capacity but subject, however, in the case of the Company or any Affiliate of the Company, to Section 5.7) at any time, whether or not the transfer books of the Company or the Share Registrar, if any, are closed, by Delivery of the Shares to the Custodian.  Every deposit of Shares shall be accompanied by the following:  (A) (i) in the case of Shares represented by certificates issued in registered form, appropriate instruments of transfer or endorsement, in a form reasonably satisfactory to the Custodian, (ii) in the case of Shares represented by certificates in bearer form, the requisite coupons and talons pertaining thereto, and (iii) in the case of Shares delivered by book-entry transfer and recordation, confirmation of such book-entry transfer and recordation in the books of the Share Registrar or of the applicable book-entry settlement system, if available, as applicable, to the Custodian or that irrevocable instructions have been given to cause such Shares to be so transferred and recorded, (B) such certifications and payments (including, without limitation, the Depositary’s fees and related charges) and evidence of such payments (including, without limitation, stamping or otherwise marking such Shares by way of receipt) as may be required by the Depositary or the Custodian in accordance with the provisions of the Deposit Agreement and applicable law, (C) if the Depositary so requires, a written order directing the Depositary to issue and deliver to, or upon the written order of, the person(s) stated

 

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in such order the number of ADSs representing the Shares so deposited, (D) evidence reasonably satisfactory to the Depositary (which may be an opinion of counsel) that all necessary approvals have been granted by, or there has been compliance with the rules and regulations of, any applicable governmental agency in the Cayman Islands, and (E) if the Depositary so requires, (i) an agreement, assignment or instrument reasonably satisfactory to the Depositary or the Custodian which provides for the prompt transfer by any person in whose name the Shares are or have been recorded to the Custodian of any distribution, or right to subscribe for additional Shares or to receive other property in respect of any such deposited Shares or, in lieu thereof, such indemnity or other agreement as shall be reasonably satisfactory to the Depositary or the Custodian and (ii) if the Shares are registered in the name of the person on whose behalf they are presented for deposit, a proxy or proxies entitling the Custodian to exercise voting rights in respect of the Shares for any and all purposes until the Shares so deposited are registered in the name of the Depositary, the Custodian or any nominee.

 

Without limiting any other provision of the Deposit Agreement, the Depositary shall instruct the Custodian not to, and the Depositary shall not knowingly, accept for deposit (a) any Restricted Securities (except as contemplated by Section 2.14) nor (b) any fractional Shares or fractional Deposited Securities nor (c) a number of Shares or Deposited Securities which upon application of the ADS to Shares ratio would give rise to fractional ADSs.  No Shares shall be accepted for deposit unless accompanied by evidence, if any is required by the Depositary, that is reasonably satisfactory to the Depositary or the Custodian that all conditions to such deposit have been satisfied by the person depositing such Shares under the laws and regulations of the Cayman Islands and any necessary approval has been granted by any applicable governmental body in the Cayman Islands, if any.  The Depositary may issue ADSs against evidence of rights to receive Shares from the Company, any agent of the Company or any custodian, registrar, transfer agent, clearing agency or other entity involved in ownership or transaction records in respect of the Shares.  Such evidence of rights shall consist of written blanket or specific guarantees of ownership of Shares furnished by the Company or any such custodian, registrar, transfer agent, clearing agency or other entity involved in ownership or transaction records in respect of the Shares.

 

Without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under the Deposit Agreement (A) any Shares or other securities required to be registered under the provisions of the Securities Act, unless (i) a registration statement is in effect as to such Shares or other securities or (ii) the deposit is made upon terms contemplated in Section 2.14, or (B) any Shares or other securities the deposit of which would violate any provisions of the Articles of Association of the Company.  For purposes of the foregoing sentence, the Depositary shall be entitled to rely upon representations and warranties made or deemed made pursuant to the Deposit Agreement and shall not be required to make any further investigation.  The Depositary will comply with written instructions of the Company (received by the Depositary reasonably in advance) not to accept for deposit hereunder any Shares identified in such instructions at such times and under such circumstances as may reasonably be specified in such instructions in order to facilitate the Company’s compliance with the securities laws of the United States.

 

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Section 2.4                                   Registration and Safekeeping of Deposited Securities.  The Depositary shall instruct the Custodian upon each Delivery of registered Shares being deposited hereunder with the Custodian (or other Deposited Securities pursuant to Article IV hereof), together with the other documents above specified, to present such Shares, together with the appropriate instrument(s) of transfer or endorsement, duly stamped, to the Share Registrar for transfer and registration of the Shares (as soon as transfer and registration can be accomplished and at the expense of the person for whom the deposit is made) in the name of the Depositary, the Custodian or a nominee of either.  Deposited Securities shall be held by the Depositary, or by a Custodian for the account and to the order of the Depositary or a nominee of the Depositary, in each case, on behalf of the Holders and Beneficial Owners, at such place(s) as the Depositary or the Custodian shall determine.  Notwithstanding anything else contained in the Deposit Agreement, any ADR(s), or any other instruments or agreements relating to the ADSs and the corresponding Deposited Property, the registration of the Deposited Securities in the name of the Depositary, the Custodian or any of their respective nominees, shall, to the maximum extent permitted by applicable law, vest in the Depositary, the Custodian or the applicable nominee the record ownership in the applicable Deposited Securities with the beneficial ownership rights and interests in such Deposited Securities being at all times vested with the Beneficial Owners of the ADSs representing the Deposited Securities.  Notwithstanding the foregoing, the Depositary, the Custodian and the applicable nominee shall at all times be entitled to exercise the beneficial ownership rights in all Deposited Property, in each case only on behalf of the Holders and Beneficial Owners of the ADSs representing the Deposited Property, upon the terms set forth in the Deposit Agreement and, if applicable, the ADR(s) representing the ADSs.  The Depositary, the Custodian and their respective nominees shall for all purposes be deemed to have all requisite power and authority to act in respect of Deposited Property on behalf of the Holders and Beneficial Owners of ADSs representing the Deposited Property, and upon making payments to, or acting upon instructions from, or information provided by, the Depositary, the Custodian or their respective nominees all persons shall be authorized to rely upon such power and authority.

 

Section 2.5                                   Issuance of ADSs.  The Depositary has made arrangements with the Custodian for the Custodian to confirm to the Depositary upon receipt of a deposit of Shares (i) that a deposit of Shares has been made pursuant to Section 2.3, (ii) that such Deposited Securities have been recorded in the name of the Depositary, the Custodian or a nominee of either on the shareholders’ register maintained by or on behalf of the Company by the Share Registrar on the books of the applicable book-entry settlement system, if available, (iii) that all required documents have been received, and (iv) the person(s) to whom or upon whose order ADSs are deliverable in respect thereof and the number of ADSs to be so delivered.  Such notification may be made by letter, cable, telex, SWIFT message or, at the risk and expense of the person making the deposit, by facsimile or other means of electronic transmission.  Upon receiving such notice from the Custodian, the Depositary, subject to the terms and conditions of the Deposit Agreement and applicable law, shall issue the ADSs representing the Shares so deposited to or upon the order of the person(s) named in the notice delivered to the Depositary and, if applicable, shall execute and deliver at its Principal Office Receipt(s) registered in the name(s) requested by such person(s) and evidencing the aggregate number of ADSs to which such person(s) are entitled, but, in each case, only upon payment to the Depositary of the charges of the Depositary for accepting a deposit of Shares and issuing ADSs (as set forth in Section 5.9 and Exhibit B hereto) and all taxes and governmental charges and fees payable in connection

 

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with such deposit and the transfer of the Shares and the issuance of the ADS(s).  The Depositary shall only issue ADSs in whole numbers and deliver, if applicable, ADR(s) evidencing whole numbers of ADSs.  Nothing herein shall prohibit any Pre-Release Transaction upon the terms set forth in the Deposit Agreement.

 

Section 2.6                                   Transfer, Combination and Split-up of ADRs.

 

(a)                                 Transfer.  The Registrar shall register the transfer of ADRs (and of the ADSs represented thereby) on the books maintained for such purpose and the Depositary shall (x) cancel such ADRs and execute new ADRs evidencing the same aggregate number of ADSs as those evidenced by the ADRs canceled by the Depositary, (y) cause the Registrar to countersign such new ADRs and (z) Deliver such new ADRs to or upon the order of the person entitled thereto, if each of the following conditions has been satisfied:  (i) the ADRs have been duly Delivered by the Holder (or by a duly authorized attorney of the Holder) to the Depositary at its Principal Office for the purpose of effecting a transfer thereof, (ii) the surrendered ADRs have been properly endorsed or are accompanied by proper instruments of transfer (including signature guarantees in accordance with standard securities industry practice), (iii) the surrendered ADRs have been duly stamped (if required by the laws of the State of New York or of the United States), and (iv) all applicable fees and charges of, and expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B hereto) have been paid, subject, however, in each case, to the terms and conditions of the applicable ADRs, of the Deposit Agreement and of applicable law, in each case as in effect at the time thereof.

 

(b)                                 Combination & Split-Up.  The Registrar shall register the split-up or combination of ADRs (and of the ADSs represented thereby) on the books maintained for such purpose and the Depositary shall (x) cancel such ADRs and execute new ADRs for the number of ADSs requested, but in the aggregate not exceeding the number of ADSs evidenced by the ADRs canceled by the Depositary, (y) cause the Registrar to countersign such new ADRs and (z) Deliver such new ADRs to or upon the order of the Holder thereof, if each of the following conditions has been satisfied:  (i) the ADRs have been duly Delivered by the Holder (or by a duly authorized attorney of the Holder) to the Depositary at its Principal Office for the purpose of effecting a split-up or combination thereof, and (ii) all applicable fees and charges of, and expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B hereto) have been paid, subject, however, in each case, to the terms and conditions of the applicable ADRs, of the Deposit Agreement and of applicable law, in each case as in effect at the time thereof.

 

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Section 2.7                                   Surrender of ADSs and Withdrawal of Deposited Securities. The Holder of ADSs shall be entitled to Delivery (at the Custodian’s designated office) of the Deposited Securities at the time represented by the ADSs upon satisfaction of each of the following conditions: (i) the Holder (or a duly-authorized attorney of the Holder) has duly Delivered ADSs to the Depositary at its Principal Office (and if applicable, the ADRs evidencing such ADSs) for the purpose of withdrawal of the Deposited Securities represented thereby, (ii) if applicable and so required by the Depositary, the ADRs Delivered to the Depositary for such purpose have been properly endorsed in blank or are accompanied by proper instruments of transfer in blank (including signature guarantees in accordance with standard securities industry practice), (iii) if so required by the Depositary, the Holder of the ADSs has executed and delivered to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be Delivered to or upon the written order of the person(s) designated in such order, and (iv) all applicable fees and charges of, and expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B) have been paid, subject, however, in each case, to the terms and conditions of the ADRs evidencing the surrendered ADSs, of the Deposit Agreement, of the Company’s Articles of Association and of any applicable laws and the rules of the applicable book-entry settlement system, if available, and to any provisions of or governing the Deposited Securities, in each case as in effect at the time thereof.

 

Upon satisfaction of each of the conditions specified above, the Depositary (i) shall cancel the ADSs Delivered to it (and, if applicable, the ADR(s) evidencing the ADSs so Delivered), (ii) shall direct the Registrar to record the cancellation of the ADSs so Delivered on the books maintained for such purpose, and (iii) shall direct the Custodian to Deliver, or cause the Delivery of, in each case, without unreasonable delay, the Deposited Securities represented by the ADSs so canceled together with any certificate or other document of title for the Deposited Securities, or evidence of the electronic transfer thereof (if available), as the case may be, to or upon the written order of the person(s) designated in the order delivered to the Depositary for such purpose, subject however, in each case, to the terms and conditions of the Deposit Agreement, of the ADRs evidencing the ADSs so canceled, of the Articles of Association of the Company, of any applicable laws and of the rules of the applicable book-entry settlement system, if available, and to the terms and conditions of or governing the Deposited Securities, in each case as in effect at the time thereof.

 

The Depositary shall not accept for surrender ADSs representing less than one (1) Share.  In the case of Delivery to it of ADSs representing a number other than a whole number of Shares, the Depositary shall cause ownership of the appropriate whole number of Shares to be Delivered in accordance with the terms hereof, and shall, at the discretion of the Depositary, either (i) return to the person surrendering such ADSs the number of ADSs representing any remaining fractional Share, or (ii) sell or cause to be sold the fractional Share represented by the ADSs so surrendered and remit the proceeds of such sale (net of (a) applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes withheld) to the person surrendering the ADSs.

 

Notwithstanding anything else contained in any ADR or the Deposit Agreement, the Depositary may make delivery at the Principal Office of the Depositary of Deposited Property

 

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consisting of (i) any cash dividends or cash distributions, or (ii) any proceeds from the sale of any non-cash distributions, which are at the time held by the Depositary in respect of the Deposited Securities represented by the ADSs surrendered for cancellation and withdrawal.  At the request, risk and expense of any Holder so surrendering ADSs, and for the account of such Holder, the Depositary shall direct the Custodian to forward (to the extent permitted by law) any Deposited Property (other than Deposited Securities) held by the Custodian in respect of such ADSs to the Depositary for delivery at the Principal Office of the Depositary.  Such direction shall be given by letter or, at the request, risk and expense of such Holder, by cable, telex or facsimile transmission.

 

Section 2.8                                   Limitations on Execution and Delivery, Transfer, etc. of ADSs; Suspension of Delivery, Transfer, etc.

 

(a)                                 Additional Requirements.  As a condition precedent to the execution and delivery, the registration of issuance, transfer, split-up, combination or surrender, of any ADS, the delivery of any distribution thereon, or the withdrawal of any Deposited Property, the Depositary or the Custodian may require (i) payment from the depositor of Shares or presenter of ADSs or of an ADR of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees and charges of the Depositary as provided in Section 5.9 and Exhibit B, (ii) the production of proof reasonably satisfactory to it as to the identity and genuineness of any signature or any other matter contemplated by Section 3.1, and (iii) compliance with (A) any laws or governmental regulations relating to the execution and delivery of ADRs or ADSs or to the withdrawal of Deposited Securities and (B) such reasonable regulations as the Depositary and the Company may establish consistent with the provisions of the representative ADR, if applicable, the Deposit Agreement and applicable law.

 

(b)                                 Additional Limitations.  The issuance of ADSs against deposits of Shares generally or against deposits of particular Shares may be suspended, or the deposit of particular Shares may be refused, or the registration of transfer of ADSs in particular instances may be refused, or the registration of transfers of ADSs generally may be suspended, during any period when the transfer books of the Company, the Depositary, a Registrar or the Share Registrar are closed or if any such action is deemed necessary or advisable by the Depositary (whereupon the Depositary shall notify the Company in writing) or the Company, in good faith, at any time or from time to time because of any requirement of law or regulation, any government or governmental body or commission or any securities exchange on which the ADSs or Shares are listed, or under any provision of the Deposit Agreement or the representative ADR(s), if applicable, or under any provision of, or governing, the Deposited Securities, or because of a meeting of shareholders of the Company or for any other reason, subject, in all cases, to Section 7.8.

 

(c)                                  Regulatory Restrictions.  Notwithstanding any provision of the Deposit Agreement or any ADR(s) to the contrary, Holders are entitled to surrender outstanding ADSs to withdraw the Deposited Securities associated herewith at any time subject only to (i) temporary delays caused by closing the transfer books of the Depositary or the Company or the deposit of Shares in connection with voting at a shareholders’ meeting or the payment of dividends, (ii) the

 

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payment of fees, taxes and similar charges, (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the ADSs or to the withdrawal of the Deposited Securities, and (iv) other circumstances specifically contemplated by Instruction I.A.(l) of the General Instructions to Form F-6 (as such General Instructions may be amended from time to time).

 

Section 2.9                                   Lost ADRs, etc.  In case any ADR shall be mutilated, destroyed, lost, or stolen, the Depositary shall execute and deliver a new ADR of like tenor at the expense of the Holder (a) in the case of a mutilated ADR, in exchange of and substitution for such mutilated ADR upon cancellation thereof, or (b) in the case of a destroyed, lost or stolen ADR, in lieu of and in substitution for such destroyed, lost, or stolen ADR, after the Holder thereof (i) has submitted to the Depositary a written request for such exchange and substitution before the Depositary has notice that the ADR has been acquired by a bona fide purchaser, (ii) has provided such security or indemnity (including an indemnity bond) as may be required by the Depositary to save it and any of its agents harmless, and (iii) has satisfied any other reasonable requirements imposed by the Depositary, including, without limitation, evidence reasonably satisfactory to the Depositary of such destruction, loss or theft of such ADR, the authenticity thereof and the Holder’s ownership thereof.

 

Section 2.10                            Cancellation and Destruction of Surrendered ADRs; Maintenance of Records.  All ADRs surrendered to the Depositary shall be canceled by the Depositary.  Canceled ADRs shall not be entitled to any benefits under the Deposit Agreement or be valid or enforceable against the Depositary for any purpose.  The Depositary is authorized to destroy ADRs so canceled, provided the Depositary maintains a record of all destroyed ADRs.  Any ADSs held in book-entry form (e.g., through accounts at DTC) shall be deemed canceled when the Depositary causes the number of ADSs evidenced by the Balance Certificate to be reduced by the number of ADSs surrendered (without the need to physically destroy the Balance Certificate).

 

Section 2.11                            Escheatment.  In the event any unclaimed property relating to the ADSs, for any reason, is in the possession of Depositary and has not been claimed by the Holder thereof or cannot be delivered to the Holder thereof through usual channels, the Depositary shall, upon expiration of any applicable statutory period relating to abandoned property laws, escheat such unclaimed property to the relevant authorities in accordance with the laws of each of the relevant States of the United States.

 

Section 2.12                            Partial Entitlement ADSs.  In the event any Shares are deposited which (i) entitle the holders thereof to receive a per-share distribution or other entitlement in an amount different from the Shares then on deposit or (ii) are not fully fungible (including, without limitation, as to settlement or trading) with the Shares then on deposit (the Shares then on deposit collectively, “Full Entitlement Shares” and the Shares with different entitlement, “Partial Entitlement Shares”), the Depositary shall (i) cause the Custodian to hold Partial Entitlement Shares separate and distinct from Full Entitlement Shares, and (ii) subject to the terms of the Deposit Agreement, issue ADSs representing Partial Entitlement Shares which are separate and distinct from the ADSs representing Full Entitlement Shares, by means of separate CUSIP numbering and legending (if necessary) and, if applicable, by issuing ADRs evidencing such ADSs with applicable notations thereon (“Partial Entitlement ADSs/ADRs” and “Full

 

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Entitlement ADSs/ADRs”, respectively).  If and when Partial Entitlement Shares become Full Entitlement Shares, the Depositary shall (a) give notice thereof to Holders of Partial Entitlement ADSs and give Holders of Partial Entitlement ADRs the opportunity to exchange such Partial Entitlement ADRs for Full Entitlement ADRs, (b) cause the Custodian to transfer the Partial Entitlement Shares into the account of the Full Entitlement Shares, and (c) take such actions as are necessary to remove the distinctions between (i) the Partial Entitlement ADRs and ADSs, on the one hand, and (ii) the Full Entitlement ADRs and ADSs on the other.  Holders and Beneficial Owners of Partial Entitlement ADSs shall only be entitled to the entitlements of Partial Entitlement Shares.  Holders and Beneficial Owners of Full Entitlement ADSs shall be entitled only to the entitlements of Full Entitlement Shares.  All provisions and conditions of the Deposit Agreement shall apply to Partial Entitlement ADRs and ADSs to the same extent as Full Entitlement ADRs and ADSs, except as contemplated by this Section 2.12.  The Depositary is authorized to take any and all other actions as may be necessary (including, without limitation, making the necessary notations on ADRs) to give effect to the terms of this Section 2.12.  The Company agrees to give timely written notice to the Depositary if any Shares issued or to be issued are Partial Entitlement Shares and shall assist the Depositary with the establishment of procedures enabling the identification of Partial Entitlement Shares upon Delivery to the Custodian.

 

Section 2.13                            Certificated/Uncertificated ADSs.  Notwithstanding any other provision of the Deposit Agreement, the Depositary may, at any time and from time to time, issue ADSs that are not evidenced by ADRs (such ADSs, the “Uncertificated ADS(s)” and the ADS(s) evidenced by ADR(s), the “Certificated ADS(s)”).  When issuing and maintaining Uncertificated ADS(s) under the Deposit Agreement, the Depositary shall at all times be subject to (i) the standards applicable to registrars and transfer agents maintaining direct registration systems for equity securities in New York and issuing uncertificated securities under New York law, and (ii) the terms of New York law applicable to uncertificated equity securities.  Uncertificated ADSs shall not be represented by any instruments but shall be evidenced by registration in the books of the Depositary maintained for such purpose.  Holders of Uncertificated ADSs, that are not subject to any registered pledges, liens, restrictions or adverse claims of which the Depositary has notice at such time, shall at all times have the right to exchange the Uncertificated ADS(s) for Certificated ADS(s) of the same type and class, subject in each case to (x) applicable laws and any rules and regulations the Depositary may have established in respect of the Uncertificated ADSs, and (y) the continued availability of Certificated ADSs in the U.S.  Holders of Certificated ADSs shall, if the Depositary maintains a direct registration system for the ADSs, have the right to exchange the Certificated ADSs for Uncertificated ADSs upon (i) the due surrender of the Certificated ADS(s) to the Depositary for such purpose and (ii) the presentation of a written request to that effect to the Depositary, subject in each case to (a) all liens and restrictions noted on the ADR evidencing the Certificated ADS(s) and all adverse claims of which the Depositary then has notice, (b) the terms of the Deposit Agreement and the rules and regulations that the Depositary may establish for such purposes hereunder, (c) applicable law, and (d) payment of the Depositary fees and expenses applicable to such exchange of Certificated ADS(s) for Uncertificated ADS(s).  Uncertificated ADSs shall in all material respects be identical to Certificated ADS(s) of the same type and class, except that (i) no ADR(s) shall be, or shall need to be, issued to evidence Uncertificated ADS(s), (ii) Uncertificated ADS(s) shall, subject to the terms of the Deposit Agreement, be transferable

 

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upon the same terms and conditions as uncertificated securities under New York law, (iii) the ownership of Uncertificated ADS(s) shall be recorded on the books of the Depositary maintained for such purpose and evidence of such ownership shall be reflected in periodic statements provided by the Depositary to the Holder(s) in accordance with applicable New York law, (iv) the Depositary may from time to time, upon notice to the Holders of Uncertificated ADSs affected thereby, establish rules and regulations, and amend or supplement existing rules and regulations, as may be deemed reasonably necessary to maintain Uncertificated ADS(s) on behalf of Holders, provided that (a) such rules and regulations do not conflict with the terms of the Deposit Agreement and applicable law, and (b) the terms of such rules and regulations are readily available to Holders upon request, (v) the Uncertificated ADS(s) shall not be entitled to any benefits under the Deposit Agreement or be valid or enforceable for any purpose against the Depositary or the Company unless such Uncertificated ADS(s) is/are registered on the books of the Depositary maintained for such purpose, (vi) the Depositary may, in connection with any deposit of Shares resulting in the issuance of Uncertificated ADSs and with any transfer, pledge, release and cancellation of Uncertificated ADSs, require the prior receipt of such documentation as the Depositary may deem reasonably appropriate, and (vii) upon termination of the Deposit Agreement, the Depositary shall not require Holders of Uncertificated ADSs to affirmatively instruct the Depositary before remitting proceeds from the sale of the Deposited Property represented by such Holders’ Uncertificated ADSs under the terms of Section 6.2 of the Deposit Agreement.  When issuing ADSs under the terms of the Deposit Agreement, including, without limitation, issuances pursuant to Sections 2.5, 4.2, 4.3, 4.4, 4.5 and 4.11, the Depositary may in its discretion determine to issue Uncertificated ADSs rather than Certificated ADSs, unless otherwise specifically instructed by the applicable Holder to issue Certificated ADSs.  All provisions and conditions of the Deposit Agreement shall apply to Uncertificated ADSs to the same extent as to Certificated ADSs, except as contemplated by this Section 2.13.  The Depositary is authorized and directed to take any and all actions and establish any and all procedures deemed reasonably necessary to give effect to the terms of this Section 2.13.  Any references in the Deposit Agreement or any ADR(s) to the terms “American Depositary Share(s)” or “ADS(s)” shall, unless the context otherwise requires, include Certificated ADS(s) and Uncertificated ADS(s).  Except as set forth in this Section 2.13 and except as required by applicable law, the Uncertificated ADSs shall be treated as ADSs issued and outstanding under the terms of the Deposit Agreement.  In the event that, in determining the rights and obligations of parties hereto with respect to any Uncertificated ADSs, any conflict arises between (a) the terms of the Deposit Agreement (other than this Section 2.13) and (b) the terms of this Section 2.13, the terms and conditions set forth in this Section 2.13 shall be controlling and shall govern the rights and obligations of the parties to the Deposit Agreement pertaining to the Uncertificated ADSs.

