Document:

Exhibit 4.18

 

Execution Version

 

 

CREDIT AGREEMENT

 

Dated as of February 21, 2014

 

between

 

VIPSHOP INTERNATIONAL HOLDINGS LIMITED

as Borrower,

 

and

 

CHINA MERCHANTS BANK CO., LTD., NEW YORK BRANCH

as Lender

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
Page No.
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 1 Definitions
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
1.1
    	
Definitions
    	
1
    
	
 
    	
1.2
    	
Other   Definitional Provisions
    	
8
    
	
 
    	
1.3
    	
Computation   of Time Periods
    	
8
    
	
 
    	
1.4
    	
Accounting   Terms
    	
8
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 2 THE CREDIT FACILITIES
    	
9
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.1
    	
Term   Loan
    	
9
    
	
 
    	
2.2
    	
Default   Rate
    	
10
    
	
 
    	
2.3
    	
Prepayments
    	
10
    
	
 
    	
2.4
    	
Capital   Adequacy
    	
10
    
	
 
    	
2.5
    	
Requirements   of Law
    	
11
    
	
 
    	
2.6
    	
Taxes
    	
12
    
	
 
    	
2.7
    	
Place   and Manner of Payments
    	
13
    
	
 
    	
2.8
    	
Facility   Fee
    	
13
    
	
 
    	
2.9
    	
Upfront   Fee
    	
14
    
	
 
    	
2.10
    	
Break   Funding Payments
    	
14
    
	
 
    	
2.11
    	
Extension
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 3 CONDITIONS PRECEDENT
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.1
    	
Conditions   to Initial Loan Advance
    	
15
    
	
 
    	
3.2
    	
Conditions   to Each Loan Advance
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 4 REPRESENTATIONS AND WARRANTIES
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.1
    	
Corporate   Status
    	
17
    
	
 
    	
4.2
    	
Power,   Authorization; Enforceable Obligations
    	
17
    
	
 
    	
4.3
    	
No   Legal Bar
    	
17
    
	
 
    	
4.4
    	
Liens;   Indebtedness
    	
18
    
	
 
    	
4.5
    	
Litigation
    	
18
    
	
 
    	
4.6
    	
Taxes
    	
18
    
	
 
    	
4.7
    	
Governmental   and Other Approvals
    	
18
    
	
 
    	
4.8
    	
Use   of the Loans
    	
19
    
	
 
    	
4.9
    	
Environmental   Compliance
    	
19
    
	
 
    	
4.10
    	
Investment   Company Act; Other Regulations
    	
19
    
	
 
    	
4.11
    	
Foreign   Assets Control Regulations, Etc.; OFAC Compliance
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 5 COVENANTS
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.1
    	
Corporate   Existence
    	
20
    
	
 
    	
5.2
    	
Reports,   Certificates and Other Information
    	
20
    
						

 

i

 

	
 
    	
5.3
    	
Compliance   Certificate
    	
21
    
	
 
    	
5.4
    	
Liens
    	
21
    
	
 
    	
5.5
    	
Mergers   and Consolidations
    	
22
    
	
 
    	
5.6
    	
Payment   of Obligations and Taxes
    	
22
    
	
 
    	
5.7
    	
Insurance
    	
23
    
	
 
    	
5.8
    	
Compliance   with Laws
    	
23
    
	
 
    	
5.9
    	
Maintenance   of Properties, Etc.
    	
23
    
	
 
    	
5.10
    	
Change   in the Nature of Business
    	
23
    
	
 
    	
5.11
    	
Ownership   of Subsidiaries
    	
23
    
	
 
    	
5.12
    	
Transactions   with Affiliates
    	
23
    
	
 
    	
5.13
    	
Maintenance   of the Minimum Equivalent Amount
    	
24
    
	
 
    	
5.14
    	
Foreign   Assets Control Regulations
    	
25
    
	
 
    	
5.15
    	
Inspection   of Property; Books and Records; Discussions
    	
25
    
	
 
    	
5.16
    	
Disposition   of Property
    	
26
    
	
 
    	
5.17
    	
Clauses   Restricting Subsidiary Distributions
    	
26
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 6 EVENTS OF DEFAULT
    	
26
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.1
    	
Events   of Default
    	
26
    
	
 
    	
6.2
    	
Rights   and Remedies
    	
28
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 7 MISCELLANEOUS
    	
28
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
7.1
    	
Notices
    	
28
    
	
 
    	
7.2
    	
Benefit   of Agreement
    	
30
    
	
 