 

Section 2.14                            Restricted ADSs.  The Depositary shall, at the request and expense of the Company, establish procedures enabling the deposit hereunder of Shares that are Restricted Securities in order to enable the holder of such Shares to hold its ownership interests in such Restricted Securities in the form of ADSs issued under the terms hereof (such Shares, “Restricted Shares”).  Upon receipt of a written request from the Company to accept Restricted Shares for deposit hereunder, the Depositary agrees to establish procedures permitting the deposit of such Restricted Shares and the issuance of ADSs representing the right to receive, subject to the terms of the Deposit Agreement and the applicable ADR (if issued as a Certificated

 

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ADS), such deposited Restricted Shares (such ADSs, the “Restricted ADSs,” and the ADRs evidencing such Restricted ADSs, the “Restricted ADRs”).  Notwithstanding anything contained in this Section 2.14, the Depositary and the Company may, to the extent not prohibited by law, agree to issue the Restricted ADSs in uncertificated form (“Uncertificated Restricted ADSs”) upon such terms and conditions as the Company and the Depositary may deem necessary and appropriate.  The Company shall assist the Depositary in the establishment of such procedures and agrees that it shall take all steps necessary and reasonably satisfactory to the Depositary to ensure that the establishment of such procedures does not violate the provisions of the Securities Act or any other applicable laws.  The depositors of such Restricted Shares and the Holders of the Restricted ADSs may be required prior to the deposit of such Restricted Shares, the transfer of the Restricted ADRs and Restricted ADSs or the withdrawal of the Restricted Shares represented by Restricted ADSs to provide such written certifications or agreements as the Depositary or the Company may require.  The Company shall provide to the Depositary in writing the legend(s) to be affixed to the Restricted ADRs (if the Restricted ADSs are to be issued as Certificated ADSs), or to be included in the statements issued from time to time to Holders of Uncertificated ADSs (if issued as Uncertificated Restricted ADSs), which legends shall (i) be in a form reasonably satisfactory to the Depositary and (ii) contain the specific circumstances under which the Restricted ADSs, and, if applicable, the Restricted ADRs evidencing the Restricted ADSs, may be transferred or the Restricted Shares withdrawn.  The Restricted ADSs issued upon the deposit of Restricted Shares shall be separately identified on the books of the Depositary and the Restricted Shares so deposited shall, to the extent required by law, be held separate and distinct from the other Deposited Securities held hereunder.  The Restricted Shares and the Restricted ADSs shall not be eligible for Pre-Release Transactions.  The Restricted ADSs shall not be eligible for inclusion in any book-entry settlement system, including, without limitation, DTC, and shall not in any way be fungible with the ADSs issued under the terms hereof that are not Restricted ADSs.  The Restricted ADSs, and, if applicable, the Restricted ADRs evidencing the Restricted ADSs, shall be transferable only by the Holder thereof upon delivery to the Depositary of (i) all documentation otherwise contemplated by the Deposit Agreement and (ii) an opinion of counsel reasonably satisfactory to the Depositary setting forth, inter alia, the conditions upon which the Restricted ADSs presented, and, if applicable, the Restricted ADRs evidencing the Restricted ADSs, are transferable by the Holder thereof under applicable securities laws and the transfer restrictions contained in the legend applicable to the Restricted ADSs presented for transfer.  Except as set forth in this Section 2.14 and except as required by applicable law, the Restricted ADSs and the Restricted ADRs evidencing Restricted ADSs shall be treated as ADSs and ADRs issued and outstanding under the terms of the Deposit Agreement.  In the event that, in determining the rights and obligations of parties hereto with respect to any Restricted ADSs, any conflict arises between (a) the terms of the Deposit Agreement (other than this Section 2.14) and (b) the terms of (i) this Section 2.14 or (ii) the applicable Restricted ADR, the terms and conditions set forth in this Section 2.14 and of the Restricted ADR shall be controlling and shall govern the rights and obligations of the parties to the Deposit Agreement pertaining to the deposited Restricted Shares, the Restricted ADSs and Restricted ADRs.

 

If the Restricted ADRs, the Restricted ADSs and the Restricted Shares cease to be Restricted Securities, the Depositary, upon receipt of (x) an opinion of counsel reasonably satisfactory to the Depositary setting forth, inter alia, that the Restricted ADRs, the Restricted

 

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ADSs and the Restricted Shares are not as of such time Restricted Securities, and (y) instructions from the Company to remove the restrictions applicable to the Restricted ADRs, the Restricted ADSs and the Restricted Shares, shall (i) eliminate the distinctions and separations that may have been established between the applicable Restricted Shares held on deposit under this Section 2.14 and the other Shares held on deposit under the terms of the Deposit Agreement that are not Restricted Shares, (ii) treat the newly unrestricted ADRs and ADSs on the same terms as, and fully fungible with, the other ADRs and ADSs issued and outstanding under the terms of the Deposit Agreement that are not Restricted ADRs or Restricted ADSs, and (iii) take all actions necessary to remove any distinctions, limitations and restrictions previously existing under this Section 2.14 between the applicable Restricted ADRs and Restricted ADSs, respectively, on the one hand, and the other ADRs and ADSs that are not Restricted ADRs or Restricted ADSs, respectively, on the other hand, including, without limitation, by making the newly-unrestricted ADSs eligible for Pre-Release Transactions and for inclusion in the applicable book-entry settlement systems.

 

ARTICLE III

 

CERTAIN OBLIGATIONS OF HOLDERS
 AND BENEFICIAL OWNERS OF ADSs

 

Section 3.1                                   Proofs, Certificates and Other Information.  Any person presenting Shares for deposit, any Holder and any Beneficial Owner may be required, and every Holder and Beneficial Owner agrees, from time to time to provide to the Depositary and the Custodian such proof of citizenship or residence, taxpayer status, payment of all applicable taxes or other governmental charges, exchange control approval, legal or beneficial ownership of ADSs and Deposited Property, compliance with applicable laws, the terms of the Deposit Agreement or the ADR(s) evidencing the ADSs and the provisions of, or governing, the Deposited Property, to execute such certifications and to make such representations and warranties, and to provide such other information and documentation (or, in the case of Shares in registered form presented for deposit, such information relating to the registration on the books of the Company or of the Share Registrar) as the Depositary or the Custodian may deem necessary or proper or as the Company may reasonably require by written request to the Depositary consistent with its obligations under the Deposit Agreement and the applicable ADR(s).  The Depositary and the Registrar, as applicable, may withhold the execution or delivery or registration of transfer of any ADR or ADS or the distribution or sale of any dividend or distribution of rights or of the proceeds thereof or, to the extent not limited by the terms of Section 7.8, the delivery of any Deposited Property until such proof or other information is filed or such certifications are executed, or such representations and warranties are made, or such other documentation or information provided, in each case to the Depositary’s, the Registrar’s and the Company’s satisfaction.  The Depositary shall provide the Company, in a timely manner, with copies or originals if necessary and appropriate of (i) any such proofs of citizenship or residence, taxpayer status, or exchange control approval or copies of written representations and warranties which it receives from Holders and Beneficial Owners, and (ii) any other information or documents which the Company may reasonably request and which the Depositary shall request and receive from any Holder or Beneficial Owner or any person presenting Shares for deposit or ADSs for cancellation, transfer or withdrawal.  Nothing herein shall obligate the Depositary to (i) obtain

 

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any information for the Company if not provided by the Holders or Beneficial Owners, or (ii) verify or vouch for the accuracy of the information so provided by the Holders or Beneficial Owners.

 

Section 3.2                                   Liability for Taxes and Other Charges.  Any tax or other governmental charge payable by the Custodian or by the Depositary with respect to any Deposited Property, ADSs or ADRs shall be payable by the Holders and Beneficial Owners to the Depositary.  The Company, the Custodian and/or the Depositary may withhold or deduct from any distributions made in respect of Deposited Property, and may sell for the account of a Holder and/or Beneficial Owner any or all of the Deposited Property and apply such distributions and sale proceeds in payment of, any taxes (including applicable interest and penalties) or charges that are or may be payable by Holders or Beneficial Owners in respect of the ADSs, Deposited Property and ADRs, the Holder and the Beneficial Owner remaining liable for any deficiency.  The Custodian may refuse the deposit of Shares and the Depositary may refuse to issue ADSs, to deliver ADRs, register the transfer of ADSs, register the split-up or combination of ADRs and (subject to Section 7.8) the withdrawal of Deposited Property until payment in full of such tax, charge, penalty or interest is received.  Every Holder and Beneficial Owner agrees to indemnify the Depositary, the Company, the Custodian, and any of their agents, officers, employees and Affiliates for, and to hold each of them harmless from, any claims with respect to taxes (including applicable interest and penalties thereon) arising from any tax benefit obtained for such Holder and/or Beneficial Owner.  The obligations of Holders and Beneficial Owners under this section 3.2 shall survive any transfer of ADSs, any cancellation of ADSs and withdrawal of Deposited Securities, and the termination of the Deposit Agreement.

 

Section 3.3                                   Representations and Warranties on Deposit of Shares.  Each person depositing Shares under the Deposit Agreement shall be deemed thereby to represent and warrant that (i) such Shares and the certificates therefor are duly authorized, validly issued, fully paid, non-assessable and legally obtained by such person, (ii) all preemptive (and similar) rights, if any, with respect to such Shares have been validly waived or exercised, (iii) the person making such deposit is duly authorized so to do, (iv) the Shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, (v) the Shares presented for deposit are not, and the ADSs issuable upon such deposit will not be, Restricted Securities (except as contemplated in Section 2.14), and (vi) the Shares presented for deposit have not been stripped of any rights or entitlements.  Such representations and warranties shall survive the deposit and withdrawal of Shares, the issuance and cancellation of ADSs in respect thereof and the transfer of such ADSs.  If any such representations or warranties are false in any way, the Company and the Depositary shall be authorized, at the cost and expense of the person depositing Shares, to take any and all actions necessary to correct the consequences thereof.

 

Section 3.4                                   Compliance with Information Requests.  Notwithstanding any other provision of the Deposit Agreement or any ADR(s), each Holder and Beneficial Owner agrees to comply with requests from the Company pursuant to applicable law, the rules and requirements of the stock exchange on which the Shares or ADSs are, or will be, registered, traded or listed or the Articles of Association of the Company, which are made to provide information, inter alia, as to the capacity in which such Holder or Beneficial Owner owns ADSs (and Shares as the case may be) and regarding the identity of any other person(s) interested in such ADSs and the nature

 

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of such interest and various other matters, whether or not they are Holders and/or Beneficial Owners at the time of such request.  The Depositary agrees to use its reasonable efforts to forward, upon the request of the Company and at the Company’s expense, any such request from the Company to the Holders and to forward to the Company any such responses to such requests received by the Depositary.

 

Section 3.5                                   Ownership Restrictions.  Notwithstanding any other provision in the Deposit Agreement or any ADR, the Company may restrict transfers of the Shares where such transfer might result in ownership of Shares exceeding limits imposed by applicable law or the Articles of Association of the Company.  The Company may also restrict, in such manner as it deems appropriate, transfers of the ADSs where such transfer may result in the total number of Shares represented by the ADSs owned by a single Holder or Beneficial Owner to exceed any such limits.  The Company may, in its sole discretion but subject to applicable law, instruct the Depositary to take action with respect to the ownership interest of any Holder or Beneficial Owner in excess of the limits set forth in the preceding sentence, including, but not limited to, the imposition of restrictions on the transfer of ADSs, the removal or limitation of voting rights or mandatory sale or disposition on behalf of a Holder or Beneficial Owner of the Shares represented by the ADSs held by such Holder or Beneficial Owner in excess of such limitations, if and to the extent such disposition is permitted by applicable law and the Articles of Association of the Company.  Nothing herein shall be interpreted as obligating the Depositary or the Company to ensure compliance with the ownership restrictions described in this Section 3.5.

 

Section 3.6                                   Reporting Obligations and Regulatory Approvals.  Applicable laws and regulations may require holders and beneficial owners of Shares, including the Holders and Beneficial Owners of ADSs, to satisfy reporting requirements and obtain regulatory approvals in certain circumstances.  Holders and Beneficial Owners of ADSs are solely responsible for determining and complying with such reporting requirements and obtaining such approvals.  Each Holder and each Beneficial Owner hereby agrees to make such determination, file such reports, and obtain such approvals to the extent and in the form required by applicable laws and regulations as in effect from time to time.  Neither the Depositary, the Custodian, the Company or any of their respective agents or affiliates shall be required to take any actions whatsoever on behalf of Holders or Beneficial Owners to determine or satisfy such reporting requirements or obtain such regulatory approvals under applicable laws and regulations.

 

ARTICLE IV

 

THE DEPOSITED SECURITIES

 

Section 4.1                                   Cash Distributions.  Whenever the Company intends to make a distribution of a cash dividend or other cash distribution in respect of any Deposited Securities, the Company shall give notice thereof to the Depositary at least twenty (20) days prior to the proposed distribution specifying, inter alia, the record date applicable for determining the holders of Deposited Securities entitled to receive such distribution.  Upon the timely receipt of such notice, the Depositary shall establish the ADS Record Date upon the terms described in Section 4.9.  Upon receipt of confirmation of the receipt of (x) any cash dividend or other cash distribution on any Deposited Securities, or (y) proceeds from the sale of any Deposited Property

 

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held in respect of the ADSs under the terms hereof, the Depositary will (i) if at the time of receipt thereof any amounts received in a Foreign Currency can, in the judgment of the Depositary (pursuant to Section 4.8), be converted on a practicable basis into Dollars transferable to the United States, promptly convert or cause to be converted such cash dividend, distribution or proceeds into Dollars (on the terms described in Section 4.8), (ii) if applicable and unless previously established, establish the ADS Record Date upon the terms described in Section 4.9, and (iii) distribute promptly the amount thus received (net of (a) the applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes withheld) to the Holders entitled thereto as of the ADS Record Date in proportion to the number of ADSs held as of the ADS Record Date.  The Depositary shall distribute only such amount, however, as can be distributed without attributing to any Holder a fraction of one cent, and any balance not so distributed shall be held by the Depositary (without liability for interest thereon) and shall be added to and become part of the next sum received by the Depositary for distribution to Holders of ADSs outstanding at the time of the next distribution.  If the Company, the Custodian or the Depositary is required to withhold and does withhold from any cash dividend or other cash distribution in respect of any Deposited Securities, or from any cash proceeds from the sales of Deposited Property, an amount on account of taxes, duties or other governmental charges, the amount distributed to Holders on the ADSs shall be reduced accordingly.  Such withheld amounts shall be forwarded by the Company, the Custodian or the Depositary to the relevant governmental authority.  Evidence of payment thereof by the Company shall be forwarded by the Company to the Depositary upon request.  The Depositary will hold any cash amounts it is unable to distribute in a non-interest bearing account for the benefit of the applicable Holders and Beneficial Owners of ADSs until the distribution can be effected or the funds that the Depositary holds must be escheated as unclaimed property in accordance with the laws of the relevant states of the United States. Notwithstanding anything contained in the Deposit Agreement to the contrary, in the event the Company fails to give the Depositary timely notice of the proposed distribution provided for in this Section 4.1, the Depositary agrees to use commercially reasonable efforts to perform the actions contemplated in this Section 4.1, and the Company, the Holders and the Beneficial Owners acknowledge that the Depositary shall have no liability for the Depositary’s failure to perform the actions contemplated in this Section 4.1 where such notice has not been so timely given, other than its failure to use commercially reasonable efforts, as provided herein.

 

Section 4.2                                   Distribution in Shares.  Whenever the Company intends to make a distribution that consists of a dividend in, or free distribution of, Shares, the Company shall give notice thereof to the Depositary at least twenty (20) days prior to the proposed distribution, specifying, inter alia, the record date applicable to holders of Deposited Securities entitled to receive such distribution.  Upon the timely receipt of such notice from the Company, the Depositary shall establish the ADS Record Date upon the terms described in Section 4.9.  Upon receipt of confirmation from the Custodian of the receipt of the Shares so distributed by the Company, the Depositary shall either (i) subject to Section 5.9, distribute to the Holders as of the ADS Record Date in proportion to the number of ADSs held as of the ADS Record Date, additional ADSs, which represent in the aggregate the number of Shares received as such dividend, or free distribution, subject to the other terms of the Deposit Agreement (including, without limitation, (a) the applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes), or (ii) if additional ADSs are not so distributed, take all actions

 

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necessary so that each ADS issued and outstanding after the ADS Record Date shall, to the extent permissible by law, thenceforth also represent rights and interests in the additional integral number of Shares distributed upon the Deposited Securities represented thereby (net of (a) the applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes).  In lieu of delivering fractional ADSs, the Depositary shall sell the number of Shares or ADSs, as the case may be, represented by the aggregate of such fractions and distribute the net proceeds upon the terms described in Section 4.1.  In the event that the Depositary determines that any distribution in property (including Shares) is subject to any tax or other governmental charges which the Depositary is obligated to withhold, or, if the Company in the fulfillment of its obligation under Section 5.7, has furnished an opinion of U.S. counsel determining that Shares must be registered under the Securities Act or other laws in order to be distributed to Holders (and no such registration statement has been declared effective), the Depositary may dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable, and the Depositary shall distribute the net proceeds of any such sale (after deduction of (a) taxes and (b) fees and charges of, and expenses incurred by, the Depositary) to Holders entitled thereto upon the terms described in Section 4.1.  The Depositary shall hold and/or distribute any unsold balance of such property in accordance with the provisions of the Deposit Agreement. Notwithstanding anything contained in the Deposit Agreement to the contrary, in the event the Company fails to give the Depositary timely notice of the proposed distribution provided for in this Section 4.2, the Depositary agrees to use commercially reasonable efforts to perform the actions contemplated in this Section 4.2, and the Company, the Holders and the Beneficial Owners acknowledge that the Depositary shall have no liability for the Depositary’s failure to perform the actions contemplated in this Section 4.2 where such notice has not been so timely given, other than its failure to use commercially reasonable efforts, as provided herein.

 

Section 4.3                                   Elective Distributions in Cash or Shares.  Whenever the Company intends to make a distribution payable at the election of the holders of Deposited Securities in cash or in additional Shares, the Company shall give notice thereof to the Depositary at least sixty (60) days prior to the proposed distribution specifying, inter alia, the record date applicable to holders of Deposited Securities entitled to receive such elective distribution and whether or not it wishes such elective distribution to be made available to Holders of ADSs.  Upon the timely receipt of a notice indicating that the Company wishes such elective distribution to be made available to Holders of ADSs, the Depositary shall consult with the Company to determine, and the Company shall assist the Depositary in its determination, whether it is lawful and reasonably practicable to make such elective distribution available to the Holders of ADSs.  The Depositary shall make such elective distribution available to Holders only if (i) the Company shall have timely requested that the elective distribution be made available to Holders, (ii) the Depositary shall have determined that such distribution is reasonably practicable and (iii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7.  If the above conditions are not satisfied or if the Company requests such elective distribution not to be made available to Holders of ADSs, the Depositary shall establish the ADS Record Date on the terms described in Section 4.9 and, to the extent permitted by law, distribute to the Holders, on the basis of the same determination as is made in the Cayman Islands in respect of the Shares for which no election is made, either (X) cash upon the terms described in Section 4.1 or (Y)

 

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additional ADSs representing such additional Shares upon the terms described in Section 4.2.  If the above conditions are satisfied, the Depositary shall establish an ADS Record Date on the terms described in Section 4.9 and establish procedures to enable Holders to elect the receipt of the proposed distribution in cash or in additional ADSs.  The Company shall assist the Depositary in establishing such procedures to the extent necessary.  If a Holder elects to receive the proposed distribution (X) in cash, the distribution shall be made upon the terms described in Section 4.1, or (Y) in ADSs, the distribution shall be made upon the terms described in Section 4.2.  Nothing herein shall obligate the Depositary to make available to Holders a method to receive the elective distribution in Shares (rather than ADSs).  There can be no assurance that Holders generally, or any Holder in particular, will be given the opportunity to receive elective distributions on the same terms and conditions as the holders of Shares. Notwithstanding anything contained in the Deposit Agreement to the contrary, in the event the Company fails to give the Depositary timely notice of the proposed distribution provided for in this Section 4.3, the Depositary agrees to use commercially reasonable efforts to perform the actions contemplated in this Section 4.3, and the Company, the Holders and the Beneficial Owners acknowledge that the Depositary shall have no liability for the Depositary’s failure to perform the actions contemplated in this Section 4.3 where such notice has not been so timely given, other than its failure to use commercially reasonable efforts, as provided herein.

 

Section 4.4                                   Distribution of Rights to Purchase Additional ADSs.

 

(a)                                 Distribution to ADS Holders.  Whenever the Company intends to distribute to the holders of the Deposited Securities rights to subscribe for additional Shares, the Company shall give notice thereof to the Depositary at least forty-five (45) days prior to the proposed distribution specifying, inter alia, the record date applicable to holders of Deposited Securities entitled to receive such distribution and whether or not it wishes such rights to be made available to Holders of ADSs.  Upon the timely receipt of a notice indicating that the Company wishes such rights to be made available to Holders of ADSs, the Depositary shall consult with the Company to determine, and the Company shall assist the Depositary in its determination, whether it is lawful and reasonably practicable to make such rights available to the Holders.  The Depositary shall make such rights available to Holders only if (i) the Company shall have timely requested that such rights be made available to Holders, (ii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7, and (iii) the Depositary shall have determined that such distribution of rights is reasonably practicable.  In the event any of the conditions set forth above are not satisfied or if the Company requests that the rights not be made available to Holders of ADSs, the Depositary shall proceed with the sale of the rights as contemplated in Section 4.4(b) below.  In the event all conditions set forth above are satisfied, the Depositary shall establish the ADS Record Date (upon the terms described in Section 4.9) and establish procedures to (x) distribute rights to purchase additional ADSs (by means of warrants or otherwise), (y) enable the Holders to exercise such rights (upon payment of the subscription price and of the applicable (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes), and (z) deliver ADSs upon the valid exercise of such rights.  The Company shall assist the Depositary to the extent necessary in establishing such procedures.  Nothing herein shall obligate the Depositary to make available to the Holders a method to exercise rights to subscribe for Shares (rather than ADSs).