    	
7.3
    	
No   Waiver; Remedies Cumulative
    	
32
    
	
 
    	
7.4
    	
Payment   of Expenses and Taxes
    	
32
    
	
 
    	
7.5
    	
Amendments,   Waivers and Consents
    	
33
    
	
 
    	
7.6
    	
Adjustments;   Set-off
    	
33
    
	
 
    	
7.7
    	
Counterparts
    	
34
    
	
 
    	
7.8
    	
Headings
    	
34
    
	
 
    	
7.9
    	
Survival   of Indemnification
    	
34
    
	
 
    	
7.10
    	
Governing   Law; Submission to Jurisdiction, Venue, Waiver of Jury Trial
    	
34
    
	
 
    	
7.11
    	
Confidentiality
    	
35
    
	
 
    	
7.12
    	
USA   Patriot Act Notice
    	
36
    
	
 
    	
7.13
    	
Severability
    	
36
    
	
 
    	
7.14
    	
Entirety
    	
36
    
	
 
    	
7.15
    	
Survival   of Representations and Warranties
    	
37
    
	
 
    	
7.16
    	
Fiduciary   Relationship
    	
37
    

 

Exhibit A Form of Notice of Borrowing

 

Exhibit B Form of Promissory Note

 

Exhibit C Form of Assignment and Assumption

 

Exhibit D Form of Compliance Certificate

 

ii

 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT dated as of February 21, 2014 (as the same may be amended, restated or otherwise modified from time to time, the “Credit Agreement”) between VIPSHOP INTERNATIONAL HOLDINGS LIMITED (the “Borrower”), and CHINA MERCHANTS BANK CO., LTD., NEW YORK BRANCH (the “Lender”).

 

W I T N E S S E T H

 

WHEREAS, the Borrower has requested the Lender, and the Lender has agreed, to provide a term credit facility in an aggregate principal amount of up to $150,000,000 on the terms and conditions hereinafter set forth;

 

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

 

SECTION 1

 

DEFINITIONS

 

1.1 Definitions.

 

As used in this Credit Agreement, the following terms shall have the meanings specified below unless the context otherwise requires:

 

“Act” has the meaning ascribed to it in Section 7.12.

 

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified.

 

“Assignment and Acceptance” means an assignment and acceptance entered into by the Lender and an assignee substantially in the form attached as Exhibit C hereto (with the consent of any party whose consent is required by Section 7.2(b)).

 

“Availability Period” means the three-month period that commences on the Closing Date.

 

“Bankruptcy Code” means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time.

 

“Borrower” means VIPSHOP INTERNATIONAL HOLDINGS LIMITED, a limited company organized under the laws of Hong Kong, together with its successors and permitted assigns.

 

 

“Borrowing Date” means the date on which a borrowing is requested as such term is defined in Section 2.1(b)(i).

 

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York or Hong Kong are authorized or required by law to close.

 

“Capital Lease” means any lease of Property the obligations with respect to which are required to be capitalized on a balance sheet of the lessee in accordance with GAAP.

 

“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

 

“Change of Control” means any Person or group of Person (in each case other than the parent of the Borrower) acting in concert gaining the Control of the Borrower.

 

“Closing Date” has the meaning ascribed to it in Section 3.1.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the Treasury regulations promulgated thereunder as in effect from time to time.

 

“Commitment” means the obligation of the Lender to fund the Loan in an aggregate principal amount not to exceed the Committed Amount.

 

“Committed Amount” means an aggregate principal amount of up to $150,000,000.

 

“Compliance Certificate” means a certificate substantially in the form set out in Exhibit D hereto.

 

“Contractual Obligation” means as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

“Control” in relation to any entity means either the direct or indirect ownership of more than 50% of the membership interest, share capital, or similar rights of ownership of the entity or the power to direct or cause the direction of the management and the policies of the entity whether through the ownership of the applicable ownership rights, contract or otherwise.

 

“Credit Documents” means this Credit Agreement, the Fee Letter, the Letter of Credit, the Promissory Note and any other documents executed by the Borrower in connection herewith.

 

“Default” means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.

 

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“Deposit Account” means such term as defined in Section 5.13.

 

“Disposition” means with respect to any property, any sale, lease, sale and leaseback, conveyance, transfer or other disposition thereof. The terms “Dispose” and “Disposed of” shall have correlative meanings.

 

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

 

“Dollar Equivalent” of a RMB amount as of a date of determination means the amount of Dollars such RMB amount can purchase at the prevailing exchange rate between the RMB and the Dollar as selected by the Lender for such date.