 

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(b)                                 Sale of Rights.  If (i) the Company does not timely request the Depositary to make the rights available to Holders or requests that the rights not be made available to Holders, (ii) the Depositary fails to receive satisfactory documentation within the terms of Section 5.7, or determines it is not reasonably practicable to make the rights available to Holders, or (iii) any rights made available are not exercised and appear to be about to lapse, the Depositary shall determine whether it is lawful and reasonably practicable to sell such rights, in a riskless principal capacity, at such place and upon such terms (including public or private sale) as it may deem practicable.  The Company shall assist the Depositary to the extent necessary to determine such legality and practicability.  The Depositary shall, upon such sale, convert and distribute proceeds of such sale (net of applicable (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes) upon the terms set forth in Section 4.1.

 

(c)                                  Lapse of Rights.  If the Depositary is unable to make any rights available to Holders upon the terms described in Section 4.4(a) or to arrange for the sale of the rights upon the terms described in Section 4.4(b), the Depositary shall allow such rights to lapse.

 

The Depositary shall not be liable for (i) any failure to accurately determine whether it may be lawful or practicable to make such rights available to Holders in general or any Holders in particular, (ii) any foreign exchange exposure or loss incurred in connection with such sale, or exercise, or (iii) the content of any materials forwarded to the Holders on behalf of the Company in connection with the rights distribution.

 

Notwithstanding anything to the contrary in this Section 4.4, if registration (under the Securities Act or any other applicable law) of the rights or the securities to which any rights relate may be required in order for the Company to offer such rights or such securities to Holders and to sell the securities represented by such rights, the Depositary will not distribute such rights to the Holders (i) unless and until a registration statement under the Securities Act (or other applicable law) covering such offering is in effect or (ii) unless the Company furnishes the Depositary opinion(s) of counsel in the United States and/or counsel in any other applicable country in which rights would be distributed, in each case reasonably satisfactory to the Depositary, to the effect that the offering and sale of such securities to Holders and Beneficial Owners are exempt from, or do not require registration under, the provisions of the Securities Act or any other applicable laws.

 

In the event that the Company, the Depositary or the Custodian shall be required to withhold and does withhold from any distribution of Deposited Property (including rights) an amount on account of taxes or other governmental charges, the amount distributed to the Holders of ADSs shall be reduced accordingly.  In the event that the Depositary determines that any distribution of Deposited Property (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charges which the Depositary is obligated to withhold, the Depositary may dispose of all or a portion of such Deposited Property (including Shares and rights to subscribe therefor) in such amounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable to pay any such taxes or charges.

 

There can be no assurance that Holders generally, or any Holder in particular, will be given the opportunity to receive or exercise rights on the same terms and conditions as the

 

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holders of Shares or be able to exercise such rights.  Nothing herein shall obligate the Company to file any registration statement in respect of any rights or Shares or other securities to be acquired upon the exercise of such rights.

 

Section 4.5                                   Distributions Other Than Cash, Shares or Rights to Purchase Shares.

 

(a)                                 Whenever the Company intends to distribute to the holders of Deposited Securities property other than cash, Shares or rights to purchase additional Shares, the Company shall give timely notice thereof to the Depositary and shall indicate whether or not it wishes such distribution to be made to Holders of ADSs.  Upon receipt of a notice indicating that the Company wishes such distribution to be made to Holders of ADSs, the Depositary shall consult with the Company, and the Company shall assist the Depositary, to determine whether such distribution to Holders is lawful and reasonably practicable.  The Depositary shall not make such distribution unless (i) the Company shall have requested the Depositary to make such distribution to Holders, (ii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7, and (iii) the Depositary shall have determined that such distribution is reasonably practicable.

 

(b)                                 Upon receipt of satisfactory documentation and the request of the Company to distribute property to Holders of ADSs and after making the requisite determinations set forth in (a) above, the Depositary shall distribute the property so received to the Holders of record, as of the ADS Record Date, in proportion to the number of ADSs held by them respectively and in such manner as the Depositary may deem practicable for accomplishing such distribution (i) upon receipt of payment or net of the applicable fees and charges of, and expenses incurred by, the Depositary, and (ii) net of any taxes withheld.  The Depositary may dispose of all or a portion of the property so distributed and deposited, in such amounts and in such manner (including public or private sale) as the Depositary may deem practicable or necessary to satisfy any taxes (including applicable interest and penalties) or other governmental charges applicable to the distribution.

 

(c)                                  If (i) the Company does not request the Depositary to make such distribution to Holders or requests the Depositary not to make such distribution to Holders, (ii) the Depositary does not receive satisfactory documentation within the terms of Section 5.7, or (iii) the Depositary determines that all or a portion of such distribution is not reasonably practicable, the Depositary shall sell or cause such property to be sold in a public or private sale, at such place or places and upon such terms as it may deem practicable and shall (i) cause the proceeds of such sale, if any, to be converted into Dollars and (ii) distribute the proceeds of such conversion received by the Depositary (net of applicable (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes) to the Holders as of the ADS Record Date upon the terms of Section 4.1.  If the Depositary is unable to sell such property, the Depositary may dispose of such property for the account of the Holders in any way it deems reasonably practicable under the circumstances.

 

(d)                                 Neither the Depositary nor the Company shall be liable for (i) any failure to accurately determine whether it is lawful or practicable to make the property described in this

 

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Section 4.5 available to Holders in general or any Holders in particular, nor (ii) any loss incurred in connection with the sale or disposal of such property.

 

Section 4.6                                   Distributions with Respect to Deposited Securities in Bearer Form.  Subject to the terms of this Article IV, distributions in respect of Deposited Securities that are held by the Depositary or the Custodian in bearer form shall be made to the Depositary for the account of the respective Holders of ADS(s) with respect to which any such distribution is made upon due presentation by the Depositary or the Custodian to the Company of any relevant coupons, talons, or certificates.  The Company shall promptly notify the Depositary of such distributions.  The Depositary or the Custodian shall promptly present such coupons, talons or certificates, as the case may be, in connection with any such distribution.

 

Section 4.7                                   Redemption.  If the Company intends to exercise any right of redemption in respect of any of the Deposited Securities, the Company shall give notice thereof to the Depositary at least forty-five (45) days prior to the intended date of redemption which notice shall set forth the particulars of the proposed redemption.  Upon timely receipt of (i) such notice and (ii) satisfactory documentation given by the Company to the Depositary within the terms of Section 5.7, and only if the Depositary shall have determined that such proposed redemption is practicable, the Depositary shall provide to each Holder a notice setting forth the intended exercise by the Company of the redemption rights and any other particulars set forth in the Company’s notice to the Depositary.  The Depositary shall instruct the Custodian to present to the Company the Deposited Securities in respect of which redemption rights are being exercised against payment of the applicable redemption price.  Upon receipt of confirmation from the Custodian that the redemption has taken place and that funds representing the redemption price have been received, the Depositary shall convert, transfer, and distribute the proceeds (net of applicable (a) fees and charges of, and the expenses incurred by, the Depositary, and (b) taxes), retire ADSs and cancel ADRs, if applicable, upon delivery of such ADSs by Holders thereof and the terms set forth in Sections 4.1 and 6.2.  If less than all outstanding Deposited Securities are redeemed, the ADSs to be retired will be selected by lot or on a pro rata basis, as may be determined by the Depositary.  The redemption price per ADS shall be the dollar equivalent of the per share amount received by the Depositary (adjusted to reflect the ADS(s)-to-Share(s) ratio) upon the redemption of the Deposited Securities represented by ADSs (subject to the terms of Section 4.8 and the applicable fees and charges of, and expenses incurred by, the Depositary, and taxes) multiplied by the number of Deposited Securities represented by each ADS redeemed.

 

Notwithstanding anything contained in the Deposit Agreement to the contrary, in the event the Company fails to give the Depositary timely notice of the proposed redemption provided for in this Section 4.7, the Depositary agrees to use commercially reasonable efforts to perform the actions contemplated in this Section 4.7, and the Company, the Holders and the Beneficial Owners acknowledge that the Depositary shall have no liability for the Depositary’s failure to perform the actions contemplated in this Section 4.7 where such notice has not been so timely given, other than its failure to use commercially reasonable efforts, as provided herein.

 

Section 4.8                                   Conversion of Foreign Currency.  Whenever the Depositary or the Custodian shall receive Foreign Currency, by way of dividends or other distributions or the net proceeds from the sale of Deposited Property, which in the judgment of the Depositary can at

 

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such time be converted on a practicable basis, by sale or in any other manner that it may determine in accordance with applicable law, into Dollars transferable to the United States and distributable to the Holders entitled thereto, the Depositary shall convert or cause to be converted, by sale or in any other manner that it may determine, such Foreign Currency into Dollars, and shall distribute such Dollars (net of any applicable fees, any reasonable and customary expenses incurred in such conversion and any expenses incurred on behalf of the Holders in complying with currency exchange control or other governmental requirements) in accordance with the terms of the applicable sections of the Deposit Agreement.  If the Depositary shall have distributed warrants or other instruments that entitle the holders thereof to such Dollars, the Depositary shall distribute such Dollars to the holders of such warrants and/or instruments upon surrender thereof for cancellation, in either case without liability for interest thereon.  Such distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Holders on account of any application of exchange restrictions or otherwise.

 

If such conversion or distribution generally or with regard to a particular Holder can be effected only with the approval or license of any government or agency thereof, the Depositary shall have authority to file such application for approval or license, if any, as it may deem desirable.  In no event, however, shall the Depositary be obligated to make such a filing.

 

If at any time the Depositary shall determine that in its judgment the conversion of any Foreign Currency and the transfer and distribution of proceeds of such conversion received by the Depositary is not practicable or lawful, or if any approval or license of any governmental authority or agency thereof that is required for such conversion, transfer and distribution is denied or, in the opinion of the Depositary, not obtainable at a reasonable cost or within a reasonable period, the Depositary may, in its discretion, (i) make such conversion and distribution in Dollars to the Holders for whom such conversion, transfer and distribution is lawful and practicable, (ii) distribute the Foreign Currency (or an appropriate document evidencing the right to receive such Foreign Currency) to Holders for whom this is lawful and practicable, or (iii) hold (or cause the Custodian to hold) such Foreign Currency (without liability for interest thereon) for the respective accounts of the Holders entitled to receive the same.

 

Section 4.9                                   Fixing of ADS Record Date.  Whenever the Depositary shall receive notice of the fixing of a record date by the Company for the determination of holders of Deposited Securities entitled to receive any distribution (whether in cash, Shares, rights, or other distribution), or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each ADS, or whenever the Depositary shall receive notice of any meeting of, or solicitation of consents or proxies of, holders of Shares or other Deposited Securities, or whenever the Depositary shall find it necessary or convenient in connection with the giving of any notice, solicitation of any consent or any other matter, the Depositary shall fix the record date (the “ADS Record Date”) for the determination of the Holders of ADS(s) who shall be entitled to receive such distribution, to give instructions for the exercise of voting rights at any such meeting, to give or withhold such consent, to receive such notice or solicitation or to otherwise take action, or to exercise the rights of Holders with respect to such changed number of Shares represented by each ADS.  The Depositary shall make reasonable efforts to establish the ADS Record Date as closely as practicable to the applicable record date for the Deposited

 

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Securities (if any) set by the Company in the Cayman Islands and shall not announce the establishment of any ADS Record Date prior to the relevant corporate action having been made public by the Company (if such corporate action affects the Deposited Securities).  Subject to applicable law and the provisions of Section 4.1 through 4.8 and to the other terms and conditions of the Deposit Agreement, only the Holders of ADSs at the close of business in New York on such ADS Record Date shall be entitled to receive such distribution, to give such voting instructions, to receive such notice or solicitation, or otherwise take action.

 

Section 4.10                            Voting of Deposited Securities.  As soon as practicable after receipt of notice of any meeting at which the holders of Deposited Securities are entitled to vote, or of solicitation of consents or proxies from holders of Deposited Securities, the Depositary shall fix the ADS Record Date in respect of such meeting or solicitation of consent or proxy in accordance with Section 4.9.  The Depositary shall, if requested by the Company in writing in a timely manner (the Depositary having no obligation to take any further action if the request shall not have been received by the Depositary at least thirty (30) days prior to the date of such vote or meeting), at the Company’s expense and provided no U.S. legal prohibitions exist, distribute as soon as practicable after receipt thereof to Holders as of the ADS Record Date: (a) such notice of meeting or solicitation of consent or proxy, (b) a statement that the Holders at the close of business on the ADS Record Date will be entitled, subject to any applicable law, the provisions of the Deposit Agreement, the Articles of Association of the Company and the provisions of or governing the Deposited Securities (which provisions, if any, shall be summarized in pertinent part by the Company), to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the Deposited Securities represented by such Holder’s ADSs, and (c) a brief statement as to the manner and timing in which such voting instructions may be given to the Depositary or in which voting instructions may be deemed to have been given in accordance with this Section 4.10 if no instructions are received prior to the deadline set for such purposes to the Depositary to give a discretionary proxy to a person designated by the Company.  Notwithstanding anything contained in the Deposit Agreement to the contrary, in the event the Company fails to timely request that the Depositary distribute the information as provided for in this Section 4.10, the Depositary agrees to use commercially reasonable efforts to perform the actions contemplated in this Section 4.10, and the Company, the Holders and the Beneficial Owners acknowledge that the Depositary shall have no liability for the Depositary’s failure to perform the actions contemplated in this Section 4.10 where such notice has not been so timely given, other than its failure to use commercially reasonable efforts, as provided herein.

 

Notwithstanding anything contained in the Deposit Agreement or any ADR, the Depositary may, to the extent not prohibited by law or regulations, or by the requirements of the stock exchange on which the ADSs are listed, in lieu of distribution of the materials provided to the Depositary in connection with any meeting of, or solicitation of consents or proxies from, holders of Deposited Securities, distribute to the Holders a notice that provides Holders with, or otherwise publicizes to Holders, instructions on how to retrieve such materials or receive such materials upon request (e.g., by reference to a website containing the materials for retrieval or a contact for requesting copies of the materials).

 

The Depositary has been advised by the Company that under the Articles of Association of the Company (as in effect on the date of the Deposit Agreement), voting at any meeting of

 

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shareholders is by show of hands unless a poll is demanded.  The Depositary will not join in demanding a poll, whether or not requested to do so by Holders of ADSs.  The Company has informed the Depositary that, under the Articles of Association of the Company (as in effect on the date of the Deposit Agreement), a poll may be demanded by the chairman of the meeting or by any shareholder present in person or by proxy in the meeting.

 

Voting instructions may be given only in respect of a number of ADSs representing an integral number of Deposited Securities.  Upon the timely receipt from a Holder of ADSs as of the ADS Record Date of voting instructions in the manner specified by the Depositary, the Depositary shall endeavor, insofar as practicable and permitted under applicable law, the provisions of the Deposit Agreement, Articles of Association of the Company and the provisions of the Deposited Securities, to vote, or cause the Custodian to vote, the Deposited Securities (in person or by proxy) represented by such Holder’s ADSs as follows:  (i) in the event voting takes place at a shareholders’ meeting by show of hands, the Depositary will instruct the Custodian to vote all Deposited Securities in accordance with the voting instructions received from a majority of Holders of ADSs who provided voting instructions, and (ii) in the event voting takes place at a shareholders’ meeting by poll, the Depositary will instruct the Custodian to vote the Deposited Securities in accordance with the voting instructions received from the Holders of ADSs. If the Depositary does not receive instructions from a Holder as of the ADS Record Date on or before the date established by the Depositary for such purpose and voting is by poll, such Holder shall be deemed, and the Depositary shall (unless otherwise specified in the notice distributed to Holders) deem such Holder, to have instructed the Depositary to give a discretionary proxy to a person designated by the Company to vote the Deposited Securities; provided, however, that no such discretionary proxy shall be given by the Depositary with respect to any matter to be voted upon as to which the Company informs the Depositary that (A) the Company does not wish such proxy to be given, (B) substantial opposition exists, or (C) the rights of holders of Deposited Securities may be materially adversely affected.

 

Neither the Depositary nor the Custodian shall under any circumstances exercise any discretion as to voting and neither the Depositary nor the Custodian shall vote, attempt to exercise the right to vote, or in any way make use of, for purposes of establishing a quorum or otherwise, the Deposited Securities represented by ADSs, except pursuant to and in accordance with the voting instructions timely received from Holders or as otherwise contemplated herein.  If the Depositary timely receives voting instructions from a Holder which fail to specify the manner in which the Depositary is to vote the Deposited Securities represented by such Holder’s ADSs, the Depositary will deem such Holder (unless otherwise specified in the notice distributed to Holders) to have instructed the Depositary to vote in favor of the items set forth in such voting instructions.  Deposited Securities represented by ADSs for which no timely voting instructions are received by the Depositary from the Holder shall not be voted (except (i) in the case voting is by show of hands, in which case the Depositary will instruct the Custodian to vote all Deposited Securities in accordance with the voting instructions received from a majority of Holders of ADSs who provided voting instructions and (ii) as otherwise contemplated herein). Notwithstanding anything else contained herein, the Depositary shall, if so requested in writing by the Company, represent all Deposited Securities (whether or not voting instructions have been received in respect of such Deposited Securities from Holders as of the ADS Record Date) for the sole purpose of establishing quorum at a meeting of shareholders.

 

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Notwithstanding anything else contained in the Deposit Agreement or any ADR, the Depositary shall not have any obligation to take any action with respect to any meeting, or solicitation of consents or proxies, of holders of Deposited Securities if the taking of such action would violate U.S. laws.  The Company agrees to take any and all actions reasonably necessary and as permitted by Cayman Islands law to enable Holders and Beneficial Owners to exercise the voting rights accruing to the Deposited Securities and to deliver to the Depositary an opinion of U.S. counsel addressing any actions requested to be taken if so requested by the Depositary.

 

There can be no assurance that Holders generally or any Holder in particular will receive the notice described above with sufficient time to enable the Holder to return voting instructions to the Depositary, or otherwise take action, in a timely manner.

 

Section 4.11                            Changes Affecting Deposited Securities.  Upon any change in nominal or par value, split-up, cancellation, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger, consolidation or sale of assets affecting the Company or to which it is a party, any property which shall be received by the Depositary or the Custodian in exchange for, or in conversion of, or replacement of, or otherwise in respect of, such Deposited Securities shall, to the extent permitted by law, be treated as new Deposited Property under the Deposit Agreement, and the ADSs shall, subject to the provisions of the Deposit Agreement, any ADR(s) evidencing such ADSs and applicable law, represent the right to receive such additional or replacement Deposited Property.  In giving effect to such change, split-up, cancellation, consolidation or other reclassification of Deposited Securities, recapitalization, reorganization, merger, consolidation or sale of assets, the Depositary may, with the Company’s approval, and shall, if the Company shall so request, subject to the terms of the Deposit Agreement (including, without limitation, (a) the applicable fees and charges of, and expenses incurred by, the Depositary, and (b) taxes) and receipt of an opinion of counsel reasonably satisfactory to the Depositary that such actions are not in violation of any applicable laws or regulations, (i) issue and deliver additional ADSs as in the case of a stock dividend on the Shares, (ii) amend the Deposit Agreement and the applicable ADRs, (iii) amend the applicable Registration Statement(s) on Form F-6 as filed with the Commission in respect of the ADSs, (iv) call for the surrender of outstanding ADRs to be exchanged for new ADRs, and (v) take such other actions as are appropriate to reflect the transaction with respect to the ADSs.  The Company agrees to, jointly with the Depositary, amend the Registration Statement on Form F-6 as filed with the Commission to permit the issuance of such new form of ADRs.  Notwithstanding the foregoing, in the event that any Deposited Property so received may not be lawfully distributed to some or all Holders, the Depositary may, with the Company’s approval, and shall, if the Company requests, subject to receipt of an opinion of counsel reasonably satisfactory to the Depositary that such action is not in violation of any applicable laws or regulations, sell such Deposited Property at public or private sale, at such place or places and upon such terms as it may deem proper and may allocate the net proceeds of such sales (net of (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes) for the account of the Holders otherwise entitled to such Deposited Property upon an averaged or other practicable basis without regard to any distinctions among such Holders and distribute the net proceeds so allocated to the extent practicable as in the case of a distribution received in cash pursuant to Section 4.1.  The Depositary shall not be responsible for (i) any failure to determine that it may be lawful or practicable to make such Deposited Property available to Holders in

 

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general or to any Holder in particular, (ii) any foreign exchange exposure or loss incurred in connection with such sale, or (iii) any liability to the purchaser of such Deposited Property.

 

Section 4.12                            Available Information.

 

The Company is subject to the periodic reporting requirements of the Exchange Act and, accordingly, is required to file or furnish certain reports with the Commission.  These reports can be retrieved from the Commission’s website (www.sec.gov) and can be inspected and copied at the public reference facilities maintained by the Commission located (as of the date of the Deposit Agreement) at 100 F Street, N.E., Washington D.C.  20549.

 

Section 4.13                            Reports.  The Depositary shall make available for inspection by Holders at its Principal Office any reports and communications, including any proxy soliciting materials, received from the Company which are both (a) received by the Depositary, the Custodian, or the nominee of either of them as the holder of the Deposited Property and (b) made generally available to the holders of such Deposited Property by the Company.  The Depositary shall also provide or make available to Holders copies of such reports when furnished by the Company pursuant to Section 5.6.

 

Section 4.14                            List of Holders.  Promptly upon written request by the Company, the Depositary shall furnish to it a list, as of a recent date, of the names, addresses and holdings of ADSs of all Holders.

 

Section 4.15                            Taxation.  The Depositary will, and will instruct the Custodian to, forward to the Company or its agents such information from its records as the Company may reasonably request to enable the Company or its agents to file the necessary tax reports with governmental authorities or agencies.  The Depositary, the Custodian or the Company and its agents may file such reports as are necessary to reduce or eliminate applicable taxes on dividends and on other distributions in respect of Deposited Property under applicable tax treaties or laws for the Holders and Beneficial Owners.  In accordance with instructions from the Company and to the extent practicable, the Depositary or the Custodian will take reasonable administrative actions to obtain tax refunds, reduced withholding of tax at source on dividends and other benefits under applicable tax treaties or laws with respect to dividends and other distributions on the Deposited Property.  As a condition to receiving such benefits, Holders and Beneficial Owners of ADSs may be required from time to time, and in a timely manner, to file such proof of taxpayer status, residence and beneficial ownership (as applicable), to execute such certificates and to make such representations and warranties, or to provide any other information or documents, as the Depositary or the Custodian may deem necessary or proper to fulfill the Depositary’s or the Custodian’s obligations under applicable law.  The Depositary and the Company shall have no obligation or liability to any person if any Holder or Beneficial Owner fails to provide such information or if such information does not reach the relevant tax authorities in time for any Holder or Beneficial Owner to obtain the benefits of any tax treatment.  The Holders and Beneficial Owners shall indemnify the Depositary, the Company, the Custodian and any of their respective directors, employees, agents and Affiliates against, and hold each of them harmless from, any claims by any governmental authority with respect to

 

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taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced rate of withholding at source or other tax benefit obtained.

 

If the Company (or any of its agents) withholds from any distribution any amount on account of taxes or governmental charges, or pays any other tax in respect of such distribution (e.g., stamp duty tax, capital gains or other similar tax), the Company shall (and shall cause such agent to) remit promptly to the Depositary information about such taxes or governmental charges withheld or paid, and, if so requested, the tax receipt (or other proof of payment to the applicable governmental authority) therefor, in each case, in a form reasonably satisfactory to the Depositary.  The Depositary shall, to the extent required by U.S. law, report to Holders any taxes withheld by it or the Custodian, and, if such information is provided to it by the Company, any taxes withheld by the Company.  The Depositary and the Custodian shall not be required to provide the Holders with any evidence of the remittance by the Company (or its agents) of any taxes withheld, or of the payment of taxes by the Company, except to the extent the evidence is provided by the Company to the Depositary or the Custodian, as applicable.  Neither the Depositary nor the Custodian shall be liable for the failure by any Holder or Beneficial Owner to obtain the benefits of credits on the basis of non-U.S. tax paid against such Holder’s or Beneficial Owner’s income tax liability.

 

The Depositary is under no obligation to provide the Holders and Beneficial Owners with any information about the tax status of the Company.  The Depositary shall not incur any liability for any tax consequences that may be incurred by Holders and Beneficial Owners on account of their ownership of the ADSs, including without limitation, tax consequences resulting from the Company (or any of its subsidiaries) being treated as a “Passive Foreign Investment Company” (in each case as defined in the U.S. Internal Revenue Code and the regulations issued thereunder) or otherwise.

 

ARTICLE V

 

THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY

 

Section 5.1                                   Maintenance of Office and Transfer Books by the Registrar.  Until termination of the Deposit Agreement in accordance with its terms, the Registrar shall maintain in the Borough of Manhattan, the City of New York, an office and facilities for the issuance and delivery of ADSs, the acceptance for surrender of ADS(s) for the purpose of withdrawal of Deposited Securities, the registration of issuances, cancellations, transfers, combinations and split-ups of ADS(s) and, if applicable, to countersign ADRs evidencing the ADSs so issued, transferred, combined or split-up, in each case in accordance with the provisions of the Deposit Agreement.

 

The Registrar shall keep books for the registration of ADSs which at all reasonable times shall be open for inspection by the Company and by the Holders of such ADSs, provided that such inspection shall not be, to the Registrar’s knowledge, for the purpose of communicating with Holders of such ADSs in the interest of a business or object other than the business of the Company or other than a matter related to the Deposit Agreement or the ADSs.

 

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The Registrar may close the transfer books with respect to the ADSs, at any time or from time to time, when deemed necessary or advisable by it in good faith in connection with the performance of its duties hereunder, or at the reasonable written request of the Company subject, in all cases, to Section 7.8.

 

If any ADSs are listed on one or more stock exchanges or automated quotation systems in the United States, the Depositary shall act as Registrar or appoint a Registrar or one or more co-registrars for registration of issuances, cancellations, transfers, combinations and split-ups of ADSs and, if applicable, to countersign ADRs evidencing the ADSs so issued, transferred, combined or split-up, in accordance with any requirements of such exchanges or systems.  Such Registrar or co-registrars may be removed and a substitute or substitutes appointed by the Depositary.

 

Section 5.2                                   Exoneration. Notwithstanding anything contained in the Deposit Agreement or any ADR, neither the Depositary nor the Company shall be obligated to do or perform any act which is inconsistent with the provisions of the Deposit Agreement or incur any liability (i) if the Depositary or the Company shall be prevented or forbidden from, or delayed in, doing or performing any act or thing required by the terms of the Deposit Agreement, by reason of any provision of any present or future law or regulation of the United States, the Cayman Islands or any other country, or of any other governmental authority or regulatory authority or stock exchange, or on account of potential criminal or civil penalties or restraint, or by reason of any provision, present or future, of the Articles of Association of the Company or any provision of or governing any Deposited Securities, or by reason of any act of God or war or other circumstances beyond its control (including, without limitation, nationalization, expropriation, currency restrictions, work stoppage, strikes, civil unrest, acts of terrorism, revolutions, rebellions, explosions and computer failure), (ii) by reason of any exercise of, or failure to exercise, any discretion provided for in the Deposit Agreement or in the Articles of Association of the Company or provisions of or governing Deposited Securities, (iii) for any action or inaction in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Holder, any Beneficial Owner or authorized representative thereof, or any other person believed by it in good faith to be competent to give such advice or information, (iv) for the inability by a Holder or Beneficial Owner to benefit from any distribution, offering, right or other benefit which is made available to holders of Deposited Securities but is not, under the terms of the Deposit Agreement, made available to Holders of ADSs, or (v) for any consequential or punitive damages (including lost profits) for any breach of the terms of the Deposit Agreement.

 

The Depositary, its controlling persons, its agents, any Custodian and the Company, its controlling persons and its agents may rely and shall be protected in acting upon any written notice, request or other document believed by it to be genuine and to have been signed or presented by the proper party or parties.

 

No disclaimer of liability under the Securities Act is intended by any provision of the Deposit Agreement.

 

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Section 5.3                                   Standard of Care.  The Company and the Depositary assume no obligation and shall not be subject to any liability under the Deposit Agreement or any ADRs to any Holder(s) or Beneficial Owner(s), except that the Company and the Depositary agree to perform their respective obligations specifically set forth in the Deposit Agreement or the applicable ADRs without negligence or bad faith.

 

Without limitation of the foregoing, neither the Depositary, nor the Company, nor any of their respective controlling persons, or agents, shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Property or in respect of the ADSs, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense (including fees and disbursements of counsel) and liability be furnished as often as may be required (and no Custodian shall be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary).

 

The Depositary and its agents shall not be liable for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any vote is cast or the effect of any vote, provided that any such action or omission is in good faith and without negligence and in accordance with the terms of the Deposit Agreement.  The Depositary shall not incur any liability for any failure to accurately determine that any distribution or action may be lawful or reasonably practicable, for the content of any information submitted to it by the Company for distribution to the Holders or for any inaccuracy of any translation thereof, for any investment risk associated with acquiring an interest in the Deposited Property, for the validity or worth of the Deposited Property or for any tax consequences that may result from the ownership of ADSs, Shares or other Deposited Property, for the credit-worthiness of any third party, for allowing any rights to lapse upon the terms of the Deposit Agreement, for the failure or timeliness of any notice from the Company, or for any action of or failure to act by, or any information provided or not provided by, DTC or any DTC Participant.

 

The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary.

 

The Depositary shall not be liable for any acts or omissions made by a predecessor depositary whether in connection with an act or omission of the Depositary or in connection with any matter arising wholly prior to the appointment of the Depositary or after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary.

 

Section 5.4                                   Resignation and Removal of the Depositary; Appointment of Successor Depositary.  The Depositary may at any time resign as Depositary hereunder by written notice of resignation delivered to the Company, such resignation to be effective on the

 

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earlier of (i) the 90th day after delivery thereof to the Company (whereupon the Depositary shall be entitled to take the actions contemplated in Section 6.2), or (ii) the appointment by the Company of a successor depositary and its acceptance of such appointment as hereinafter provided.

 

The Depositary may at any time be removed by the Company by written notice of such removal, which removal shall be effective on the later of (i) the 90th day after delivery thereof to the Depositary (whereupon the Depositary shall be entitled to take the actions contemplated in Section 6.2), or (ii) upon the appointment by the Company of a successor depositary and its acceptance of such appointment as hereinafter provided.

 

In case at any time the Depositary acting hereunder shall resign or be removed, the Company shall use its best efforts to appoint a successor depositary, which shall be a bank or trust company having an office in the Borough of Manhattan, the City of New York.  Every successor depositary shall be required by the Company to execute and deliver to its predecessor and to the Company an instrument in writing accepting its appointment hereunder, and thereupon such successor depositary, without any further act or deed (except as required by applicable law), shall become fully vested with all the rights, powers, duties and obligations of its predecessor (other than as contemplated in Sections 5.8 and 5.9).  The predecessor depositary, upon payment of all sums due it and on the written request of the Company, shall, (i) execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder (other than as contemplated in Sections 5.8 and 5.9), (ii) duly assign, transfer and deliver all of the Depositary’s right, title and interest to the Deposited Property to such successor, and (iii) deliver to such successor a list of the Holders of all outstanding ADSs and such other information relating to ADSs and Holders thereof as the successor may reasonably request.  Any such successor depositary shall promptly provide notice of its appointment to such Holders.

 

Any entity into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act.

 

Section 5.5                                   The Custodian.  The Depositary has initially appointed Citibank, N.A. — Hong Kong as Custodian for the purpose of the Deposit Agreement.  The Custodian or its successors in acting hereunder shall be subject at all times and in all respects to the direction of the Depositary for the Deposited Property for which the Custodian acts as custodian and shall be responsible solely to it.  If any Custodian resigns or is discharged from its duties hereunder with respect to any Deposited Property and no other Custodian has previously been appointed hereunder, the Depositary shall promptly appoint a substitute custodian.  The Depositary shall require such resigning or discharged Custodian to Deliver, or cause the Delivery of, the Deposited Property held by it, together with all such records maintained by it as Custodian with respect to such Deposited Property as the Depositary may request, to the Custodian designated by the Depositary.  Whenever the Depositary determines, in its discretion, that it is appropriate to do so, it may appoint an additional custodian with respect to any Deposited Property, or discharge the Custodian with respect to any Deposited Property and appoint a substitute custodian, which shall thereafter be Custodian hereunder with respect to the Deposited Property.  Immediately upon any such change, the Depositary shall give notice thereof in writing to all Holders of ADSs, each other Custodian and the Company.

 

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Citibank, N.A. may at any time act as Custodian of the Deposited Property pursuant to the Deposit Agreement, in which case any reference to Custodian shall mean Citibank, N.A. solely in its capacity as Custodian pursuant to the Deposit Agreement.  Notwithstanding anything contained in the Deposit Agreement or any ADR, the Depositary shall not be obligated to give notice to the Company, any Holders of ADSs or any other Custodian of its acting as Custodian pursuant to the Deposit Agreement.

 

Upon the appointment of any successor depositary, any Custodian then acting hereunder shall, unless otherwise instructed by the Depositary, continue to be the Custodian of the Deposited Property without any further act or writing, and shall be subject to the direction of the successor depositary.  The successor depositary so appointed shall, nevertheless, on the written request of any Custodian, execute and deliver to such Custodian all such instruments as may be proper to give to such Custodian full and complete power and authority to act on the direction of such successor depositary.

 

Section 5.6                                   Notices and Reports.  On or before the first date on which the Company gives notice, by publication or otherwise, of any meeting of holders of Shares or other Deposited Securities, or of any adjourned meeting of such holders, or of the taking of any action by such holders other than at a meeting, or of the taking of any action in respect of any cash or other distributions or the offering of any rights in respect of Deposited Securities, the Company shall transmit to the Depositary and the Custodian a copy of the notice thereof in the English language but otherwise in the form given or to be given to holders of Shares or other Deposited Securities. The Company shall also furnish to the Custodian and the Depositary a summary, in English, of any applicable provisions or proposed provisions of the Articles of Association of the Company that may be relevant or pertain to such notice of meeting or be the subject of a vote thereat.

 

The Company will also transmit to the Depositary (a) an English language version of the other notices, reports and communications which are made generally available by the Company to holders of its Shares or other Deposited Securities and (b) the English-language versions of the Company’s annual reports prepared in accordance with the applicable requirements of the Commission.  The Depositary shall arrange, at the request of the Company and at the Company’s expense, to provide copies thereof to all Holders or make such notices, reports and other communications available to all Holders on a basis similar to that for holders of Shares or other Deposited Securities or on such other basis as the Company may advise the Depositary or as may be required by any applicable law, regulation or stock exchange requirement.  The Company has delivered to the Depositary and the Custodian a copy of the Company’s Articles of Association along with the provisions of or governing the Shares and any other Deposited Securities issued by the Company in connection with such Shares, and promptly upon any amendment thereto or change therein, the Company shall deliver to the Depositary and the Custodian a copy of such amendment thereto or change therein.  The Depositary may rely upon such copy for all purposes of the Deposit Agreement.

 

The Depositary will, at the expense of the Company, make available a copy of any such notices, reports or communications issued by the Company and delivered to the Depositary for inspection by the Holders of the ADSs at the Depositary’s Principal Office, at the office of the Custodian and at any other designated transfer office.

 

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Section 5.7                                   Issuance of Additional Shares, ADSs etc.  The Company agrees that in the event it or any of its Affiliates proposes (i) an issuance, sale or distribution of additional Shares, (ii) an offering of rights to subscribe for Shares or other Deposited Securities, (iii) an issuance or assumption of securities convertible into or exchangeable for Shares, (iv) an issuance of rights to subscribe for securities convertible into or exchangeable for Shares, (v) an elective dividend of cash or Shares, (vi) a redemption of Deposited Securities, (vii) a meeting of holders of Deposited Securities, or solicitation of consents or proxies, relating to any reclassification of securities, merger or consolidation or transfer of assets, (viii) any assumption, reclassification, recapitalization, reorganization, merger, consolidation or sale of assets which affects the Deposited Securities, or (ix) a distribution of securities other than Shares, it will obtain U.S. legal advice and take all steps necessary to ensure that the application of the proposed transaction to Holders and Beneficial Owners does not violate the registration provisions of the Securities Act, or any other applicable laws (including, without limitation, the Investment Company Act of 1940, as amended, the Exchange Act and the securities laws of the states of the U.S.).  In support of the foregoing, the Company will furnish to the Depositary (a) a written opinion of U.S. counsel (reasonably satisfactory to the Depositary) stating whether such transaction (1) requires a registration statement under the Securities Act to be in effect or (2) is exempt from the registration requirements of the Securities Act and (b) an opinion of Cayman Islands counsel stating that (1) making the transaction available to Holders and Beneficial Owners does not violate the laws or regulations of the Cayman Islands and (2) all requisite regulatory consents and approvals have been obtained in the Cayman Islands.  If the filing of a registration statement is required, the Depositary shall not have any obligation to proceed with the transaction unless it shall have received evidence reasonably satisfactory to it that such registration statement has been declared effective.  If, being advised by counsel, the Company determines that a transaction is required to be registered under the Securities Act, the Company will either (i) register such transaction to the extent necessary, (ii) alter the terms of the transaction to avoid the registration requirements of the Securities Act or (iii) direct the Depositary to take specific measures, in each case as contemplated in the Deposit Agreement, to prevent such transaction from violating the registration requirements of the Securities Act.  The Company agrees with the Depositary that neither the Company nor any of its Affiliates will at any time (i) deposit any Shares or other Deposited Securities, either upon original issuance or upon a sale of Shares or other Deposited Securities previously issued and reacquired by the Company or by any such Affiliate, or (ii) issue additional Shares, rights to subscribe for such Shares, securities convertible into or exchangeable for Shares or rights to subscribe for such securities or distribute securities other than Shares, unless such transaction and the securities issuable in such transaction do not violate the registration provisions of the Securities Act, or any other applicable laws (including, without limitation, the Investment Company Act of 1940, as amended, the Exchange Act and the securities laws of the states of the U.S.).

 

Notwithstanding anything else contained in the Deposit Agreement, nothing in the Deposit Agreement shall be deemed to obligate the Company to file any registration statement in respect of any proposed transaction.

 

Section 5.8                                   Indemnification.  The Depositary agrees to indemnify the Company and its directors, officers, employees, agents and Affiliates against, and hold each of them harmless from, any direct loss, liability, tax, charge or expense of any kind whatsoever (including, but not

 

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limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted by the Depositary and the Custodian (for so long as the Custodian is a branch of Citibank) under the terms hereof due to the negligence or bad faith of the Depositary or the Custodian, as applicable.

 

The Company agrees to indemnify the Depositary, the Custodian and any of their respective directors, officers, employees, agents and Affiliates against, and hold each of them harmless from, any direct loss, liability, tax, charge or expense of any kind whatsoever (including, but not limited to, the reasonable fees and expenses of counsel) that may arise (a) out of, or in connection with, any offer, issuance, sale, resale, transfer, deposit or withdrawal of ADRs, ADSs, the Shares, or other Deposited Securities, as the case may be, (b) out of, or as a result of, any offering documents in respect thereof or (c) out of acts performed or omitted, including, but not limited to, any delivery by the Depositary on behalf of the Company of information regarding the Company, in connection with the Deposit Agreement, the ADRs, the ADSs, the Shares, or any Deposited Property, in any such case (i) by the Depositary, the Custodian or any of their respective directors, officers, employees, agents and Affiliates, except to the extent such loss, liability, tax, charge or expense is due to the negligence or bad faith of any of them, or (ii) by the Company or any of its directors, officers, employees, agents and Affiliates. The Company shall not indemnify the Depositary or the Custodian against any liability or expense arising out of (1) a Pre-Release Transaction (except in the case of a Pre-Release Transaction requested by or on behalf of the Company) or (2) information relating to the Depositary or any Custodian, as the case may be, furnished in writing by the Depositary to the Company expressly for use in any registration statement, proxy statement, prospectus or preliminary prospectus or any other offering documents relating to the ADRs, the ADSs or any Deposited Securities represented by the ADSs.

 

The obligations set forth in this Section shall survive the termination of the Deposit Agreement and the succession or substitution of any party hereto.

 

Any person seeking indemnification hereunder (an “indemnified person”) shall notify the person from whom it is seeking indemnification (the “indemnifying person”) of the commencement of any indemnifiable action or claim promptly after such indemnified person becomes aware of such commencement (provided that the failure to make such notification shall not affect such indemnified person’s rights to seek indemnification except to the extent the indemnifying person is materially prejudiced by such failure) and shall consult in good faith with the indemnifying person as to the conduct of the defense of such action or claim that may give rise to an indemnity hereunder, which defense shall be reasonable in the circumstances.  No indemnified person shall compromise or settle any action or claim that may give rise to an indemnity hereunder without the consent of the indemnifying person, which consent shall not be unreasonably withheld.

 

Section 5.9                                   ADS Fees and Charges.  The Company, the Holders, the Beneficial Owners, and persons receiving ADSs upon issuance or whose ADSs are being cancelled shall be required to pay the ADS fees and charges identified as payable by them respectively in the ADS fee schedule attached hereto as Exhibit B.  All ADS fees and charges so payable may be deducted from distributions or must be remitted to the Depositary, or its designee, and may, at

 

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any time and from time to time, be changed by agreement between the Depositary and the Company, but, in the case of ADS fees and charges payable by Holders and Beneficial Owners, only in the manner contemplated in Section 6.1.  The Depositary shall provide, without charge, a copy of its latest ADS fee schedule to anyone upon request.

 

ADS fees and charges payable upon (i) the issuance of ADSs and (ii) the cancellation of ADSs will be payable by the person to whom the ADSs are so issued by the Depositary (in the case of ADS issuances) and by the person whose ADSs are being cancelled (in the case of ADS cancellations).  In the case of ADSs issued by the Depositary into DTC or presented to the Depositary via DTC, the ADS issuance and cancellation fees and charges will be payable by the DTC Participant(s) receiving the ADSs from the Depositary or the DTC Participant(s) holding the ADSs being cancelled, as the case may be, on behalf of the Beneficial Owner(s) and will be charged by the DTC Participant(s) to the account(s) of the applicable Beneficial Owner(s) in accordance with the procedures and practices of the DTC participant(s) as in effect at the time.  ADS fees and charges in respect of distributions and the ADS service fee are payable by Holders as of the applicable ADS Record Date established by the Depositary.  In the case of distributions of cash, the amount of the applicable ADS fees and charges is deducted from the funds being distributed.  In the case of (i) distributions other than cash and (ii) the ADS service fee, the applicable Holders as of the ADS Record Date established by the Depositary will be invoiced for the amount of the ADS fees and charges and such ADS fees may be deducted from distributions made to Holders.  For ADSs held through DTC, the ADS fees and charges for distributions other than cash and the ADS service fee may be deducted from distributions made through DTC, and may be charged to the DTC Participants in accordance with the procedures and practices prescribed by DTC from time to time and the DTC Participants in turn charge the amount of such ADS fees and charges to the Beneficial Owners for whom they hold ADSs.

 

The Depositary may reimburse the Company for certain expenses incurred by the Company in respect of the ADR program established pursuant to the Deposit Agreement, by making available a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as the Company and the Depositary agree from time to time.  The Company shall pay to the Depositary such fees and charges, and reimburse the Depositary for such out-of-pocket expenses, as the Depositary and the Company may agree from time to time.  Responsibility for payment of such fees, charges and reimbursements may from time to time be changed by agreement between the Company and the Depositary.  Unless otherwise agreed, the Depositary shall present its statement for such fees, charges and reimbursements to the Company once every three months.  The charges and expenses of the Custodian are for the sole account of the Depositary.

 

The obligations of Holders and Beneficial Owners to pay ADS fees and charges shall survive the termination of the Deposit Agreement.  As to any Depositary, upon the resignation or removal of such Depositary as described in Section 5.4, the right to collect ADS fees and charges shall extend for those ADS fees and charges incurred prior to the effectiveness of such resignation or removal.

 

Section 5.10                            Pre-Release Transactions.  Subject to the further terms and provisions of this Section 5.10, the Depositary, its Affiliates and their agents, on their own behalf, may own

 

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and deal in any class of securities of the Company and its Affiliates and in ADSs.  In its capacity as Depositary, the Depositary shall not lend Shares or ADSs; provided, however, that the Depositary may (i) issue ADSs prior to the receipt of Shares pursuant to Section 2.3 and (ii) deliver Shares prior to the receipt of ADSs for withdrawal of Deposited Securities pursuant to Section 2.7, including ADSs which were issued under (i) above but for which Shares may not have been received (each such transaction a “Pre-Release Transaction”).  The Depositary may receive ADSs in lieu of Shares under (i) above and receive Shares in lieu of ADSs under (ii) above.  Each such Pre-Release Transaction will be (a) subject to a written agreement whereby the person or entity (the “Applicant”) to whom ADSs or Shares are to be delivered (w) represents that at the time of the Pre-Release Transaction the Applicant or its customer owns the Shares or ADSs that are to be delivered by the Applicant under such Pre-Release Transaction, (x) agrees to indicate the Depositary as owner of such Shares or ADSs in its records and to hold such Shares or ADSs in trust for the Depositary until such Shares or ADSs are delivered to the Depositary or the Custodian, (y) unconditionally guarantees to deliver to the Depositary or the Custodian, as applicable, such Shares or ADSs, and (z) agrees to any additional restrictions or requirements that the Depositary deems appropriate, (b) at all times fully collateralized with cash, U.S. government securities or such other collateral as the Depositary deems appropriate, (c) terminable by the Depositary on not more than five (5) business days’ notice and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate.  The Depositary will normally limit the number of ADSs and Shares involved in such Pre-Release Transactions at any one time to thirty percent (30%) of the ADSs outstanding (without giving effect to ADSs outstanding under (i) above), provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate.

 

The Depositary may also set limits with respect to the number of ADSs and Shares involved in Pre-Release Transactions with any one person on a case-by-case basis as it deems appropriate.  The Depositary may retain for its own account any compensation received by it in conjunction with the foregoing.  Collateral provided pursuant to (b) above, but not the earnings thereon, shall be held for the benefit of the Holders (other than the Applicant).

 

Section 5.11                            Restricted Securities Owners.  The Company agrees to advise in writing each of the persons or entities who, to the knowledge of the Company, holds Restricted Securities that such Restricted Securities are ineligible for deposit hereunder (except under the circumstances contemplated in Section 2.14) and, to the extent practicable, shall require each of such persons to represent in writing that such person will not deposit Restricted Securities hereunder (except under the circumstances contemplated in Section 2.14).