 

“Environmental Laws” means any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect.

 

“Event of Default” means such term as defined in Section 6.1.

 

“Facility Fee” means the Lender’s charge for making the credit facility available to the Borrower hereunder, payable by the Borrower to the Lender in an amount and in the manner as set forth in Section 2.8 hereunder.

 

“Fee Letter” means one or more fee letters dated the date hereof by and between the Borrower and the Lender with respect to the transactions contemplated hereby.

 

“GAAP” means generally accepted accounting principles in Hong Kong applied on a consistent basis and subject to Section 1.4 hereof.

 

“Governmental Authority” means any Federal, state, local or other foreign court or governmental agency, authority, instrumentality or regulatory body.

 

“Guaranty Obligations” means, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any Property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including without limitation keep well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (iii) to lease or purchase Property, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any

 

3

 

limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made.

 

“Indebtedness” means, as to any Person, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments or upon which interest payments are customarily made, (iii) all obligations of such Person under conditional sale or other title retention agreements relating to Property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (iv) all obligations, including without limitation intercompany items, of such Person issued or assumed as the deferred purchase price of Property or services purchased by such Person (other than trade debt incurred in the ordinary course of business and due within six (6) months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person, (v) all obligations of such Person under take-or-pay or similar arrangements or under commodities agreements, (vi) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, Property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (vii) all Guaranty Obligations of such Person, (viii) the principal portion of all obligations of such Person under Capital Leases, (ix) all obligations of such Person in respect of interest rate protection agreements, foreign currency exchange agreements, commodity purchase or option agreements or other interest or exchange rate or commodity price hedging agreements and (x) the maximum amount of all letters of credit issued or bankers’ acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed). The Indebtedness of any Person shall include the Indebtedness of any partnership in which such Person is a general partner (except for any such Indebtedness with respect to which the holder thereof is limited to the assets of such partnership or joint venture).

 

“Interest Payment Date” means, as to any LIBOR Loan, the last day of each Interest Period for such Loan, the date of any prepayment and the Maturity Date. If an Interest Payment Date falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the immediately succeeding Business Day, except that in the case of LIBOR Loans where the immediately succeeding Business Day falls in the immediately succeeding calendar month, then on the immediately preceding Business Day.

 

“Interest Period” means a period of three (3) months duration commencing in each case on the date of the borrowing (including extensions and conversions); provided, however, that (A) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the immediately succeeding Business Day (except that in the case of LIBOR Loans where the immediately succeeding Business Day falls in the immediately succeeding calendar month, then on the immediately preceding Business Day), (B) no Interest Period shall extend beyond the Maturity Date and (C) in the case of LIBOR Loans, where an Interest Period begins on a day for which

 

4

 

there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall, subject to clause (A) above, end on the last Business Day of such calendar month.

 

“L/C Minimum Amount” means a RMB amount which, when converted into Dollars at the applicable prevailing exchange rate between the RMB and the Dollar selected by the Lender for the Closing Date, shall at least be equal to (a) the sum of (i) the outstanding principal of the Loan, and (ii) the interest and fees due and payable by the Borrower to the Lender for one Interest Period, divided by (b) 95%.

 

“Lender” means China Merchants Bank Co., Ltd., New York Branch, together with its successors and permitted assigns.

 

“Letter of Credit” means one or more standby letters of credit which have an aggregate drawable amount not less than the L/C Minimum Amount issued by China Merchants Bank Co., Ltd., Guangzhou Branch in favor of the Lender to secure the Borrower’s obligations to the Lender hereunder, which letters of credit shall have been issued in compliance with the laws and regulations applicable to the branch, and which letters of credit should otherwise be satisfactory to the Lender in form and substance, as such letter of credit may be amended, extended, or replaced from time to time; provided that any such amendment, extension or replacement is subject to prior written consent by the Lender.

 

“LIBOR Loan” means any Loan bearing interest at a rate determined by reference to the LIBOR Rate.

 

“LIBOR Rate” means, with respect to any LIBOR Loan for any Interest Period applicable thereto, the rate appearing on Reuters Screen LIBOR01 (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Lender from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 A.M., London time, two (2) Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then “LIBOR Rate” shall mean, with respect to any LIBOR Loan for any Interest Period applicable thereto, the arithmetic average, as determined by the Lender, of the rates per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) quoted by each Reference Bank at approximately 11:00 A.M. New York, New York time (or as soon thereafter as practicable) two (2) Business Days prior to the first day of such Interest Period for such LIBOR Loan for the offering by such Reference Banks to leading banks in the London interbank market of eurodollar deposits having a term comparable to such Interest Period and in an amount comparable to the principal amount of such LIBOR Loan; provided that if any Reference Bank does not furnish such information to the Lender on a timely basis the Lender shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks.

 

5

 

“LIBOR Rate Spread” means, for any LIBOR Loan for any applicable Interest Period, 1.50% per annum.

 

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof).

 

“Loan” means, unless otherwise stated in this Credit Agreement, the principal amount of each borrowing under this Credit Agreement or the principal amount outstanding of that borrowing.

 

“Material Adverse Effect” means any event, development or circumstances that has had or could reasonably expected to have a material adverse effect on (i) the condition (financial or otherwise), operations, business, assets, liabilities or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform any obligation under the Credit Documents or (iii) the validity or enforceability of this Credit Agreement or any other Credit Document or the rights and remedies of the Lender under the Credit Documents.

 

“Material Subsidiary” means a Subsidiary, including its Subsidiaries, substantially all of whose voting Capital Stock is owned by the Borrower and/or the Borrower’s other Subsidiaries and which meets all of the following criteria:

 

(i)                                     the Borrower’s and its other Subsidiaries’ proportionate share of total assets (after intercompany eliminations) of such subsidiary exceeds 10% of the total assets of the Borrower and its Subsidiaries on a consolidated basis as of its most recently completed fiscal year; and

 

(ii)                                  the Borrower’s and its other Subsidiaries’ proportionate share of or equity in the income from continuing operations before income taxes, extraordinary items and the cumulative effect of a change in accounting principle of such Subsidiary exceeds 10% of such income of the Borrower and its Subsidiaries on a consolidated basis for the most recently completed fiscal year.

 

“Maturity Date” means, for each Loan, the earlier of (x) the first anniversary of its Borrowing Date, and (y) the date that is ten Business Days prior to the date on which any Letter of Credit securing the Obligations shall expire or terminate. Whenever such date is stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the immediately succeeding Business Day, except where the immediately succeeding Business Day falls in the immediately succeeding calendar month, then the due date shall be the immediately preceding Business Day.

 

“Non-Excluded Taxes” means such term as defined in Section 2.6.

 

6

 

“Notice of Borrowing” means the written notice of borrowing as referenced and defined in Section 2.1(b)(i) substantially in the form attached as Exhibit A hereto.

 

“Obligations” means the unpaid principal of, and the accrued and unpaid interest on, the Loan, all accrued and unpaid fees and expenses payable by the Borrower to the Lender and all other unsatisfied obligations of the Borrower arising under any of the Credit Documents, including without limitation any and all unsatisfied obligations of the Borrower to the Lender arising as a result of any payment of the Borrower to the Lender being avoided as the preference payment under the applicable insolvency law or any other similar contingent obligations of the Borrower to the Lender under any of the Credit Documents.

 

“Participant” means such term as defined in Section 7.2(c).

 

“Prohibited Person” shall have the meaning given to such term in the Trading with the Enemy Act, as amended, or the applicable foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended).

 

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

 

“Requirement of Law” means, as to any Person, the certificate of formation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its material property.

 

“Responsible Officer” means the chief executive officer, president, chief financial officer or treasurer of the Borrower.

 

“RMB” means Renminbi, the official currency of the People’s Republic of China.

 

“Subsidiary” means, as to any Person, (a) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries, and (b) any partnership, limited liability company, association, joint venture or other entity in which such person directly or indirectly through Subsidiaries has more than 50% equity interest at the time. Unless otherwise specified, any reference to a Subsidiary is intended as a reference to a Subsidiary of the Borrower.

 

“Upfront Fee” means such term as defined in Section 2.9.

 

7

 

1.2 Other Definitional Provisions.

 

(a)                                 Unless otherwise specified therein, all terms defined in this Credit Agreement shall have the defined meanings when used in the other Credit Documents or any certificate or other document made or delivered pursuant hereto or thereto.

 

(b)                                 As used herein and in the other Credit Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to the Borrower not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP, (ii) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (iii) the word “incur” shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words “incurred” and “incurrence” shall have correlative meanings), (iv) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights, and (v) references to agreements or other Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or Contractual Obligations as amended, supplemented, restated or otherwise modified from time to time.