 

ARTICLE VI

 

AMENDMENT AND TERMINATION

 

Section 6.1                                   Amendment/Supplement.  Subject to the terms and conditions of this Section 6.1 and applicable law, the ADRs outstanding at any time, the provisions of the Deposit Agreement and the form of ADR attached hereto and to be issued under the terms hereof may at any time and from time to time be amended or supplemented by written agreement between the Company and the Depositary in any respect which they may deem necessary or desirable without

 

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the prior written consent of the Holders or Beneficial Owners.  Any amendment or supplement which shall impose or increase any fees or charges (other than charges in connection with foreign exchange control regulations, and taxes and other governmental charges, delivery and other such expenses), or which shall otherwise materially prejudice any substantial existing right of Holders or Beneficial Owners, shall not, however, become effective as to outstanding ADSs until the expiration of thirty (30) days after notice of such amendment or supplement shall have been given to the Holders of outstanding ADSs.  Notice of any amendment to the Deposit Agreement or any ADR shall not need to describe in detail the specific amendments effectuated thereby, and failure to describe the specific amendments in any such notice shall not render such notice invalid, provided, however, that, in each such case, the notice given to the Holders identifies a means for Holders and Beneficial Owners to retrieve or receive the text of such amendment (e.g., upon retrieval from the Commission’s, the Depositary’s or the Company’s website or upon request from the Depositary).  The parties hereto agree that any amendments or supplements which (i) are reasonably necessary (as agreed by the Company and the Depositary) in order for (a) the ADSs to be registered on Form F-6 under the Securities Act or (b) the ADSs to be settled solely in electronic book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne by Holders, shall be deemed not to materially prejudice any substantial rights of Holders or Beneficial Owners.  Every Holder and Beneficial Owner at the time any amendment or supplement so becomes effective shall be deemed, by continuing to hold such ADSs, to consent and agree to such amendment or supplement and to be bound by the Deposit Agreement and the ADR, if applicable, as amended or supplemented thereby.  In no event shall any amendment or supplement impair the right of the Holder to surrender such ADS and receive therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.  Notwithstanding the foregoing, if any governmental body should adopt new laws, rules or regulations which would require an amendment of, or supplement to, the Deposit Agreement to ensure compliance therewith, the Company and the Depositary may amend or supplement the Deposit Agreement and any ADRs at any time in accordance with such changed laws, rules or regulations.  Such amendment or supplement to the Deposit Agreement and any ADRs in such circumstances may become effective before a notice of such amendment or supplement is given to Holders or within any other period of time as required for compliance with such laws, rules or regulations.

 

Section 6.2                                   Termination.  The Depositary shall, at any time at the written direction of the Company, terminate the Deposit Agreement by distributing notice of such termination to the Holders of all ADSs then outstanding at least thirty (30) days prior to the date fixed in such notice for such termination.  If (i) ninety (90) days shall have expired after the Depositary shall have delivered to the Company a written notice of its election to resign, or (ii) ninety (90) days shall have expired after the Company shall have delivered to the Depositary a written notice of the removal of the Depositary, and, in either case, a successor depositary shall not have been appointed and accepted its appointment as provided in Section 5.4 of the Deposit Agreement, the Depositary may terminate the Deposit Agreement by distributing notice of such termination to the Holders of all ADSs then outstanding at least thirty (30) days prior to the date fixed in such notice for such termination.  The date so fixed for termination of the Deposit Agreement in any termination notice so distributed by the Depositary to the Holders of ADSs is referred to as the “Termination Date”.  Until the Termination Date, the Depositary shall continue to perform all of

 

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its obligations under the Deposit Agreement, and the Holders and Beneficial Owners will be entitled to all of their rights under the Deposit Agreement.

 

If any ADSs shall remain outstanding after the Termination Date, the Registrar and the Depositary shall not, after the Termination Date, have any obligation to perform any further acts under the Deposit Agreement, except that the Depositary shall, subject, in each case, to the terms and conditions of the Deposit Agreement, continue to (i) collect dividends and other distributions pertaining to Deposited Securities, (ii) sell Deposited Property received in respect of Deposited Securities, (iii) deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any other Deposited Property, in exchange for ADSs surrendered to the Depositary (after deducting, or charging, as the case may be, in each case, the fees and charges of, and expenses incurred by, the Depositary, and all applicable taxes or governmental charges for the account of the Holders and Beneficial Owners, in each case upon the terms set forth in Section 5.9 of the Deposit Agreement), and (iv) take such actions as may be required under applicable law in connection with its role as Depositary under the Deposit Agreement.

 

At any time after the Termination Date, the Depositary may sell the Deposited Property then held under the Deposit Agreement and shall after such sale hold un-invested the net proceeds of such sale, together with any other cash then held by it under the Deposit Agreement, in an un-segregated account and without liability for interest, for the pro rata benefit of the Holders whose ADSs have not theretofore been surrendered.  After making such sale, the Depositary shall be discharged from all obligations under the Deposit Agreement except (i) to account for such net proceeds and other cash (after deducting, or charging, as the case may be, in each case, the fees and charges of, and expenses incurred by, the Depositary, and all applicable taxes or governmental charges for the account of the Holders and Beneficial Owners, in each case upon the terms set forth in Section 5.9 of the Deposit Agreement), and (ii) as may be required at law in connection with the termination of the Deposit Agreement.  After the Termination Date, the Company shall be discharged from all obligations under the Deposit Agreement, except for its obligations to the Depositary under Sections 5.8, 5.9 and 7.6 of the Deposit Agreement.  The obligations under the terms of the Deposit Agreement of Holders and Beneficial Owners of ADSs outstanding as of the Termination Date shall survive the Termination Date and shall be discharged only when the applicable ADSs are presented by their Holders to the Depositary for cancellation under the terms of the Deposit Agreement (except as specifically provided in the Deposit Agreement).

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.1                                   Counterparts.  The Deposit Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of such counterparts together shall constitute one and the same agreement.  Copies of the Deposit Agreement shall be maintained with the Depositary and shall be open to inspection by any Holder during business hours.

 

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Section 7.2                                   No Third-Party Beneficiaries.  The Deposit Agreement is for the exclusive benefit of the parties hereto (and their successors) and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person, except to the extent specifically set forth in the Deposit Agreement.  Nothing in the Deposit Agreement shall be deemed to give rise to a partnership or joint venture among the parties nor establish a fiduciary or similar relationship among the parties.  The parties hereto acknowledge and agree that (i) Citibank and its Affiliates may at any time have multiple banking relationships with the Company, the Holders, the Beneficial Owners, and their respective Affiliates, (ii) Citibank and its Affiliates may be engaged at any time in transactions in which parties adverse to the Company, the Holders, the Beneficial Owners or their respective Affiliates may have interests, (iii) the Depositary and its Affiliates may from time to time have in their possession non-public information about the Company, the Holders, the Beneficial Owners, and their respective Affiliates, (iv) nothing contained in the Deposit Agreement shall (a) preclude Citibank or any of its Affiliates from engaging in such transactions or establishing or maintaining such relationships, (b) obligate Citibank or any of its Affiliates to disclose such information, transactions or relationships, or to account for any profit made or payment received in such transactions or relationships, and (v) the Depositary shall not be deemed to have knowledge of any information any other division of Citibank or any of its Affiliates may have about the Company, the Holders, the Beneficial Owners, or any of their respective Affiliates.

 

Section 7.3                                   Severability.  In case any one or more of the provisions contained in the Deposit Agreement or in the ADRs should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby.

 

Section 7.4                                   Holders and Beneficial Owners as Parties; Binding Effect.  The Holders and Beneficial Owners from time to time of ADSs issued hereunder shall be parties to the Deposit Agreement and shall be bound by all of the terms and conditions hereof and of any ADR evidencing their ADSs by acceptance thereof or any beneficial interest therein.

 

Section 7.5                                   Notices.  Any and all notices to be given to the Company shall be deemed to have been duly given if personally delivered or sent by mail, air courier or cable, telex or facsimile transmission, confirmed by letter personally delivered or sent by mail or air courier, addressed to 4/F, No. 29 Building, Fangguyuan Section 1, Fangzhuang, Fengtai District, Beijing 100078, People’s Republic of China, Attention:  Chief Financial Officer, or to any other address which the Company may specify in writing to the Depositary.

 

Any and all notices to be given to the Depositary shall be deemed to have been duly given if personally delivered or sent by mail, air courier or cable, telex or facsimile transmission, confirmed by letter personally delivered or sent by mail or air courier, addressed to Citibank, N.A., 388 Greenwich Street, New York, New York 10013, U.S.A., Attention:  Depositary Receipts Department, or to any other address which the Depositary may specify in writing to the Company.

 

Any and all notices to be given to any Holder shall be deemed to have been duly given (a) if personally delivered or sent by mail or cable, telex or facsimile transmission, confirmed by

 

43

 

letter, addressed to such Holder at the address of such Holder as it appears on the books of the Depositary or, if such Holder shall have filed with the Depositary a request that notices intended for such Holder be mailed to some other address, at the address specified in such request, or (b) if a Holder shall have designated such means of notification as an acceptable means of notification under the terms of the Deposit Agreement, by means of electronic messaging addressed for delivery to the e-mail address designated by the Holder for such purpose.  Notice to Holders shall be deemed to be notice to Beneficial Owners for all purposes of the Deposit Agreement.  Failure to notify a Holder or any defect in the notification to a Holder shall not affect the sufficiency of notification to other Holders or to the Beneficial Owners of ADSs held by such other Holders. Any notices given to DTC under the terms of the Deposit Agreement shall (unless otherwise specified by the Depositary) constitute notice to the DTC Participants who hold as the ADSs in their DTC accounts and to the Beneficial Owners of such ADSs.

 

Delivery of a notice sent by mail, air courier or cable, telex or facsimile transmission shall be deemed to be effective at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a cable, telex or facsimile transmission) is deposited, postage prepaid, in a post-office letter box or delivered to an air courier service, without regard for the actual receipt or time of actual receipt thereof by a Holder.  The Depositary or the Company may, however, act upon any cable, telex or facsimile transmission received by it from any Holder, the Custodian, the Depositary, or the Company, notwithstanding that such cable, telex or facsimile transmission shall not be subsequently confirmed by letter.

 

Delivery of a notice by means of electronic messaging shall be deemed to be effective at the time of the initiation of the transmission by the sender (as shown on the sender’s records), notwithstanding that the intended recipient retrieves the message at a later date, fails to retrieve such message, or fails to receive such notice on account of its failure to maintain the designated e-mail address, its failure to designate a substitute e-mail address or for any other reason.

 

Section 7.6                                   Governing Law and Jurisdiction.  The Deposit Agreement and the ADRs shall be interpreted in accordance with, and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by, the laws of the State of New York without reference to the principles of choice of law thereof.  Notwithstanding anything contained in the Deposit Agreement, any ADR or any present or future provisions of the laws of the State of New York, the rights of holders of Shares and of any other Deposited Securities and the obligations and duties of the Company in respect of the holders of Shares and other Deposited Securities, as such, shall be governed by the laws of the Cayman Islands (or, if applicable, such other laws as may govern the Deposited Securities).

 

Except as set forth in the following paragraph of this Section 7.6, the Company and the Depositary agree that the federal or state courts in the City of New York shall have jurisdiction to hear and determine any suit, action or proceeding and to settle any dispute between them that may arise out of or in connection with the Deposit Agreement and, for such purposes, each irrevocably submits to the non-exclusive jurisdiction of such courts.  The Company hereby irrevocably designates, appoints and empowers Law Debenture Corporate Services Inc. (the “Agent”) now at 801 2nd Avenue, Suite 403 New York, NY 10017 as its authorized agent to receive and accept for and on its behalf, and on behalf of its properties, assets and revenues,

 

44

 

service by mail of any and all legal process, summons, notices and documents that may be served in any suit, action or proceeding brought against the Company in any federal or state court as described in the preceding sentence or in the next paragraph of this Section 7.6.  If for any reason the Agent shall cease to be available to act as such, the Company agrees to designate a new agent in New York on the terms and for the purposes of this Section 7.6 reasonably satisfactory to the Depositary. The Company further hereby irrevocably consents and agrees to the service of any and all legal process, summons, notices and documents in any suit, action or proceeding against the Company, by service by mail of a copy thereof upon the Agent (whether or not the appointment of such Agent shall for any reason prove to be ineffective or such Agent shall fail to accept or acknowledge such service), with a copy mailed to the Company by registered or certified air mail, postage prepaid, to its address provided in Section 7.5.  The Company agrees that the failure of the Agent to give any notice of such service to it shall not impair or affect in any way the validity of such service or any judgment rendered in any action or proceeding based thereon.

 

Notwithstanding the foregoing, the Depositary and the Company unconditionally agree that in the event that a Holder or Beneficial Owner brings a suit, action or proceeding against (a) the Company, (b) the Depositary in its capacity as Depositary under the Deposit Agreement or (c) against both the Company and the Depositary, in any such case, in any state or federal court of the United States other than in a state or federal court in the City of New York (to the extent permitted hereunder), and the Depositary or the Company have any claim, for indemnification or otherwise, against each other arising out of the subject matter of such suit, action or proceeding, then the Company and the Depositary may pursue such claim against each other in the state or federal court in the United States in which such suit, action, or proceeding is pending and, for such purposes, the Company and the Depositary irrevocably submit to the non-exclusive jurisdiction of such courts.  The Company agrees that service of process upon the Agent in the manner set forth in the preceding paragraph shall be effective service upon it for any suit, action or proceeding brought against it as described in this paragraph.

 

The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of venue of any actions, suits or proceedings brought in any court as provided in this Section 7.6, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

 

Holders and Beneficial Owners understand and each irrevocably agrees that, by holding an ADS or an interest therein, any legal suit, action or proceeding against or involving the Company or the Depositary, arising out of or based upon the Deposit Agreement, ADSs, ADRs or the transactions contemplated hereby or thereby or by virtue of ownership thereof, may only be instituted in a state or federal court in the City of New York, and by holding an ADS or an interest therein each irrevocably waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Holders and Beneficial Owners agree that the provisions of this paragraph shall survive such Holders’ and Beneficial Owners’ ownership of ADSs or interests therein.

 

45

 

The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, and agrees not to plead or claim, any right of immunity from legal action, suit or proceeding, from setoff or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment in aid of execution or judgment, from execution of judgment, or from any other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, and consents to such relief and enforcement against it, its assets and its revenues in any jurisdiction, in each case with respect to any matter arising out of, or in connection with, the Deposit Agreement, any ADR or the Deposited Property.

 

EACH OF THE PARTIES TO THE DEPOSIT AGREEMENT (INCLUDING, WITHOUT LIMITATION, EACH HOLDER AND BENEFICIAL OWNER) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING AGAINST THE COMPANY AND/OR THE DEPOSITARY ARISING OUT OF, OR RELATING TO, THE DEPOSIT AGREEMENT, ANY ADR AND ANY TRANSACTIONS CONTEMPLATED THEREIN (WHETHER BASED ON CONTRACT, TORT, COMMON LAW OR OTHERWISE).

 

No disclaimer of liability under the Securities Act is intended by any provision of the Deposit Agreement.  The provisions of this Section 7.6 shall survive any termination of the Deposit Agreement, in whole or in part.

 

Section 7.7                                   Assignment.  Subject to the provisions of Section 5.4, the Deposit Agreement may not be assigned by either the Company or the Depositary.

 

Section 7.8                                   Compliance with U.S. Securities Laws.  Notwithstanding anything in the Deposit Agreement to the contrary, the withdrawal or delivery of Deposited Securities will not be suspended by the Company or the Depositary except as would be permitted by Instruction I.A.(1) of the General Instructions to Form F-6 Registration Statement, as amended from time to time, under the Securities Act.

 

Section 7.9                                   Cayman Islands Law References.  Any summary of the laws and regulations of the Cayman Islands and of the terms of the Company’s Articles of Association set forth in the Deposit Agreement have been provided by the Company solely for the convenience of Holders, Beneficial Owners and the Depositary.  While such summaries are believed by the Company to be accurate as of the date of the Deposit Agreement, (i) they are summaries and as such may not include all aspects of the materials summarized applicable to a Holder or Beneficial Owner, and (ii) these laws and regulations and the Company’s Articles of Association may change after the date of the Deposit Agreement.  Neither the Depositary nor the Company has any obligation under the terms of the Deposit Agreement to update any such summaries.

 

Section 7.10                            Titles and References.

 

(a)                                Deposit Agreement.  All references in the Deposit Agreement to exhibits, articles, sections, subsections, and other subdivisions refer to the exhibits, articles, sections,

 

46

 

subsections and other subdivisions of the Deposit Agreement unless expressly provided otherwise.  The words “the Deposit Agreement”, “herein”, “hereof”, “hereby”, “hereunder”, and words of similar import refer to the Deposit Agreement as a whole as in effect at the relevant time between the Company, the Depositary and the Holders and Beneficial Owners of ADSs and not to any particular subdivision unless expressly so limited.  Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa unless the context otherwise requires.  Titles to sections of the Deposit Agreement are included for convenience only and shall be disregarded in construing the language contained in the Deposit Agreement.  References to “applicable laws and regulations” shall refer to laws and regulations applicable to ADRs, ADSs or Deposited Property as in effect at the relevant time of determination, unless otherwise required by law or regulation.

 

(b)                                ADRs.  All references in any ADR(s) to paragraphs, exhibits, articles, sections, subsections, and other subdivisions refer to the paragraphs, exhibits, articles, sections, subsections and other subdivisions of the ADR(s) in question unless expressly provided otherwise.  The words “the Receipt”, “the ADR”, “herein”, “hereof”, “hereby”, “hereunder”, and words of similar import used in any ADR refer to the ADR as a whole and as in effect at the relevant time, and not to any particular subdivision unless expressly so limited.  Pronouns in masculine, feminine and neuter gender in any ADR shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa unless the context otherwise requires.  Titles to paragraphs of any ADR are included for convenience only and shall be disregarded in construing the language contained in the ADR.  References to “applicable laws and regulations” shall refer to laws and regulations applicable to ADRs, ADSs or Deposited Property as in effect at the relevant time of determination, unless otherwise required by law or regulation.

 

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IN WITNESS WHEREOF, RYB EDUCATION, INC. and CITIBANK, N.A. have duly executed the Deposit Agreement as of the day and year first above set forth and all Holders and Beneficial Owners shall become parties hereto upon acceptance by them of ADSs issued in accordance with the terms hereof, or upon acquisition of any beneficial interest therein.

 

	
 
    	
RYB EDUCATION, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Yanlai Shi
    
	
 
    	
 
    	
Name:   Yanlai Shi
    
	
 
    	
 
    	
Title:   Executive Director and Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CITIBANK,   N.A.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Keith Galfo
    
	
 
    	
 
    	
Name:   Keith Galfo
    
	
 
    	
 
    	
Title:   Vice President
    

 

1

 

EXHIBIT A

 

[FORM OF ADR]

 

	
Number            
    	
CUSIP NUMBER:            
    

 

	
 
    	
American   Depositary Shares (each American Depositary Share representing the right to   receive one fully paid Class A   ordinary share)
    

 

AMERICAN DEPOSITARY RECEIPT

 

for

 

AMERICAN DEPOSITARY SHARES

 

representing

 

DEPOSITED CLASS A ORDINARY SHARES

 

of

 

RYB EDUCATION, INC.

 

(Incorporated under the laws of the Cayman Islands)

 

CITIBANK, N.A., a national banking association organized and existing under the laws of the United States of America, as depositary (the “Depositary”), hereby certifies that               is the owner of                  American Depositary Shares (hereinafter “ADS”) representing deposited Class A ordinary shares, including evidence of rights to receive such Class A ordinary shares (the “Shares”), of RYB Education, Inc., an exempted company with limited liability organized under the laws of the Cayman Islands (the “Company”).  As of the date of issuance of this ADR, each ADS represents the right to receive one Share deposited under the Deposit Agreement (as hereinafter defined) with the Custodian, which at the date of issuance of this ADR is Citibank, N.A. — Hong Kong (the “Custodian”).  The ADS(s)-to-Share(s) ratio is subject to amendment as provided in Articles IV and VI of the Deposit Agreement.  The Depositary’s Principal Office is located at 388 Greenwich Street, New York, New York 10013, U.S.A.

 

A-1

 

(1)                                 The Deposit Agreement.  This American Depositary Receipt is one of an issue of American Depositary Receipts (“ADRs”), all issued and to be issued upon the terms and conditions set forth in the Deposit Agreement, dated as of September 26, 2017 (as amended and supplemented from time to time, the “Deposit Agreement”), by and among the Company, the Depositary, and all Holders and Beneficial Owners of ADSs issued thereunder.  The Deposit Agreement sets forth the rights and obligations of Holders and Beneficial Owners of ADSs and the rights and duties of the Depositary in respect of the Shares deposited thereunder and any and all other Deposited Property (as defined in the Deposit Agreement) from time to time received and held on deposit in respect of the ADSs.  Copies of the Deposit Agreement are on file at the Principal Office of the Depositary and with the Custodian.  Each Holder and each Beneficial Owner, upon acceptance of any ADSs (or any interest therein) issued in accordance with the terms and conditions of the Deposit Agreement, shall be deemed for all purposes to (a) be a party to and bound by the terms of the Deposit Agreement and the applicable ADR(s), and (b) appoint the Depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in the Deposit Agreement and the applicable ADR(s), to adopt any and all procedures necessary to comply with applicable law and to take such action as the Depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the Deposit Agreement and the applicable ADR(s), the taking of such actions to be the conclusive determinant of the necessity and appropriateness thereof.  The manner in which a Beneficial Owner holds ADSs (e.g., in a brokerage account vs. as registered holder) may affect the rights and obligations of, the manner in which, and the extent to which, services are made available to, Beneficial Owners pursuant to the terms of the Deposit Agreement.

 

The statements made on the face and reverse of this ADR are summaries of certain provisions of the Deposit Agreement and the Articles of Association of the Company (as in effect on the date of the signing of the Deposit Agreement) and are qualified by and subject to the detailed provisions of the Deposit Agreement and the Articles of Association, to which reference is hereby made.

 

All capitalized terms not defined herein shall have the meanings ascribed thereto in the Deposit Agreement.

 

The Depositary makes no representation or warranty as to the validity or worth of the Deposited Property.  The Depositary has made arrangements for the acceptance of the ADSs into DTC.  Each Beneficial Owner of ADSs held through DTC must rely on the procedures of DTC and the DTC Participants to exercise and be entitled to any rights attributable to such ADSs.  The Depositary may issue Uncertificated ADSs subject, however, to the terms and conditions of Section 2.13 of the Deposit Agreement.

 

(2)                                 Surrender of ADSs and Withdrawal of Deposited Securities.  The Holder of this ADR (and of the ADSs evidenced hereby) shall be entitled to Delivery (at the Custodian’s designated office) of the Deposited Securities at the time represented by the ADSs evidenced hereby upon satisfaction of each of the following conditions: (i) the Holder (or a duly-authorized attorney of the Holder) has duly Delivered ADSs to the Depositary at its Principal Office the ADSs evidenced hereby (and, if applicable, this ADR evidencing such ADSs) for the purpose of

 

A-2

 

withdrawal of the Deposited Securities represented thereby, (ii) if applicable and so required by the Depositary, this ADR Delivered to the Depositary for such purpose has been properly endorsed in blank or is accompanied by proper instruments of transfer in blank (including signature guarantees in accordance with standard securities industry practice), (iii) if so required by the Depositary, the Holder of the ADSs has executed and delivered to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be Delivered to or upon the written order of the person(s) designated in such order, and (iv) all applicable fees and charges of, and expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 of, and Exhibit B to, the Deposit Agreement) have been paid, subject, however, in each case, to the terms and conditions of this ADR evidencing the surrendered ADSs, of the Deposit Agreement, of the Company’s Articles of Association and of any applicable laws and the rules of the applicable book-entry settlement system, if available, and to any provisions of or governing the Deposited Securities, in each case as in effect at the time thereof.Upon satisfaction of each of the conditions specified above, the Depositary (i) shall cancel the ADSs Delivered to it (and, if applicable, this ADR(s) evidencing the ADSs so Delivered), (ii) shall direct the Registrar to record the cancellation of the ADSs so Delivered on the books maintained for such purpose, and (iii) shall direct the Custodian to Deliver, or cause the Delivery of, in each case, without unreasonable delay, the Deposited Securities represented by the ADSs so canceled together with any certificate or other document of title for the Deposited Securities, or evidence of the electronic transfer thereof (if available), as the case may be, to or upon the written order of the person(s) designated in the order delivered to the Depositary for such purpose, subject however, in each case, to the terms and conditions of the Deposit Agreement, of this ADR evidencing the ADS so canceled, of the Articles of Association of the Company, of any applicable laws and of the rules of the applicable book-entry settlement system, if available, and to the terms and conditions of or governing the Deposited Securities, in each case as in effect at the time thereof.