 

(c)                                  The words “hereof”, “herein” and “hereunder” and words of similar import, when used in this Credit Agreement, shall refer to this Credit Agreement as a whole and not to any particular provision of this Credit Agreement, and Section, Schedule and Exhibit references are to this Credit Agreement unless otherwise specified.

 

(d)                                 The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

 

1.3 Computation of Time Periods.

 

For purposes of computation of periods of time hereunder, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”

 

1.4 Accounting Terms.

 

Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lender hereunder shall be prepared, in accordance with GAAP applied on a consistent basis. All calculations made for the purposes of determining compliance with this Credit Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements delivered pursuant to Section 5.2 hereof.

 

8

 

SECTION 2

 

THE CREDIT FACILITIES

 

2.1 Term Loan.

 

(a)                                 Commitment. Subject to the terms and conditions of this Credit Agreement, the Lender agrees to make one or more term loans to the Borrower within the Availability Period such that (i) the aggregate of (a) the outstanding principal amount of such Loans and (b) the interest and fees due and payable with respect to such Loans for one Interest Period shall not exceed 95% of the Dollar Equivalent of the drawable amount of the Letters of Credit that secure the Borrower’s Obligations under the Credit Agreement and are delivered to the Lender on or prior to the Borrowing Date of such Loans, and (ii) the aggregate principal amount of all the Loans will not exceed the Committed Amount. Amounts repaid or prepaid in respect of each Loan may not be reborrowed.

 

(b)                                 Loan Borrowings.

 

(i)                                     Notice of Borrowing. The Borrower shall request a Loan borrowing by written notice (or telephone notice promptly confirmed in writing) to the Lender not later than 11:00 A.M. (New York, New York time) two (2) business days prior to the date of the requested borrowing. Such request for borrowing shall be irrevocable, shall be made in a notice of borrowing in substantially the form of Exhibit A attached hereto (a “Notice of Borrowing”), and shall specify (A) that a Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day within the Availability Period) (the “Borrowing Date”), and (C) the aggregate principal amount to be borrowed.

 

(ii)                                  Minimum Amounts. A Loan borrowing shall be in a minimum aggregate amount of $100,000 and integral multiples of $100,000 in excess thereof (or the remaining Committed Amount, if less).

 

(iii)                               Advances. The Lender will make a Loan borrowing available to the Borrower by crediting the account of the Borrower on the books of the office of the Lender specified in Section 7.1 with the amount requested in the Notice of Borrowing or by wire transferring such amount to a bank account designated by the Borrower pursuant to the wire instruction set forth in the Notice of Borrowing. The Lender at its option may make any Loan by causing any of its domestic or foreign branch or Affiliate to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Credit Agreement.

 

(c)                                  Repayment. The Borrower hereby unconditionally promises to repay in full the principal amount of each Loan and the other Obligations outstanding, and not previously repaid, on its Maturity Date.

 

(d)                                 Interest. Subject to the provisions of Section 2.2, each Loan shall bear interest at a per annum rate equal to the LIBOR Rate for the applicable Interest Period plus the LIBOR Rate Spread. The Borrower hereby unconditionally promises to pay to the Lender accrued interest on each Loan in arrears on each Interest Payment Date and on its Maturity Date.

 

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(e)                                  Evidence of Debt. The Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to the Lender resulting from the Loans made by the Lender, including the amounts of principal and interest payable and paid to the Lender from time to time hereunder. The entries made in the accounts maintained pursuant to this subsection shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of the Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Credit Agreement. The Lender may request that a Loan made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to the Lender a promissory note payable to the order of the Lender (or, if requested by the Lender, to the Lender and its registered assigns) and substantially in the form of Exhibit B attached hereto. Thereafter, the Loan evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 7.2) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

 

2.2 Default Rate.

 

The Borrower hereby unconditionally promises to pay to the Lender interest on demand on all overdue principal and, to the extent permitted by law (after as well as before judgment), overdue interest in respect of each Loan and any other overdue amount payable hereunder or under the other Credit Documents at a rate 4% per annum greater than the rate which would otherwise be applicable.

 

2.3 Prepayments.

 

(a)                                 Voluntary Prepayments. The Borrower may prepay the Loans, in whole or in part, at any time without any premium or penalty (subject to the break funding payments as set forth in Section 2.10 hereunder); provided that partial prepayments shall be in a minimum principal amount of $100,000 and multiples of $100,000 in excess thereof (or the remaining outstanding principal of all Loan, if less) and may only be made on the last day of an Interest Period. Any prepayment under this Credit Agreement shall be made together with accrued interest on the amount prepaid if such prepayment is made on Interest Payment Date; otherwise, only the principal amount shall be prepaid on the date of such prepayment and the accrued interest on the amount prepaid shall be paid on the next applicable Interest Payment Date.

 

(b)                                 Notice. In the case of voluntary prepayments under subsection (a) hereof, the Borrower will give notice to the Lender of its intent to make such a prepayment by 11:00 A.M. (New York, New York time) three (3) Business Days prior to the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Loan or portion thereof to be prepaid.

 

2.4 Capital Adequacy.

 

If, after the Closing Date, the Lender has determined that the adoption or effectiveness of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any

 

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change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Lender or its holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the Lender’s or its holding company’s capital or assets as a consequence of its commitments or obligations hereunder to a level below that which the Lender or its holding company could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration the Lender’s or its holding company’s policies with respect to capital adequacy), then, upon notice from the Lender, the Borrower shall pay to the Lender such additional amount or amounts as will compensate the Lender or its holding company for such reduction. Each determination by the Lender of amounts owing under this Section shall, absent manifest error, be conclusive and binding on the Borrower. Notwithstanding the foregoing, the Lender agrees that, before giving any notice seeking a payment under this Section 2.4, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different office, branch or Affiliate of the Lender as the office, branch or Affiliate of the Lender having the commitments and obligations of the Lender hereunder if making such designation would avoid or reduce the amount of such reduction in its rate of return on its capital or assets and would not, in the reasonable judgment of the Lender, be otherwise disadvantageous to the Lender.

 

2.5 Requirements of Law.

 

If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof applicable to the Lender, or compliance by the Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority, in each case made subsequent to the Closing Date (or, if later, the date on which such Lender becomes a Lender) (it being understood and agreed that matters set forth in the Consultation Paper issued by the Basel Committee on Banking Supervision of June 1999 shall not be treated as having been adopted or applied prior to the Closing Date):

 

(i)                                     shall subject the Lender to any tax of any kind whatsoever with respect to the Loans made by it or change the basis of taxation of payments to the Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.6 (including Non-Excluded Taxes imposed solely by reason of any failure of the Lender to comply with its obligations under Section 2.6) and changes in taxes measured by or imposed upon the overall net income, or franchise tax (imposed in lieu of such net income tax), of the Lender or its applicable lending office, branch, or any affiliate thereof);

 

(ii)                                  shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of the Lender; or

 

(iii)                               shall impose on the Lender any other condition (excluding any tax of any kind whatsoever);

 

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and the result of any of the foregoing is to increase the cost to the Lender, by an amount which such Lender deems to be material, of making, continuing or maintaining the Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, upon notice to the Borrower from the Lender, in accordance herewith, the Borrower shall promptly pay the Lender, upon its demand, any additional amounts necessary to compensate the Lender for such increased cost or reduced amount receivable; provided that, the Borrower shall not be under any obligation to pay to the Lender amounts otherwise owing under this Section 2.7 if the Lender shall not have delivered such written notice to the Borrower, within ninety (90) days following the later of (A) the date of occurrence of the event which forms the basis for such notice and request for compensation and (B) the date the Lender becomes aware of such event. Notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder, issued in connection therewith or in implementation thereof, shall be deemed to be a change in a Requirement of Law, regardless of the date enacted, adopted, issued or implemented. If the Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall provide prompt notice thereof to the Borrower certifying (x) that one of the events described in this Section has occurred and describing in reasonable detail the nature of such event, (y) as to the increased cost or reduced amount resulting from such event and (z) as to the additional amount demanded by the Lender and a reasonably detailed explanation of the calculation thereof. Such a certificate as to any additional amounts payable pursuant to this Section submitted by the Lender to the Borrower shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. Notwithstanding the foregoing, the Lender agrees that, before giving any notice seeking a payment of additional amounts under this Section 2.5, the Lender will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different office, branch or Affiliate as the office, branch or Affiliate of the Lender making, continuing or maintaining the Loans hereunder or having the commitments and obligations hereunder resulting in such increased cost to the Lender or reduction in the amount receivable by the Lender hereunder if making such designation would avoid the need for, or reduce the amount of, such increased cost or would avoid or decrease the reduction in the amount receivable hereunder and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to the Lender.