 

The Depositary shall not accept for surrender ADSs representing less than one (1) Share.  In the case of Delivery to it of ADSs representing a number other than a whole number of Shares, the Depositary shall cause ownership of the appropriate whole number of Shares to be Delivered in accordance with the terms hereof, and shall, at the discretion of the Depositary, either (i) return to the person surrendering such ADSs the number of ADSs representing any remaining fractional Share, or (ii) sell or cause to be sold the fractional Share represented by the ADSs so surrendered and remit the proceeds of such sale (net of (a) applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes withheld) to the person surrendering the ADSs.

 

Notwithstanding anything else contained in this ADR or the Deposit Agreement, the Depositary may make delivery at the Principal Office of the Depositary of Deposited Property consisting of (i) any cash dividends or cash distributions, or (ii) any proceeds from the sale of any non-cash distributions, which are at the time held by the Depositary in respect of the Deposited Securities represented by the ADSs surrendered for cancellation and withdrawal.  At the request, risk and expense of any Holder so surrendering ADSs represented by this ADR, and for the account of such Holder, the Depositary shall direct the Custodian to forward (to the extent permitted by law) any Deposited Property (other than Deposited Securities) held by the

 

A-3

 

Custodian in respect of such ADSs to the Depositary for delivery at the Principal Office of the Depositary.  Such direction shall be given by letter or, at the request, risk and expense of such Holder, by cable, telex or facsimile transmission.

 

(3)                                 Transfer, Combination and Split-up of ADRs.  The Registrar shall register the transfer of this ADR (and of the ADSs represented hereby) on the books maintained for such purpose and the Depositary shall (x) cancel this ADR and execute new ADRs evidencing the same aggregate number of ADSs as those evidenced by this ADR canceled by the Depositary, (y) cause the Registrar to countersign such new ADRs, and (z) Deliver such new ADRs to or upon the order of the person entitled thereto, if each of the following conditions has been satisfied:  (i) this ADR has been duly Delivered by the Holder (or by a duly authorized attorney of the Holder) to the Depositary at its Principal Office for the purpose of effecting a transfer hereof, (ii) this surrendered ADR has been properly endorsed or is accompanied by proper instruments of transfer (including signature guarantees in accordance with standard securities industry practice), (iii) this surrendered ADR has been duly stamped (if required by the laws of the State of New York or of the United States), and (iv) all applicable fees and charges of, and expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 of, and Exhibit B to, the Deposit Agreement) have been paid, subject, however, in each case, to the terms and conditions of this ADR, of the Deposit Agreement and of applicable law, in each case as in effect at the time thereof.

 

The Registrar shall register the split-up or combination of this ADR (and of the ADSs represented hereby) on the books maintained for such purpose and the Depositary shall (x) cancel this ADR and execute new ADRs for the number of ADSs requested, but in the aggregate not exceeding the number of ADSs evidenced by this ADR canceled by the Depositary, (y) cause the Registrar to countersign such new ADRs, and (z) Deliver such new ADRs to or upon the order of the Holder thereof, if each of the following conditions has been satisfied:  (i) this ADR has been duly Delivered by the Holder (or by a duly authorized attorney of the Holder) to the Depositary at its Principal Office for the purpose of effecting a split-up or combination hereof, and (ii) all applicable fees and charges of, and expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 of, and Exhibit B to, the Deposit Agreement) have been paid, subject, however, in each case, to the terms and conditions of this ADR, of the Deposit Agreement and of applicable law, in each case as in effect at the time thereof.

 

(4)                                 Pre-Conditions to Registration, Transfer, Etc.  As a condition precedent to the execution and delivery, the registration of issuance, transfer, split-up, combination or surrender, of any ADS, the delivery of any distribution thereon, or the withdrawal of any Deposited Property, the Depositary or the Custodian may require (i) payment from the depositor of Shares or presenter of ADSs or of this ADR of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees and charges of the Depositary as provided in Section 5.9 and Exhibit B to the Deposit Agreement and in this ADR, (ii) the production of proof reasonably satisfactory to it as to the identity and genuineness of any signature or any other matter

 

A-4

 

contemplated by Section 3.1 of the Deposit Agreement, and (iii) compliance with (A) any laws or governmental regulations relating to the execution and delivery of this ADR or ADSs or to the withdrawal of Deposited Securities and (B) such reasonable regulations as the Depositary and the Company may establish consistent with the provisions of this ADR, if applicable, the Deposit Agreement and applicable law.

 

The issuance of ADSs against deposits of Shares generally or against deposits of particular Shares may be suspended, or the deposit of particular Shares may be refused, or the registration of transfer of ADSs in particular instances may be refused, or the registration of transfer of ADSs generally may be suspended, during any period when the transfer books of the Company, the Depositary, a Registrar or the Share Registrar are closed or if any such action is deemed necessary or advisable by the Depositary (whereupon the Depositary shall notify the Company in writing) or the Company, in good faith, at any time or from time to time because of any requirement of law or regulation, any government or governmental body or commission or any securities exchange on which the ADSs or Shares are listed, or under any provision of the Deposit Agreement or this ADR, if applicable, or under any provision of, or governing, the Deposited Securities, or because of a meeting of shareholders of the Company or for any other reason, subject, in all cases to Section 7.8 of the Deposit Agreement and paragraph (25) of this ADR.  Notwithstanding any provision of the Deposit Agreement or this ADR to the contrary, Holders are entitled to surrender outstanding ADSs to withdraw the Deposited Securities associated therewith at any time subject only to (i) temporary delays caused by closing the transfer books of the Depositary or the Company or the deposit of Shares in connection with voting at a shareholders’ meeting or the payment of dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the ADSs or to the withdrawal of the Deposited Securities, and (iv) other circumstances specifically contemplated by Instruction I.A.(l) of the General Instructions to Form F-6 (as such General Instructions may be amended from time to time).

 

(5)                                 Compliance With Information Requests.  Notwithstanding any other provision of the Deposit Agreement or this ADR, each Holder and Beneficial Owner of the ADSs represented hereby agrees to comply with requests from the Company pursuant to applicable law, the rules and requirements of the stock exchange on which the Shares or ADSs are, or will be, registered, traded or listed, or the Articles of Association of the Company, which are made to provide information, inter alia, as to the capacity in which such Holder or Beneficial Owner owns ADSs (and the Shares represented by such ADSs, as the case may be) and regarding the identity of any other person(s) interested in such ADSs (and the Shares represented by such ADSs, as the case may be) and the nature of such interest and various other matters, whether or not they are Holders and/or Beneficial Owners at the time of such request.

 

(6)                                 Ownership Restrictions.  Notwithstanding any other provision of this ADR or of the Deposit Agreement, the Company may restrict transfers of the Shares where such transfer might result in ownership of Shares exceeding limits imposed by applicable law or the Articles of Association of the Company.  The Company may also restrict, in such manner as it deems appropriate, transfers of the ADSs where such transfer may result in the total number of Shares represented by the ADSs owned by a single Holder or Beneficial Owner to exceed any such

 

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limits.  The Company may, in its sole discretion but subject to applicable law, instruct the Depositary to take action with respect to the ownership interest of any Holder or Beneficial Owner in excess of the limits set forth in the preceding sentence, including but not limited to, the imposition of restrictions on the transfer of ADSs, the removal or limitation of voting rights or the mandatory sale or disposition on behalf of a Holder or Beneficial Owner of the Shares represented by the ADSs held by such Holder or Beneficial Owner in excess of such limitations, if and to the extent such disposition is permitted by applicable law and the Articles of Association of the Company.  Nothing herein or in the Deposit Agreement shall be interpreted as obligating the Depositary or the Company to ensure compliance with the ownership restrictions described herein or in Section 3.5 of the Deposit Agreement.

 

(7)                                 Reporting Obligations and Regulatory Approvals.  Applicable laws and regulations may require holders and beneficial owners of Shares, including the Holders and Beneficial Owners of ADSs, to satisfy reporting requirements and obtain regulatory approvals in certain circumstances.  Holders and Beneficial Owners of ADSs are solely responsible for determining and complying with such reporting requirements and obtaining such approvals.  Each Holder and each Beneficial Owner hereby agrees to make such determination, file such reports, and obtain such approvals to the extent and in the form required by applicable laws and regulations as in effect from time to time.  Neither the Depositary, the Custodian, the Company or any of their respective agents or affiliates shall be required to take any actions whatsoever on behalf of Holders or Beneficial Owners to determine or satisfy such reporting requirements or obtain such regulatory approvals under applicable laws and regulations.

 

(8)                                 Liability for Taxes and Other Charges.  Any tax or other governmental charge payable by the Custodian or by the Depositary with respect to any Deposited Property, ADSs or this ADR shall be payable by the Holders and Beneficial Owners to the Depositary.  The Company, the Custodian and/or the Depositary may withhold or deduct from any distributions made in respect of Deposited Property, and may sell for the account of a Holder and/or Beneficial Owner any or all of the Deposited Property and apply such distributions and sale proceeds in payment of, any taxes (including applicable interest and penalties) or charges that are or may be payable by Holders or Beneficial Owners in respect of the ADSs, Deposited Property and this ADR, the Holder and the Beneficial Owner hereof remaining liable for any deficiency.  The Custodian may refuse the deposit of Shares and the Depositary may refuse to issue ADSs, to deliver ADRs, register the transfer of ADSs, register the split-up or combination of ADRs and (subject to paragraph (25) of this ADR and Section 7.8 of the Deposit Agreement) the withdrawal of Deposited Property until payment in full of such tax, charge, penalty or interest is received.  Every Holder and Beneficial Owner agrees to indemnify the Depositary, the Company, the Custodian, and any of their agents, officers, employees and Affiliates for, and to hold each of them harmless from, any claims with respect to taxes (including applicable interest and penalties thereon) arising from any tax benefit obtained for such Holder and/or Beneficial Owner.  The obligations of Holders and Beneficial Owners under this paragraph (8) and Section 3.2 of the Deposit Agreement shall survive any transfer of ADSs, any cancellation of ADSs and withdrawal of Deposited Securities, and the termination of the Deposit Agreement.

 

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(9)                                 Representations and Warranties on Deposit of Shares.  Each person depositing Shares under the Deposit Agreement shall be deemed thereby to represent and warrant that (i) such Shares and the certificates therefor are duly authorized, validly issued, fully paid, non-assessable and legally obtained by such person, (ii) all preemptive (and similar) rights, if any, with respect to such Shares have been validly waived or exercised, (iii) the person making such deposit is duly authorized so to do, (iv) the Shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, (v) the Shares presented for deposit are not, and the ADSs issuable upon such deposit will not be, Restricted Securities (except as contemplated in Section 2.14 of the Deposit Agreement), and (vi) the Shares presented for deposit have not been stripped of any rights or entitlements.  Such representations and warranties shall survive the deposit and withdrawal of Shares, the issuance and cancellation of ADSs in respect thereof and the transfer of such ADSs.  If any such representations or warranties are false in any way, the Company and the Depositary shall be authorized, at the cost and expense of the person depositing Shares, to take any and all actions necessary to correct the consequences thereof.

 

(10)                          Proofs, Certificates and Other Information.  Any person presenting Shares for deposit, any Holder and any Beneficial Owner may be required, and every Holder and Beneficial Owner agrees, from time to time to provide to the Depositary and the Custodian such proof of citizenship or residence, taxpayer status, payment of all applicable taxes or other governmental charges, exchange control approval, legal or beneficial ownership of ADSs and Deposited Property, compliance with applicable laws, the terms of the Deposit Agreement or this ADR evidencing the ADSs and the provisions of, or governing, the Deposited Property, to execute such certifications and to make such representations and warranties, and to provide such other information and documentation (or, in the case of Shares in registered form presented for deposit, such information relating to the registration on the books of the Company or of the Share Registrar) as the Depositary or the Custodian may deem necessary or proper or as the Company may reasonably require by written request to the Depositary consistent with its obligations under the Deposit Agreement and this ADR.  The Depositary and the Registrar, as applicable, may withhold the execution or delivery or registration of transfer of any ADR or ADS or the distribution or sale of any dividend or distribution of rights or of the proceeds thereof or, to the extent not limited by paragraph (25) and Section 7.8 of the Deposit Agreement, the delivery of any Deposited Property until such proof or other information is filed or such certifications are executed, or such representations and warranties are made or such other documentation or information are provided, in each case to the Depositary’s, the Registrar’s and the Company’s satisfaction.

 

(11)                          ADS Fees and Charges.  The following ADS fees are payable under the terms of the Deposit Agreement:

 

(i)                                     ADS Issuance Fee:  by any person to whom the ADSs are issued (e.g., an issuance upon a deposit of Shares, upon a change in the ADS(s)-to-Share(s) ratio, or for any other reason), excluding issuances as a result of distributions described in paragraph (iv) below, a fee not in excess of U.S.

 

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$5.00 per 100 ADSs (or fraction thereof) issued under the terms of the Deposit Agreement;

 

(ii)                                  ADS Cancellation Fee:  by any person whose ADSs are being cancelled (e.g., a cancellation of ADSs for delivery of deposited Shares, upon a change in the ADS(s)-to-Share(s) ratio, or for any other reason), a fee not in excess of U.S. $5.00 per 100 ADSs (or fraction thereof) cancelled;

 

(iii)                               Cash Distribution Fee:  by any Holder of ADSs, a fee not in excess of U.S. $5.00 per 100 ADSs (or fraction thereof) held for the distribution of cash dividends or other cash distributions (e.g., upon a sale of rights and other entitlements);

 

(iv)                              Stock Distribution /Rights Exercise Fee:  by any Holder of ADS(s), a fee not in excess of U.S. $5.00 per 100 ADSs (or fraction thereof) held for the distribution of ADSs pursuant to (a) stock dividends or other free stock distributions, or (b) an exercise of rights to purchase additional ADSs;

 

(v)                                 Other Distribution Fee:  by any Holder of ADS(s), a fee not in excess of U.S. $5.00 per 100 ADSs (or fraction thereof) held for the distribution of securities other than ADSs or rights to purchase additional ADSs (e.g., spin-off shares); and

 

(vi)                              Depositary Services Fee:  by any Holder of ADS(s), a fee not in excess of U.S. $5.00 per 100 ADSs (or fraction thereof) held on the applicable record date(s) established by the Depositary.

 

The Company, Holders, Beneficial Owners, persons receiving ADSs upon issuance and persons whose ADSs are being cancelled will be responsible for the following ADS charges under the terms of the Deposit Agreement:

 

(a)                                 taxes (including applicable interest and penalties) and other governmental charges;

 

(b)                                 such registration fees as may from time to time be in effect for the registration of Shares or other Deposited Securities on the share register and applicable to transfers of Shares or other Deposited Securities to or from the name of the Custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively;

 

(c)                                  such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the Deposit Agreement to be at the expense of the person depositing Shares or withdrawing Deposited Securities or of the Holders and Beneficial Owners of ADSs;

 

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(d)                                 the expenses and charges incurred by the Depositary in the conversion of foreign currency;

 

(e)                                  such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Shares, Deposited Securities, ADSs and ADRs; and

 

(f)                                   the fees and expenses incurred by the Depositary, the Custodian, or any nominee in connection with the servicing or delivery of Deposited Property.

 

All ADS fees and charges may, at any time and from time to time, be changed by agreement between the Depositary and Company but, in the case of ADS fees and charges payable by Holders and Beneficial Owners, only in the manner contemplated by paragraph (23) of this ADR and as contemplated in Section 6.1 of the Deposit Agreement.  The Depositary shall provide, without charge, a copy of its latest ADS fee schedule to anyone upon request.

 

ADS fees and charges payable upon (i) the issuance of ADSs and (ii) the cancellation of ADSs will be payable by the person to whom the ADSs are so issued by the Depositary (in the case of ADS issuances) and by the person whose ADSs are being cancelled (in the case of ADS cancellations).  In the case of ADSs issued by the Depositary into DTC or presented to the Depositary via DTC, the ADS issuance and cancellation fees and charges will be payable by the DTC Participant(s) receiving the ADSs from the Depositary or the DTC Participant(s) holding the ADSs being cancelled, as the case may be, on behalf of the Beneficial Owner(s) and will be charged by the DTC Participant(s) to the account(s) of the applicable Beneficial Owner(s) in accordance with the procedures and practices of the DTC Participant(s) as in effect at the time.  ADS fees and charges in respect of distributions and the ADS service fee are payable by Holders as of the applicable ADS Record Date established by the Depositary.  In the case of distributions of cash, the amount of the applicable ADS fees and charges is deducted from the funds being distributed.  In the case of (i) distributions other than cash and (ii) the ADS service fee, the applicable Holders as of the ADS Record Date established by the Depositary will be invoiced for the amount of the ADS fees and charges and such ADS fees may be deducted from distributions made to Holders.  For ADSs held through DTC, the ADS fees and charges for distributions other than cash and the ADS service fee may be deducted from distributions made through DTC and may be charged to the DTC Participants in accordance with the procedures and practices prescribed by DTC from time to time and the DTC Participants in turn charge the amount of such ADS fees and charges to the Beneficial Owners for whom they hold ADSs.

 

The Depositary may reimburse the Company for certain expenses incurred by the Company in respect of the ADR program established pursuant to the Deposit Agreement, by making available a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as the Company and the Depositary agree from time to time.  The Company shall pay to the Depositary such fees and charges, and reimburse the Depositary for such out-of-pocket expenses, as the Depositary and the Company may agree from time to

 

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time.  Responsibility for payment of such fees, charges and reimbursements may from time to time be changed by agreement between the Company and the Depositary.  Unless otherwise agreed, the Depositary shall present its statement for such fees, charges and reimbursements to the Company once every three months.  The charges and expenses of the Custodian are for the sole account of the Depositary.

 

The obligations of Holders and Beneficial Owners to pay ADS fees and charges shall survive the termination of the Deposit Agreement.  As to any Depositary, upon the resignation or removal of such Depositary as described in Section 5.4 of the Deposit Agreement, the right to collect ADS fees and charges shall extend for those ADS fees and charges incurred prior to the effectiveness of such resignation or removal.

 

(12)                          Title to ADRs.  Subject to the limitations contained in the Deposit Agreement and in this ADR, it is a condition of this ADR, and every successive Holder of this ADR by accepting or holding the same consents and agrees, that title to this ADR (and to each Certificated ADS evidenced hereby) shall be transferable upon the same terms as a certificated security under the laws of the State of New York, provided that, in the case of Certificated ADSs, this ADR has been properly endorsed or is accompanied by proper instruments of transfer.  Notwithstanding any notice to the contrary, the Depositary and the Company may deem and treat the Holder of this ADR (that is, the person in whose name this ADR is registered on the books of the Depositary) as the absolute owner thereof for all purposes.  Neither the Depositary nor the Company shall have any obligation nor be subject to any liability under the Deposit Agreement or this ADR to any holder of this ADR or any Beneficial Owner unless, in the case of a holder of ADSs, such holder is the Holder of this ADR registered on the books of the Depositary or, in the case of a Beneficial Owner, such Beneficial Owner, or the Beneficial Owner’s representative, is the Holder registered on the books of the Depositary.

 

(13)                          Validity of ADR.  The Holder(s) of this ADR (and the ADSs represented hereby) shall not be entitled to any benefits under the Deposit Agreement or be valid or enforceable for any purpose against the Depositary or the Company unless this ADR has been (i) dated, (ii) signed by the manual or facsimile signature of a duly-authorized signatory of the Depositary, (iii) countersigned by the manual or facsimile signature of a duly-authorized signatory of the Registrar, and (iv) registered in the books maintained by the Registrar for the registration of issuances and transfers of ADRs.  An ADR bearing the facsimile signature of a duly-authorized signatory of the Depositary or the Registrar, who at the time of signature was a duly authorized signatory of the Depositary or the Registrar, as the case may be, shall bind the Depositary, notwithstanding the fact that such signatory has ceased to be so authorized prior to the delivery of such ADR by the Depositary.

 

(14)                          Available Information; Reports; Inspection of Transfer Books.  The Company is subject to the periodic reporting requirements of the Exchange Act and, accordingly, is required to file or furnish certain reports with the Commission.  These reports can be retrieved from the Commission’s website (www.sec.gov) and can be inspected and copied at the public reference facilities maintained by the Commission located (as of the date of the Deposit Agreement) at 100 F Street, N.E., Washington D.C.  20549.  The Depositary shall make

 

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available for inspection by Holders at its Principal Office any reports and communications, including any proxy soliciting materials, received from the Company which are both (a) received by the Depositary, the Custodian, or the nominee of either of them as the holder of the Deposited Property and (b) made generally available to the holders of such Deposited Property by the Company.

 

The Registrar shall keep books for the registration of ADSs which at all reasonable times shall be open for inspection by the Company and by the Holders of such ADSs, provided that such inspection shall not be, to the Registrar’s knowledge, for the purpose of communicating with Holders of such ADSs in the interest of a business or object other than the business of the Company or other than a matter related to the Deposit Agreement or the ADSs.

 

The Registrar may close the transfer books with respect to the ADSs, at any time or from time to time, when deemed necessary or advisable by it in good faith in connection with the performance of its duties hereunder or under the Deposit Agreement, or at the reasonable written request of the Company subject, in all cases, to paragraph (25) and Section 7.8 of the Deposit Agreement.

 

Dated:

 

	
CITIBANK, N.A.
    	
 
    	
CITIBANK, N.A.
    
	
Transfer Agent and   Registrar
    	
 
    	
as Depositary
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
Authorized Signatory
    	
 
    	
 
    	
Authorized Signatory
    

 

The address of the Principal Office of the Depositary is 388 Greenwich Street, New York, New York 10013, U.S.A.