 

2.6 Taxes.

 

Except as provided below in this subsection, all payments made by the Borrower under this Credit Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, (excluding net income taxes and franchise taxes imposed in lieu of net income taxes imposed on the Lender as a result of a present or former connection between the jurisdiction of the Governmental Authority imposing such tax and the Lender (except a connection arising solely from the Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Credit Agreement)) (all such non-excluded taxes, levies, imposts, duties, charges, fees, deductions and withholdings being hereinafter called “Non-Excluded Taxes”). If any Non-Excluded Taxes are required to be withheld from any amounts payable to the Lender hereunder, the amounts so payable to the

 

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Lender shall be increased to the extent necessary to yield to the Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Credit Agreement. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Lender a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Lender the required receipts or other required documentary evidence, the Borrower shall indemnify the Lender for any taxes, interest or penalties that may become payable by the Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder.

 

2.7 Place and Manner of Payments.

 

Except as otherwise specifically provided herein, all payments hereunder shall be made to the Lender in Dollars in immediately available funds, without offset, deduction, counterclaim or withholding of any kind, at its offices specified in Section 7.1 not later than 2:00 P.M. (New York, New York time) on the date when due. Payments received after such time shall be deemed to have been received on the immediately succeeding Business Day. The Lender may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrower maintained with the Lender (with notice to the Borrower). The Borrower shall, at the time it makes any payment under this Credit Agreement, specify to the Lender the Loans, fees or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, the Lender shall apply the payment in such manner as the Lender may determine to be appropriate in respect of obligations owing by the Borrower hereunder subject to the terms of Section 2.3(a)). Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the immediately succeeding Business Day (subject to accrual of interest at non-default rates and fees for the period of such extension (but not any default interest on amounts as to which such due date shall have been extended)), except where the immediately succeeding Business Day falls in the immediately succeeding calendar month, then the due date shall be the immediately preceding Business Day. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days elapsed over a year of three hundred and sixty (360) days. Interest shall accrue from and include the date of borrowing, but exclude the date of payment.

 

2.8 Facility Fee.

 

The Borrower shall pay to the Lender a Facility Fee in an amount equal to 0.30% per annum multiplied by the outstanding principal amount of each Loan. The Facility Fee is payable on each Interest Payment Date of such Loan. Any Facility Fee, once paid, is not refundable under any circumstances (including but not limited to circumstances in relation to any prepayment made by the Borrower pursuant to this Credit Agreement).

 

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2.9 Upfront Fee.

 

The Borrower shall pay to the Lender an Upfront Fee, in an amount and in the manner as set forth in a Fee Letter. Any Upfront Fee, once paid, is not refundable under any circumstances (including but not limited to circumstances in relation to any prepayment made by the Borrower pursuant to this Credit Agreement).

 

2.10 Break Funding Payments.

 

In the event of (a) the payment of any principal of any Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), or (b) the failure to borrow or prepay any Loan on the date specified in any notice delivered pursuant hereto, then, in any such event, the Borrower shall compensate the Lender for the loss, cost and expense attributable to such event. Such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loans had such event not occurred, at the interest rate that would have been applicable to such Loans, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, for the period that would have been the Interest Period for such Loans), over (ii) the amount of interest which would accrue on such principal amount for such period at the then applicable LIBOR Rate for a period available in the London interbank market closest in length to such remaining period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

 

2.11 Extension.

 

Unless the Loans hereunder shall have been prepaid on or before the last date of an Interest Period, the outstanding Loans hereunder shall be automatically extended on the last date of an Interest Period for another Interest Period; provided that no Loan hereunder shall be extended beyond its Maturity Date.

 

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SECTION 3

 

CONDITIONS PRECEDENT

 

3.1 Conditions to Initial Loan Advance.

 

This Credit Agreement, including the obligation of the Lender to make the Loans requested to be made by it, shall not become effective until the date (the “Closing Date”) on which each of the following conditions is satisfied or provided for in form and substance reasonably acceptable to the Lender, or duly waived in writing by the Lender in accordance with Section 7.5:

 

(a)                                         Executed Credit Documents. Receipt by the Lender of duly executed copies of this Credit Agreement, the Fee Letter, the Letters of Credit, the Promissory Note and the other Credit Documents.

 

(b)                                         No Default; Representations and Warranties. Receipt by the Lender of an officer’s certificate duly executed by an officer of the Borrower acceptable to the Lender, certifying that as of the Closing Date (i) there exists no Default or Event of Default, (ii) all representations and warranties contained herein and in the other Credit Documents are true and correct in all material respects, and (iii) since the date of the most recent audited financial statements of the Borrower received by the Lender from the Borrower, there has not occurred, nor otherwise exist, an event or condition which has a Material Adverse Effect on the Borrower.