 

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[FORM OF REVERSE OF ADR]

 

SUMMARY OF CERTAIN ADDITIONAL PROVISIONS

 

OF THE DEPOSIT AGREEMENT

 

(15)                          Dividends and Distributions in Cash, Shares, etc.  (a) Cash Distributions: Whenever the Company intends to make a distribution of a cash dividend or other cash distribution in respect of any Deposited Securities, the Company shall give notice thereof to the Depositary at least twenty (20) days prior to the proposed distribution specifying, inter alia, the record date applicable for determining the holders of Deposited Securities entitled to receive such distribution.  Upon the timely receipt of such notice, the Depositary shall establish the ADS Record Date upon the terms described in Section 4.9 of the Deposit Agreement.  Upon receipt of confirmation of the receipt of (x) any cash dividend or other cash distribution on any Deposited Securities, or (y) proceeds from the sale of any Deposited Property held in respect of the ADSs under the terms of the Deposit Agreement, the Depositary will (i) if at the time of receipt thereof any amounts received in a Foreign Currency can, in the judgment of the Depositary (pursuant to Section 4.8 of the Deposit Agreement), be converted on a practicable basis into Dollars transferable to the United States, promptly convert or cause to be converted such cash dividend, distribution or proceeds into Dollars (on the terms described in Section 4.8 of the Deposit Agreement), (ii) if applicable and unless previously established, establish the ADS Record Date upon the terms described in Section 4.9 of the Deposit Agreement, and (iii) distribute promptly the amount thus received (net of (a) the applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes withheld) to the Holders entitled thereto as of the ADS Record Date in proportion to the number of ADSs held as of the ADS Record Date.  The Depositary shall distribute only such amount, however, as can be distributed without attributing to any Holder a fraction of one cent, and any balance not so distributed shall be held by the Depositary (without liability for interest thereon) and shall be added to and become part of the next sum received by the Depositary for distribution to Holders of ADSs outstanding at the time of the next distribution.  If the Company, the Custodian or the Depositary is required to withhold and does withhold from any cash dividend or other cash distribution in respect of any Deposited Securities, or from any cash proceeds from the sales of Deposited Property, an amount on account of taxes, duties or other governmental charges, the amount distributed to Holders on the ADSs shall be reduced accordingly.  Such withheld amounts shall be forwarded by the Company, the Custodian or the Depositary to the relevant governmental authority.  Evidence of payment thereof by the Company shall be forwarded by the Company to the Depositary upon request.  The Depositary will hold any cash amounts it is unable to distribute in a non-interest bearing account for the benefit of the applicable Holders and Beneficial Owners of ADSs until the distribution can be effected or the funds that the Depositary holds must be escheated as unclaimed property in accordance with the laws of the relevant states of the United States. Notwithstanding anything contained in the Deposit Agreement to the contrary, in the event the Company fails to give the Depositary timely notice of the proposed distribution provided for above, the Depositary agrees to use commercially reasonable efforts to perform the actions contemplated in Section 4.1 of the Deposit Agreement, and the Company, the Holders and the

 

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Beneficial Owners acknowledge that the Depositary shall have no liability for the Depositary’s failure to perform the actions contemplated in Section 4.1 of the Deposit Agreement where such notice has not been so timely given, other than its failure to use commercially reasonable efforts, as provided herein.

 

(b)  Share Distributions: Whenever the Company intends to make a distribution that consists of a dividend in, or free distribution of, Shares, the Company shall give notice thereof to the Depositary at least twenty (20) days prior to the proposed distribution, specifying, inter alia, the record date applicable to holders of Deposited Securities entitled to receive such distribution.  Upon the timely receipt of such notice from the Company, the Depositary shall establish the ADS Record Date upon the terms described in Section 4.9 of the Deposit Agreement.  Upon receipt of confirmation from the Custodian of the receipt of the Shares so distributed by the Company, the Depositary shall either (i) subject to Section 5.9 of the Deposit Agreement, distribute to the Holders as of the ADS Record Date in proportion to the number of ADSs held as of the ADS Record Date, additional ADSs, which represent in the aggregate the number of Shares received as such dividend, or free distribution, subject to the other terms of the Deposit Agreement (including, without limitation, (a) the applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes), or (ii) if additional ADSs are not so distributed, take all actions necessary so that each ADS issued and outstanding after the ADS Record Date shall, to the extent permissible by law, thenceforth also represent rights and interests in the additional integral number of Shares distributed upon the Deposited Securities represented thereby (net of (a) the applicable fees and charges of, and expenses incurred by, the Depositary, and (b) taxes).  In lieu of delivering fractional ADSs, the Depositary shall sell the number of Shares or ADSs, as the case may be, represented by the aggregate of such fractions and distribute the net proceeds upon the terms described in Section 4.1 of the Deposit Agreement.

 

In the event that the Depositary determines that any distribution in property (including Shares) is subject to any tax or other governmental charges which the Depositary is obligated to withhold, or, if the Company in the fulfillment of its obligations under Section 5.7 of the Deposit Agreement, has furnished an opinion of U.S. counsel determining that Shares must be registered under the Securities Act or other laws in order to be distributed to Holders (and no such registration statement has been declared effective), the Depositary may dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable, and the Depositary shall distribute the net proceeds of any such sale (after deduction of (a) taxes and (b) fees and charges of, and the expenses incurred by, the Depositary) to Holders entitled thereto upon the terms of Section 4.1 of the Deposit Agreement.  The Depositary shall hold and/or distribute any unsold balance of such property in accordance with the provisions of the Deposit Agreement. Notwithstanding anything contained in the Deposit Agreement to the contrary, in the event the Company fails to give the Depositary timely notice of the proposed distribution provided for above, the Depositary agrees to use commercially reasonable efforts to perform the actions contemplated in Section 4.2 of the Deposit Agreement, and the Company, the Holders and the Beneficial Owners acknowledge that the Depositary shall have no liability for the Depositary’s failure to perform the actions contemplated in Section 4.2 of the Deposit

 

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Agreement where such notice has not been so timely given, other than its failure to use commercially reasonable efforts, as provided herein.

 

(c)  Elective Distributions in Cash or Shares: Whenever the Company intends to make a distribution payable at the election of the holders of Deposited Securities in cash or in additional Shares, the Company shall give notice thereof to the Depositary at least sixty (60) days prior to the proposed distribution specifying, inter alia, the record date applicable to holders of Deposited Securities entitled to receive such elective distribution and whether or not it wishes such elective distribution to be made available to Holders of ADSs.  Upon the timely receipt of a notice indicating that the Company wishes such elective distribution to be made available to Holders of ADSs, the Depositary shall consult with the Company to determine, and the Company shall assist the Depositary in its determination, whether it is lawful and reasonably practicable to make such elective distribution available to the Holders of ADSs.  The Depositary shall make such elective distribution available to Holders only if (i) the Company shall have timely requested that the elective distribution be made available to Holders, (ii) the Depositary shall have determined that such distribution is reasonably practicable and (iii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7 of the Deposit Agreement. If the above conditions are satisfied, the Depositary shall, subject to the terms and conditions of the Deposit Agreement, establish the ADS Record Date according to paragraph (16) and Section 4.9 of the Deposit Agreement and establish procedures to enable the Holder hereof to elect to receive the proposed distribution in cash or in additional ADSs.  If a Holder elects to receive the distribution in cash, the distribution shall be made as in the case of a distribution in cash.  If the Holder hereof elects to receive the distribution in additional ADSs, the distribution shall be made as in the case of a distribution in Shares upon the terms described in the Deposit Agreement.  If such elective distribution is not reasonably practicable or if the Depositary did not receive satisfactory documentation set forth in the Deposit Agreement, the Depositary shall establish an ADS Record Date upon the terms of Section 4.9 of the Deposit Agreement and, to the extent permitted by law, distribute to Holders, on the basis of the same determination as is made in the Cayman Islands in respect of the Shares for which no election is made, either (x) cash upon the terms described in Section 4.1 of the Deposit Agreement or (y) additional ADSs representing such additional Shares, in each case, upon the terms described in Section 4.2 of the Deposit Agreement.  Nothing herein or in the Deposit Agreement shall obligate the Depositary to make available to the Holder hereof a method to receive the elective distribution in Shares (rather than ADSs).  There can be no assurance that the Holder hereof will be given the opportunity to receive elective distributions on the same terms and conditions as the holders of Shares. Notwithstanding anything contained in the Deposit Agreement to the contrary, in the event the Company fails to give the Depositary timely notice of the proposed distribution provided for above, the Depositary agrees to use commercially reasonable efforts to perform the actions contemplated in Section 4.3 of the Deposit Agreement, and the Company, the Holders and the Beneficial Owners acknowledge that the Depositary shall have no liability for the Depositary’s failure to perform the actions contemplated in Section 4.3 of the Deposit Agreement where such notice has not been so timely given, other than its failure to use commercially reasonable efforts, as provided herein.

 

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(d)  Distribution of Rights to Purchase Additional ADSs: Whenever the Company intends to distribute to the holders of the Deposited Securities rights to subscribe for additional Shares, the Company shall give notice thereof to the Depositary at least forty-five (45) days prior to the proposed distribution specifying, inter alia, the record date applicable to holders of Deposited Securities entitled to receive such distribution and whether or not it wishes such rights to be made available to Holders of ADSs.  Upon the timely receipt of a notice indicating that the Company wishes such rights to be made available to Holders of ADSs, the Depositary shall consult with the Company to determine, and the Company shall assist the Depositary in its determination, whether it is lawful and reasonably practicable to make such rights available to the Holders.  The Depositary shall make such rights available to any Holders only if (i) the Company shall have timely requested that such rights be made available to Holders, (ii) the Depositary shall have received the documentation within the terms of Section 5.7 of the Deposit Agreement, and (iii) the Depositary shall have determined that such distribution of rights is reasonably practicable.  If such conditions are not satisfied or if the Company requests that the rights not be made available to Holders of ADSs, the Depositary shall sell the rights as described below.  In the event all conditions set forth above are satisfied, the Depositary shall establish the ADS Record Date (upon the terms described in Section 4.9 of the Deposit Agreement) and establish procedures to (x) distribute rights to purchase additional ADSs (by means of warrants or otherwise), (y) enable the Holders to exercise such rights (upon payment of the subscription price and of the applicable (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes), and (z) to deliver ADSs upon the valid exercise of such rights.  Nothing herein or in the Deposit Agreement shall obligate the Depositary to make available to the Holders a method to exercise rights to subscribe for Shares (rather than ADSs).  If (i) the Company does not timely request the Depositary to make the rights available to Holders or requests that the rights not be made available to Holders, (ii) the Depositary fails to receive satisfactory documentation within the terms of Section 5,7 of the Deposit Agreement or determines it is not reasonably practicable to make the rights available to Holders, or (iii) any rights made available are not exercised and appear to be about to lapse, the Depositary shall determine whether it is lawful and reasonably practicable to sell such rights, in a riskless principal capacity, at such place and upon such terms (including public and private sale) as it may deem practicable.  The Depositary shall, upon such sale, convert and distribute proceeds of such sale (net of applicable (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes) upon the terms hereof and of Section 4.1 of the Deposit Agreement.  If the Depositary is unable to make any rights available to Holders upon the terms described in Section 4.4(a) of the Deposit Agreement or to arrange for the sale of the rights upon the terms described in Section 4.4(b) of the Deposit Agreement, the Depositary shall allow such rights to lapse.  The Depositary shall not be liable for (i) any failure to accurately determine whether it may be lawful or practicable to make such rights available to Holders in general or any Holders in particular, (ii) any foreign exchange exposure or loss incurred in connection with such sale or exercise, or (iii) the content of any materials forwarded to the Holders on behalf of the Company in connection with the rights distribution.

 

Notwithstanding anything herein or in Section 4.4 of the Deposit Agreement to the contrary, if registration (under the Securities Act or any other applicable law) of the rights or the securities to which any rights relate may be required in order for the Company to offer such rights or such securities to Holders and to sell the securities represented by such rights, the

 

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Depositary will not distribute such rights to the Holders (i) unless and until a registration statement under the Securities Act (or other applicable law) covering such offering is in effect or (ii) unless the Company furnishes the Depositary opinion(s) of counsel in the United States and/or in any other applicable country in which rights would be distributed, in each case reasonably satisfactory to the Depositary, to the effect that the offering and sale of such securities to Holders and Beneficial Owners are exempt from, or do not require registration under, the provisions of the Securities Act or any other applicable laws.  In the event that the Company, the Depositary or the Custodian shall be required to withhold and does withhold from any distribution of Deposited Property (including rights) an amount on account of taxes or other governmental charges, the amount distributed to the Holders of ADSs shall be reduced accordingly.  In the event that the Depositary determines that any distribution of Deposited Property (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charges which the Depositary is obligated to withhold, the Depositary may dispose of all or a portion of such Deposited Property (including Shares and rights to subscribe therefor) in such amounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable to pay any such taxes or charges.

 

There can be no assurance that Holders generally, or any Holder in particular, will be given the opportunity to receive or exercise rights on the same terms and conditions as the holders of Shares or be able to exercise such rights.  Nothing herein or in the Deposit Agreement shall obligate the Company to file any registration statement in respect of any rights or Shares or other securities to be acquired upon the exercise of such rights.

 

(e)  Distributions other than Cash, Shares or Rights to Purchase Shares:  Whenever the Company intends to distribute to the holders of Deposited Securities property other than cash, Shares or rights to purchase additional Shares, the Company shall give timely notice thereof to the Depositary and shall indicate whether or not it wishes such distribution to be made to Holders of ADSs.  Upon receipt of a notice indicating that the Company wishes such distribution to be made to Holders of ADSs, the Depositary shall consult with the Company, and the Company shall assist the Depositary, to determine whether such distribution to Holders is lawful and reasonably practicable.  The Depositary shall not make such distribution unless (i) the Company shall have requested the Depositary to make such distribution to Holders, (ii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7 of the Deposit Agreement, and (iii) the Depositary shall have determined that such distribution is reasonably practicable.  Upon satisfaction of such conditions, the Depositary shall distribute the property so received to the Holders of record, as of the ADS Record Date, in proportion to the number of ADSs held by them respectively and in such manner as the Depositary may deem practicable for accomplishing such distribution (i) upon receipt of payment or net of the applicable fees and charges of, and expenses incurred by, the Depositary, and (ii) net of any taxes withheld.  The Depositary may dispose of all or a portion of the property so distributed and deposited, in such amounts and in such manner (including public or private sale) as the Depositary may deem practicable or necessary to satisfy any taxes (including applicable interest and penalties) or other governmental charges applicable to the distribution.

 

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If the conditions above are not satisfied, the Depositary shall sell or cause such property to be sold in a public or private sale, at such place or places and upon such terms as it may deem practicable and shall (i) cause the proceeds of such sale, if any, to be converted into Dollars and (ii) distribute the proceeds of such conversion received by the Depositary (net of applicable (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes) to the Holders as of the ADS Record Date upon the terms hereof and of Section 4.1 of the Deposit Agreement.  If the Depositary is unable to sell such property, the Depositary may dispose of such property for the account of the Holders in any way it deems reasonably practicable under the circumstances.

 

Neither the Depositary nor the Company shall be responsible for (i) any failure to determine whether it is lawful or practicable to make the property described in Section 4.5 of the Deposit Agreement available to Holders in general or any Holders in particular, nor (ii) any loss incurred in connection with the sale or disposal of such property.

 

(f)  Distributions with Respect to Deposited Securities in Bearer Form:  Subject to the terms of this paragraph (15) and Article IV of the Deposit Agreement, distributions in respect of Deposited Securities that are held by the Depositary or the Custodian in bearer form shall be made to the Depositary for the account of the respective Holders of ADS(s) with respect to which any such distribution is made upon due presentation by the Depositary or the Custodian to the Company of any relevant coupons, talons, or certificates.  The Company shall promptly notify the Depositary of such distributions.  The Depositary or the Custodian shall promptly present such coupons, talons or certificates, as the case may be, in connection with any such distribution.

 

(16)                          Redemption.  If the Company intends to exercise any right of redemption in respect of any of the Deposited Securities, the Company shall give notice thereof to the Depositary at least forty-five (45) days prior to the intended date of redemption which notice shall set forth the particulars of the proposed redemption.  Upon timely receipt of (i) such notice and (ii) satisfactory documentation given by the Company to the Depositary within the terms of Section 5.7 of the Deposit Agreement, and only if the Depositary shall have determined that such proposed redemption is practicable, the Depositary shall provide to each Holder a notice setting forth the intended exercise by the Company of the redemption rights and any other particulars set forth in the Company’s notice to the Depositary.  The Depositary shall instruct the Custodian to present to the Company the Deposited Securities in respect of which redemption rights are being exercised against payment of the applicable redemption price. Upon receipt of confirmation from the Custodian that the redemption has taken place and that funds representing the redemption price have been received, the Depositary shall convert, transfer, and distribute the proceeds (net of applicable (a) fees and charges of, and the expenses incurred by, the Depositary, and (b) taxes), retire ADSs and cancel ADRs, if applicable, upon delivery of such ADSs by Holders thereof and the terms set forth in Sections 4.1 and 6.2 of the Deposit Agreement.  If less than all outstanding Deposited Securities are redeemed, the ADSs to be retired will be selected by lot or on a pro rata basis, as may be determined by the Depositary.  The redemption price per ADS shall be the dollar equivalent of the per share amount received by the Depositary (adjusted to reflect the ADS(s)-to-Share(s) ratio) upon the redemption of the Deposited Securities represented by ADSs (subject to the terms of Section 4.8 of the Deposit Agreement and the applicable fees

 

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and charges of, and expenses incurred by, the Depositary, and taxes) multiplied by the number of Deposited Securities represented by each ADS redeemed. Notwithstanding anything contained in this Deposit Agreement to the contrary, in the event the Company fails to give the Depositary timely notice of the proposed redemption provided for above, the Depositary agrees to use commercially reasonable efforts to perform the actions contemplated in Section 4.7 of the Deposit Agreement, and the Company, the Holders and the Beneficial Owners acknowledge that the Depositary shall have no liability for the Depositary’s failure to perform the actions contemplated in Section 4.7 of the Deposit Agreement where such notice has not been so timely given, other than its failure to use commercially reasonable efforts, as provided herein.

 

(17)                          Fixing of ADS Record Date.  Whenever the Depositary shall receive notice of the fixing of a record date by the Company for the determination of holders of Deposited Securities entitled to receive any distribution (whether in cash, Shares, rights or other distribution), or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each ADS, or whenever the Depositary shall receive notice of any meeting of, or solicitation of consents or proxies of, holders of Shares or other Deposited Securities, or whenever the Depositary shall find it necessary or convenient in connection with the giving of any notice, solicitation of any consent or any other matter, the Depositary shall fix the record date (the “ADS Record Date”) for the determination of the Holders of ADS(s) who shall be entitled to receive such distribution, to give instructions for the exercise of voting rights at any such meeting, to give or withhold such consent, to receive such notice or solicitation or to otherwise take action, or to exercise the rights of Holders with respect to such changed number of Shares represented by each ADS.  The Depositary shall make reasonable efforts to establish the ADS Record Date as closely as practicable to the applicable record date for the Deposited Securities (if any) set by the Company in the Cayman Islands and shall not announce the establishment of any ADS Record Date prior to the relevant corporate action having been made public by the Company (if such corporate action affected the Deposited Securities).  Subject to applicable law, the terms and conditions of this ADR and Sections 4.1 through 4.8 of the Deposit Agreement, only the Holders of ADSs at the close of business in New York on such ADS Record Date shall be entitled to receive such distribution, to give such voting instructions, to receive such notice or solicitation, or otherwise take action.

 

(18)                          Voting of Deposited Securities.  As soon as practicable after receipt of notice of any meeting at which the holders of Deposited Securities are entitled to vote, or of solicitation of consents or proxies from holders of Deposited Securities, the Depositary shall fix the ADS Record Date in respect of such meeting or solicitation of consent or proxy in accordance with Section 4.9 of the Deposit Agreement.  The Depositary shall, if requested by the Company in writing in a timely manner (the Depositary having no obligation to take any further action if the request shall not have been received by the Depositary at least thirty (30) days prior to the date of such vote or meeting), at the Company’s expense and provided no U.S. legal prohibitions exist, distribute as soon as practicable after receipt thereof to Holders as of the ADS Record Date: (a) such notice of meeting or solicitation of consent or proxy, (b) a statement that the Holders at the close of business on the ADS Record Date will be entitled, subject to any applicable law, the provisions of the Deposit Agreement, the Articles of Association of the Company and the provisions of or governing the Deposited Securities (which provisions, if any, shall be

 

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summarized in pertinent part by the Company), to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the Deposited Securities represented by such Holder’s ADSs, and (c) a brief statement as to the manner and timing in which such voting instructions may be given to the Depositary or in which voting instructions may be deemed to have been given in accordance with Section 4.10 of the Deposit Agreement if no instructions are received prior to the deadline set for such purposes to the Depositary to give a discretionary proxy to a person designated by the Company.  Notwithstanding anything contained in the Deposit Agreement to the contrary, in the event the Company fails to timely request that the Depositary distribute the information as provided for in Section 4.10 of the Deposit Agreement, the Depositary agrees to use commercially reasonable efforts to perform the actions contemplated in Section 4.10 of the Deposit Agreement, and the Company, the Holders and the Beneficial Owners acknowledge that the Depositary shall have no liability for the Depositary’s failure to perform the actions contemplated in Section 4.10 of the Deposit Agreement where such notice has not been so timely given, other than its failure to use commercially reasonable efforts, as provided herein.

 

Notwithstanding anything contained in the Deposit Agreement or this ADR, the Depositary may, to the extent not prohibited by law or regulations, or by the requirements of the stock exchange on which the ADSs are listed, in lieu of distribution of the materials provided to the Depositary in connection with any meeting of, or solicitation of consents or proxies from, holders of Deposited Securities, distribute to the Holders a notice that provides Holders with, or otherwise publicizes to Holders, instructions on how to retrieve such materials or receive such materials upon request (e.g., by reference to a website containing the materials for retrieval or a contact for requesting copies of the materials).

 

The Depositary has been advised by the Company that under the Articles of Association of the Company (as in effect on the date of the Deposit Agreement), voting at any meeting of shareholders is by show of hands unless a poll is demanded.  The Depositary will not join in demanding a poll, whether or not requested to do so by Holders of ADSs.  The Company has informed the Depositary that, under the Articles of Association of the Company (as in effect on the date of the Deposit Agreement), a poll may be demanded by the chairman of the meeting or by any shareholder present in person or by proxy in the meeting.

 

Voting instructions may be given only in respect of a number of ADSs representing an integral number of Deposited Securities.  Upon the timely receipt from a Holder of ADSs as of the ADS Record Date of voting instructions in the manner specified by the Depositary, the Depositary shall endeavor, insofar as practicable and permitted under applicable law, the provisions of the Deposit Agreement, Articles of Association of the Company and the provisions of the Deposited Securities, to vote, or cause the Custodian to vote, the Deposited Securities (in person or by proxy) represented by such Holder’s ADSs as follows:  (i) in the event voting takes place at a shareholders’ meeting by show of hands, the Depositary will instruct the Custodian to vote all Deposited Securities in accordance with the voting instructions received from a majority of Holders of ADSs who provided voting instructions, and (ii) in the event voting takes place at a shareholders’ meeting by poll, the Depositary will instruct the Custodian to vote the Deposited Securities in accordance with the voting instructions received from the Holders of ADSs. If the

 

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Depositary does not receive instructions from a Holder as of the ADS Record Date on or before the date established by the Depositary for such purpose and voting is by poll, such Holder shall be deemed, and the Depositary shall (unless otherwise specified in the notice distributed to Holders) deem such Holder, to have instructed the Depositary to give a discretionary proxy to a person designated by the Company to vote the Deposited Securities; provided, however, that no such discretionary proxy shall be given by the Depositary with respect to any matter to be voted upon as to which the Company informs the Depositary that (A) the Company does not wish such proxy to be given, (B) substantial opposition exists, or (C) the rights of holders of Deposited Securities may be materially adversely affected.

 

Neither the Depositary nor the Custodian shall under any circumstances exercise any discretion as to voting and neither the Depositary nor the Custodian shall vote, attempt to exercise the right to vote, or in any way make use of, for purposes of establishing a quorum or otherwise, the Deposited Securities represented by ADSs, except pursuant to and in accordance with the voting instructions timely received from Holders or as otherwise contemplated herein.  If the Depositary timely receives voting instructions from a Holder which fail to specify the manner in which the Depositary is to vote the Deposited Securities represented by such Holder’s ADSs, the Depositary will deem such Holder (unless otherwise specified in the notice distributed to Holders) to have instructed the Depositary to vote in favor of the items set forth in such voting instructions.  Deposited Securities represented by ADSs for which no timely voting instructions are received by the Depositary from the Holder shall not be voted (except (i) in the case voting is by show of hands, in which case the Depositary will instruct the Custodian to vote all Deposited Securities in accordance with the voting instructions received from a majority of Holders of ADSs who provided voting instructions and (ii) as otherwise contemplated herein or in the Deposit Agreement). Notwithstanding anything else contained herein or in the Deposit Agreement, the Depositary shall, if so requested in writing by the Company, represent all Deposited Securities (whether or not voting instructions have been received in respect of such Deposited Securities from Holders as of the ADS Record Date) for the sole purpose of establishing quorum at a meeting of shareholders.

 

Notwithstanding anything else contained in the Deposit Agreement or this ADR, the Depositary shall not have any obligation to take any action with respect to any meeting, or solicitation of consents or proxies, of holders of Deposited Securities if the taking of such action would violate U.S. laws.  The Company agrees to take any and all actions reasonably necessary and as permitted by Cayman Islands law to enable Holders and Beneficial Owners to exercise the voting rights accruing to the Deposited Securities and to deliver to the Depositary an opinion of U.S. counsel addressing any actions requested to be taken if so requested by the Depositary.

 

There can be no assurance that Holders generally or any Holder in particular will receive the notice described above with sufficient time to enable the Holder to return voting instructions to the Depositary, or otherwise take action, in a timely manner.

 

(19)                          Changes Affecting Deposited Securities.  Upon any change in nominal or par value, split-up, cancellation, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger, consolidation or sale of assets affecting the

 

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Company or to which it is a party, any property which shall be received by the Depositary or the Custodian in exchange for, or in conversion of, or replacement of, or otherwise in respect of, such Deposited Securities shall, to the extent permitted by law, be treated as new Deposited Property under the Deposit Agreement, and this ADR shall, subject to the provisions of the Deposit Agreement, this ADR and applicable law, represent the right to receive such additional or replacement Deposited Property.  In giving effect to such change, split-up, cancellation, consolidation or other reclassification of Deposited Securities, recapitalization, reorganization, merger, consolidation or sale of assets, the Depositary may, with the Company’s approval, and shall, if the Company shall so request, subject to the terms of the Deposit Agreement (including, without limitation, (a) the applicable fees and charges of, and expenses incurred by, the Depositary, and (b) taxes) and receipt of an opinion of counsel reasonably satisfactory to the Depositary that such actions are not in violation of any applicable laws or regulations, (i) issue and deliver additional ADSs as in the case of a stock dividend on the Shares, (ii) amend the Deposit Agreement and the applicable ADRs, (iii) amend the applicable Registration Statement(s) on Form F-6 as filed with the Commission in respect of the ADSs, (iv) call for the surrender of outstanding ADRs to be exchanged for new ADRs, and (v) take such other actions as are appropriate to reflect the transaction with respect to the ADSs.  Notwithstanding the foregoing, in the event that any Deposited Property so received may not be lawfully distributed to some or all Holders, the Depositary may, with the Company’s approval, and shall, if the Company requests, subject to receipt of an opinion of counsel reasonably satisfactory to the Depositary that such action is not in violation of any applicable laws or regulations, sell such Deposited Property at public or private sale, at such place or places and upon such terms as it may deem proper and may allocate the net proceeds of such sales (net of (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes) for the account of the Holders otherwise entitled to such Deposited Property upon an averaged or other practicable basis without regard to any distinctions among such Holders and distribute the net proceeds so allocated to the extent practicable as in the case of a distribution received in cash pursuant to Section 4.1 of the Deposit Agreement.  The Depositary shall not be responsible for (i) any failure to determine that it may be lawful or practicable to make such Deposited Property available to Holders in general or to any Holder in particular, (ii) any foreign exchange exposure or loss incurred in connection with such sale, or (iii) any liability to the purchaser of such Deposited Property.

 

(20)                          Exoneration.  Neither the Depositary nor the Company shall be obligated to do or perform any act which is inconsistent with the provisions of the Deposit Agreement or incur any liability (i) if the Depositary or the Company shall be prevented or forbidden from, or delayed in, doing or performing any act or thing required by the terms of the Deposit Agreement and this ADR, by reason of any provision of any present or future law or regulation of the United States, the Cayman Islands or any other country, or of any other governmental authority or regulatory authority or stock exchange, or on account of potential criminal or civil penalties or restraint, or by reason of any provision, present or future, of the Articles of Association of the Company or any provision of or governing any Deposited Securities, or by reason of any act of God or war or other circumstances beyond its control (including, without limitation, nationalization, expropriation, currency restrictions, work stoppage, strikes, civil unrest, acts of terrorism, revolutions, rebellions, explosions and computer failure), (ii) by reason of any exercise of, or failure to exercise, any discretion provided for in the Deposit Agreement or in the Articles of

 

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Association of the Company or provisions of or governing Deposited Securities, (iii) for any action or inaction in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Holder, any Beneficial Owner or authorized representative thereof, or any other person believed by it in good faith to be competent to give such advice or information, (iv) for the inability by a Holder or Beneficial Owner to benefit from any distribution, offering, right or other benefit which is made available to holders of Deposited Securities but is not, under the terms of the Deposit Agreement, made available to Holders of ADSs, or (v) for any consequential or punitive damages (including lost profits) for any breach of the terms of the Deposit Agreement.  The Depositary, its controlling persons, its agents, any Custodian and the Company, its controlling persons and its agents may rely and shall be protected in acting upon any written notice, request or other document believed by it to be genuine and to have been signed or presented by the proper party or parties.  No disclaimer of liability under the Securities Act is intended by any provision of the Deposit Agreement or this ADR.

 

(21)         Standard of Care.  The Company and the Depositary assume no obligation and shall not be subject to any liability under the Deposit Agreement or this ADR to any Holder(s) or Beneficial Owner(s), except that the Company and the Depositary agree to perform their respective obligations specifically set forth in the Deposit Agreement or this ADR without negligence or bad faith.  Without limitation of the foregoing, neither the Depositary, nor the Company, nor any of their respective controlling persons, or agents, shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Property or in respect of the ADSs, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense (including fees and disbursements of counsel) and liability be furnished as often as may be required (and no Custodian shall be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary).

 

The Depositary and its agents shall not be liable for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any vote is cast or the effect of any vote, provided that any such action or omission is in good faith and without negligence and in accordance with the terms of the Deposit Agreement.  The Depositary shall not incur any liability for any failure to accurately determine that any distribution or action may be lawful or reasonably practicable, for the content of any information submitted to it by the Company for distribution to the Holders or for any inaccuracy of any translation thereof, for any investment risk associated with acquiring an interest in the Deposited Property, for the validity or worth of the Deposited Property or for any tax consequences that may result from the ownership of ADSs, Shares or other Deposited Property, for the credit-worthiness of any third party, for allowing any rights to lapse upon the terms of the Deposit Agreement, for the failure or timeliness of any notice from the Company, or for any action of or failure to act by, or any information provided or not provided by, DTC or any DTC Participant.

 

The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary,

 

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provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary.

 

The Depositary shall not be liable for any acts or omissions made by a predecessor depositary whether in connection with an act or omission of the Depositary or in connection with any matter arising wholly prior to the appointment of the Depositary or after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary.

 

(22)         Resignation and Removal of the Depositary; Appointment of Successor Depositary.  The Depositary may at any time resign as Depositary under the Deposit Agreement by written notice of resignation delivered to the Company, such resignation to be effective on the earlier of (i) the 90th day after delivery thereof to the Company (whereupon the Depositary shall be entitled to take the actions contemplated in Section 6.2 of the Deposit Agreement), or (ii) the appointment by the Company of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement.  The Depositary may at any time be removed by the Company by written notice of such removal, which removal shall be effective on the later of (i) the 90th day after delivery thereof to the Depositary (whereupon the Depositary shall be entitled to take the actions contemplated in Section 6.2 of the Deposit Agreement), or (ii) upon the appointment by the Company of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement.  In case at any time the Depositary acting hereunder shall resign or be removed, the Company shall use its best efforts to appoint a successor depositary, which shall be a bank or trust company having an office in the Borough of Manhattan, the City of New York.  Every successor depositary shall be required by the Company to execute and deliver to its predecessor and to the Company an instrument in writing accepting its appointment hereunder, and thereupon such successor depositary, without any further act or deed (except as required by applicable law), shall become fully vested with all the rights, powers, duties and obligations of its predecessor (other than as contemplated in Sections 5.8 and 5.9 of the Deposit Agreement).  The predecessor depositary, upon payment of all sums due it and on the written request of the Company shall (i) execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder (other than as contemplated in Sections 5.8 and 5.9 of the Deposit Agreement), (ii) duly assign, transfer and deliver all of the Depositary’s right, title and interest to the Deposited Property to such successor, and (iii) deliver to such successor a list of the Holders of all outstanding ADSs and such other information relating to ADSs and Holders thereof as the successor may reasonably request. Any such successor depositary shall promptly provide notice of its appointment to such Holders.  Any entity into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act.

 

(23)         Amendment/Supplement.  Subject to the terms and conditions of this paragraph (23), Section 6.1 of the Deposit Agreement and applicable law, this ADR and any provisions of the Deposit Agreement may at any time and from time to time be amended or supplemented by

 

A-23

 

written agreement between the Company and the Depositary in any respect which they may deem necessary or desirable without the prior written consent of the Holders or Beneficial Owners.  Any amendment or supplement which shall impose or increase any fees or charges (other than charges in connection with foreign exchange control regulations, and taxes and other governmental charges, delivery and other such expenses), or which shall otherwise materially prejudice any substantial existing right of Holders or Beneficial Owners, shall not, however, become effective as to outstanding ADSs until the expiration of thirty (30) days after notice of such amendment or supplement shall have been given to the Holders of outstanding ADSs.  Notice of any amendment to the Deposit Agreement or any ADR shall not need to describe in detail the specific amendments effectuated thereby, and failure to describe the specific amendments in any such notice shall not render such notice invalid, provided, however, that, in each such case, the notice given to the Holders identifies a means for Holders and Beneficial Owners to retrieve or receive the text of such amendment (e.g., upon retrieval from the Commission’s, the Depositary’s or the Company’s website or upon request from the Depositary).  The parties hereto agree that any amendments or supplements which (i) are reasonably necessary (as agreed by the Company and the Depositary) in order for (a) the ADSs to be registered on Form F-6 under the Securities Act or (b) the ADSs to be settled solely in electronic book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne by Holders, shall be deemed not to materially prejudice any substantial rights of Holders or Beneficial Owners.  Every Holder and Beneficial Owner at the time any amendment or supplement so becomes effective shall be deemed, by continuing to hold such ADSs, to consent and agree to such amendment or supplement and to be bound by the Deposit Agreement and this ADR, if applicable, as amended or supplemented thereby.  In no event shall any amendment or supplement impair the right of the Holder to surrender such ADS and receive therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.  Notwithstanding the foregoing, if any governmental body should adopt new laws, rules or regulations which would require an amendment of, or supplement to, the Deposit Agreement to ensure compliance therewith, the Company and the Depositary may amend or supplement the Deposit Agreement and this ADR at any time in accordance with such changed laws, rules or regulations.  Such amendment or supplement to the Deposit Agreement and this ADR in such circumstances may become effective before a notice of such amendment or supplement is given to Holders or within any other period of time as required for compliance with such laws, rules or regulations.

 

(24)         Termination.  The Depositary shall, at any time at the written direction of the Company, terminate the Deposit Agreement by distributing notice of such termination to the Holders of all ADSs then outstanding at least thirty (30) days prior to the date fixed in such notice for such termination.  If (i) ninety (90) days shall have expired after the Depositary shall have delivered to the Company a written notice of its election to resign, or (ii) ninety (90) days shall have expired after the Company shall have delivered to the Depositary a written notice of the removal of the Depositary, and, in either case, a successor depositary shall not have been appointed and accepted its appointment as provided in Section 5.4 of the Deposit Agreement, the Depositary may terminate the Deposit Agreement by distributing notice of such termination to the Holders of all ADSs then outstanding at least thirty (30) days prior to the date fixed in such notice for such termination.  The date so fixed for termination of the Deposit Agreement in any

 

A-24

 

termination notice so distributed by the Depositary to the Holders of ADSs is referred to as the “Termination Date”.  Until the Termination Date, the Depositary shall continue to perform all of its obligations under the Deposit Agreement, and the Holders and Beneficial Owners will be entitled to all of their rights under the Deposit Agreement.  If any ADSs shall remain outstanding after the Termination Date, the Registrar and the Depositary shall not, after the Termination Date, have any obligation to perform any further acts under the Deposit Agreement, except that the Depositary shall, subject, in each case, to the terms and conditions of the Deposit Agreement, continue to (i) collect dividends and other distributions pertaining to Deposited Securities, (ii) sell Deposited Property received in respect of Deposited Securities, (iii) deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any other Deposited Property, in exchange for ADSs surrendered to the Depositary (after deducting, or charging, as the case may be, in each case, the fees and charges of, and expenses incurred by, the Depositary, and all applicable taxes or governmental charges for the account of the Holders and Beneficial Owners, in each case upon the terms set forth in Section 5.9 of the Deposit Agreement), and (iv) take such actions as may be required under applicable law in connection with its role as Depositary under the Deposit Agreement.  At any time after the Termination Date, the Depositary may sell the Deposited Property then held under the Deposit Agreement and shall after such sale hold un-invested the net proceeds of such sale, together with any other cash then held by it under the Deposit Agreement, in an un-segregated account and without liability for interest, for the pro rata benefit of the Holders whose ADSs have not theretofore been surrendered.  After making such sale, the Depositary shall be discharged from all obligations under the Deposit Agreement except (i) to account for such net proceeds and other cash (after deducting, or charging, as the case may be, in each case, the fees and charges of, and expenses incurred by, the Depositary, and all applicable taxes or governmental charges for the account of the Holders and Beneficial Owners, in each case upon the terms set forth in Section 5.9 of the Deposit Agreement), and (ii) as may be required at law in connection with the termination of the Deposit Agreement.  After the Termination Date, the Company shall be discharged from all obligations under the Deposit Agreement, except for its obligations to the Depositary under Sections 5.8, 5.9 and 7.6 of the Deposit Agreement.  The obligations under the terms of the Deposit Agreement of Holders and Beneficial Owners of ADSs outstanding as of the Termination Date shall survive the Termination Date and shall be discharged only when the applicable ADSs are presented by their Holders to the Depositary for cancellation under the terms of the Deposit Agreement (except as specifically provided in the Deposit Agreement).

 

(25)         Compliance with U.S. Securities Laws.  Notwithstanding any provisions in this ADR or the Deposit Agreement to the contrary, the withdrawal or delivery of Deposited Securities will not be suspended by the Company or the Depositary except as would be permitted by Instruction I.A.(1) of the General Instructions to the Form F-6 Registration Statement, as amended from time to time, under the Securities Act.

 

(26)         Certain Rights of the Depositary; Limitations.  Subject to the further terms and provisions of this paragraph (26) and Sections 2.3 and 5.10 of the Deposit Agreement, the Depositary, its Affiliates and their agents, on their own behalf, may own and deal in any class of securities of the Company and its Affiliates and in ADSs.  The Depositary may issue ADSs

 

A-25

 

against evidence of rights to receive Shares from the Company, any agent of the Company or any custodian, registrar, transfer agent, clearing agency or other entity involved in ownership or transaction records in respect of the Shares.  Such evidence of rights shall consist of written blanket or specific guarantees of ownership of Shares.  In its capacity as Depositary, the Depositary shall not lend Shares or ADSs; provided, however, that the Depositary may (i) issue ADSs prior to the receipt of Shares pursuant to Section 2.3 of the Deposit Agreement and (ii) deliver Shares prior to the receipt of ADSs for withdrawal of Deposited Securities pursuant to Section 2.7 of the Deposit Agreement, including ADSs which were issued under (i) above but for which Shares may not have been received (each such transaction a “Pre-Release Transaction”).  The Depositary may receive ADSs in lieu of Shares under (i) above and receive Shares in lieu of ADSs under (ii) above.  Each such Pre-Release Transaction will be (a) subject to a written agreement whereby the person or entity (the “Applicant”) to whom ADSs or Shares are to be delivered (w) represents that at the time of the Pre-Release Transaction the Applicant or its customer owns the Shares or ADSs that are to be delivered by the Applicant under such Pre-Release Transaction, (x) agrees to indicate the Depositary as owner of such Shares or ADSs in its records and to hold such Shares or ADSs in trust for the Depositary until such Shares or ADSs are delivered to the Depositary or the Custodian, (y) unconditionally guarantees to deliver to the Depositary or the Custodian, as applicable, such Shares or ADSs and (z) agrees to any additional restrictions or requirements that the Depositary deems appropriate, (b) at all times fully collateralized with cash, U.S. government securities or such other collateral as the Depositary deems appropriate, (c) terminable by the Depositary on not more than five (5) business days’ notice and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate.  The Depositary will normally limit the number of ADSs and Shares involved in such Pre-Release Transactions at any one time to thirty percent (30%) of the ADSs outstanding (without giving effect to ADSs outstanding under (i) above), provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate.  The Depositary may also set limits with respect to the number of ADSs and Shares involved in Pre-Release Transactions with any one person on a case-by-case basis as it deems appropriate.  The Depositary may retain for its own account any compensation received by it in conjunction with the foregoing.  Collateral provided pursuant to (b) above, but not the earnings thereon, shall be held for the benefit of the Holders (other than the Applicant).

 

(27)         Governing Law / Waiver of Jury Trial.  The Deposit Agreement and the ADRs shall be interpreted in accordance with, and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by, the laws of the State of New York without reference to the principles of choice of law thereof.  Notwithstanding anything contained in the Deposit Agreement, any ADR or any present or future provisions of the laws of the State of New York, the rights of holders of Shares and of any other Deposited Securities and the obligations and duties of the Company in respect of the holders of Shares and other Deposited Securities, as such, shall be governed by the laws of the Cayman Islands (or, if applicable, such other laws as may govern the Deposited Securities).

 

Holders and Beneficial Owners understand and each irrevocably agrees that, by holding an ADS or an interest therein, any legal suit, action or proceeding against or involving the Company or the Depositary, arising out of or based upon the Deposit Agreement, ADSs, ADRs

 

A-26

 

or the transactions contemplated hereby or thereby or by virtue of ownership thereof, may only be instituted in a state or federal court in the City of New York, and by holding an ADS or an interest therein each irrevocably waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Holders and Beneficial Owners agree that the provisions of this paragraph shall survive such Holders’ and Beneficial Owners’ ownership of ADSs or interests therein.

 

EACH OF THE PARTIES TO THE DEPOSIT AGREEMENT (INCLUDING, WITHOUT LIMITATION, EACH HOLDER AND BENEFICIAL OWNER) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING AGAINST THE COMPANY AND/OR THE DEPOSITARY ARISING OUT OF, OR RELATING TO, THE DEPOSIT AGREEMENT, ANY ADR AND ANY TRANSACTIONS CONTEMPLATED THEREIN (WHETHER BASED ON CONTRACT, TORT, COMMON LAW OR OTHERWISE).

 

A-27

 

(ASSIGNMENT AND TRANSFER SIGNATURE LINES)

 

FOR VALUE RECEIVED, the undersigned Holder hereby sell(s), assign(s) and transfer(s) unto                               whose taxpayer identification number is                          and whose address including postal zip code is                   , the within ADR and all rights thereunder, hereby irrevocably constituting and appointing                           attorney-in-fact to transfer said ADR on the books of the Depositary with full power of substitution in the premises.

 

	
Dated:
    	
Name:
    	
 
    
	
 
    	
 
    	
By:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
NOTICE:   The signature of the Holder to this assignment must correspond with the name   as written upon the face of the within instrument in every particular,   without alteration or enlargement or any change whatsoever.

 

If   the endorsement be executed by an attorney, executor, administrator, trustee   or guardian, the person executing the endorsement must give his/her full   title in such capacity and proper evidence of authority to act in such   capacity, if not on file with the Depositary, must be forwarded with this   ADR.
    
	
 
    	
 
    	
 
    
	
SIGNATURE   GUARANTEED
    	
 
    
	
 
    	
All   endorsements or assignments of ADRs must be guaranteed by a member of a   Medallion Signature Program approved by the Securities Transfer Association, Inc.
    
				

 

Legends
 [The ADRs issued in respect of Partial Entitlement American Depositary Shares shall bear the following legend on the face of the ADR:  “This ADR evidences ADSs representing ‘partial entitlement’ Shares of RYB Education, Inc. and as such do not entitle the holders thereof to the same per-share entitlement as other Shares (which are ‘full entitlement’ Shares) issued and outstanding at such time.  The ADSs represented by this ADR shall entitle holders to distributions and entitlements identical to other ADSs when the Shares represented by such ADSs become ‘full entitlement’ Shares.”]

 

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EXHIBIT B

 

FEE SCHEDULE

 

ADS FEES AND RELATED CHARGES

 

All capitalized terms used but not otherwise defined herein shall have the meaning given to such terms in the Deposit Agreement.

 

I.             ADS Fees

 

The following ADS fees are payable under the terms of the Deposit Agreement:

 

	
Service
    	
 
    	
Rate
    	
 
    	
By Whom Paid
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
(1)    Issuance   of ADSs (e.g., an issuance upon a deposit of   Shares, upon a change in the ADS(s)-to-Share(s) ratio, or for any other   reason), excluding issuances as a result of distributions described in   paragraph (4) below.
    	
 
    	
Up to U.S. $5.00 per 100 ADSs (or fraction thereof)   issued.
    	
 
    	
Person receiving ADSs.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
(2)    Cancellation   of ADSs (e.g., a cancellation of ADSs for   delivery of deposited Shares, upon a change in the ADS(s)-to-Share(s) ratio,   or for any other reason).
    	
 
    	
Up to U.S. $5.00 per 100 ADSs (or fraction thereof)   cancelled.
    	
 
    	
Person whose ADSs are being cancelled.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
(3)    Distribution   of cash dividends or other cash distributions (e.g.,   upon a sale of rights and other entitlements).
    	
 
    	
Up to U.S. $5.00 per 100 ADSs (or fraction thereof)   held.
    	
 
    	
Person to whom the distribution is made.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
(4)    Distribution   of ADSs pursuant to (i) stock dividends or other free stock distributions, or   (ii) an exercise of rights to purchase additional ADSs.
    	
 
    	
Up to U.S. $5.00 per 100 ADSs (or fraction thereof)   held.
    	
 
    	
Person to whom the distribution is made.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
(5)    Distribution   of securities other than ADSs or rights to purchase additional ADSs (e.g., spin-off shares).
    	
 
    	
Up to U.S. $5.00 per 100 ADSs (or fraction thereof)   held.
    	
 
    	
Person to whom the distribution is made.
    

 

B-1

 

	
6)     ADS   Services.
    	
 
    	
Up to U.S. $5.00 per 100 ADSs (or fraction thereof)   held on the applicable record date(s) established by the Depositary.
    	
 
    	
Person holding ADSs on the applicable record date(s)   established by the Depositary.
    

 

II.                                   Charges

 

The Company, Holders, Beneficial Owners, persons receiving ADSs upon issuance and persons whose ADSs are being cancelled shall be responsible for the following ADS charges under the terms of the Deposit Agreement:

 

(i)                                     taxes (including applicable interest and penalties) and other governmental charges;

 

(ii)                                  such registration fees as may from time to time be in effect for the registration of Shares or other Deposited Securities on the share register and applicable to transfers of Shares or other Deposited Securities to or from the name of the Custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively;

 

(iii)                               such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the Deposit Agreement to be at the expense of the person depositing Shares or withdrawing Deposited Securities or of the Holders and Beneficial Owners of ADSs;

 

(iv)                              the expenses and charges incurred by the Depositary in the conversion of foreign currency;

 

(v)                                 such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Shares, Deposited Securities, ADSs and ADRs; and

 

(vi)                              the fees and expenses incurred by the Depositary, the Custodian, or any nominee in connection with the servicing or delivery of Deposited Property.

 

B-2

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