 

(c)                                          Corporate Documents. Receipt by the Lender of the following:

 

(i)                                     Charter Documents. A copy of the Certificate of Incorporation of the Borrower certified to be true and complete as of a recent date by the appropriate Governmental Authority of the jurisdiction of its incorporation and certified by an officer of the Borrower to be true and correct as of the Closing Date.

 

(ii)                                  By-laws. A copy of the By-laws of the Borrower certified by an officer of the Borrower to be true and correct as of the Closing Date.

 

(iii)                               Resolutions. A copy of the resolution of the board of directors of the Borrower approving and adopting the Credit Documents to which it is a party, the transactions contemplated thereby and authorizing execution and delivery thereof, certified by an officer of the Borrower to be true and correct and in force and effect as of the Closing Date.

 

(iv)                              Incumbency. Receipt by the Lender of an incumbency certificate, including specimen signatures, of the authorized signatories of the Borrower authorized to execute the Credit Documents to which it is a party on behalf of the Borrower.

 

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(d)                                 Financial Statements. The Borrower shall have delivered or made available (including by electronic communication regarding public filings thereof) financial statements of the Borrower requested by the Lender for the past fiscal year, and such financial statements shall not, in the reasonable judgment of the Lender, reflect any material adverse change in the financial condition of the Borrower.

 

(e)                                  Fees. The Lender shall have received all fees agreed to be paid, and all reasonable out-of-pocket expenses agreed to be paid for which invoices have been presented (including the reasonable fees and expenses of legal counsel), reasonably in advance of the Closing Date.

 

(f)                                   Patriot Act/ “Know You Customer” Laws. At least two (2) Business Days before the Closing Date the Lender shall have received all documents and other information reasonably requested by it that is required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.

 

(g)                                  Other. Receipt by the Lender of such other documents, agreements or information which it may reasonably request.

 

3.2 Conditions to Each Loan Advance.

 

The obligation of the Lender to make any Loan is subject to satisfaction of the following conditions:

 

(a)                                 The Lender shall have received (i) an appropriate Notice of Borrowing, (ii) the Letter of Credit securing the Borrower’s Obligations with respect to such Loan, (iii) evidence of cash deposit to China Merchants Bank Co., Ltd., Guangzhou Branch from an Affiliate of the Borrower, and (iv) a copy of the letter of credit reimbursement agreement between the Letter of Credit applicant and China Merchants Bank Co., Ltd., Guangzhou Branch and of the pledge agreement pursuant to which the cash deposit is pledged to China Merchants Bank Co., Ltd., Guangzhou Branch to secure the obligations thereunder of the Letter of Credit applicant thereto;

 

(b)                                 The representations and warranties set forth in Section 4 shall be true and correct in all material respects as of such date (except for those which expressly relate to an earlier date);

 

(c)                                  No Default or Event of Default shall exist and be continuing either prior to or after giving effect to such Loan to be made; and

 

(d)                                 (i) The aggregate principal amount of such Loan and all the other Loans plus the interest and fees due on all the Loans on the next following applicable Interest Payment Date shall not exceed 95% of the Dollar Equivalent of the drawable amount of the Letters of Credit that secure the Borrower’s Obligations and are delivered to the Lender on or prior to the Borrowing Date of such Loan, and (ii) the aggregate principal amount of all the Loans will not exceed the Committed Amount.

 

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The delivery of each Notice of Borrowing shall constitute a representation and warranty by the Borrower of the correctness of the matters specified in subsections (b) and (c) above.

 

SECTION 4

 

REPRESENTATIONS AND WARRANTIES

 

The Borrower represents and warrants to the Lender as follows:

 

4.1 Corporate Status.

 

The Borrower and each Material Subsidiary (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its material properties, to lease the material properties it operates as lessee and to conduct the business in which it is currently engaged and (c) is duly qualified as a foreign corporation or other organization and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to be so qualified or in good standing could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

4.2 Power, Authorization; Enforceable Obligations.

 

The Borrower has the corporate power and authority to make, deliver and perform the Credit Documents to which it is a party and to obtain extensions of credit hereunder. The Borrower has taken all necessary organizational action to authorize the execution, delivery and performance of the Credit Documents to which it is a party and to authorize the extensions of credit on the terms and conditions of this Credit Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with (a) any extension of credit hereunder when made (except for consents, authorizations, filings, notices or other acts required with respect to such extension of credit that have been obtained or made and are in full force and effect at the time of such extension of credit) or (b) the execution, delivery, performance, validity or enforceability of this Credit Agreement or any of the Credit Documents. Each Credit Document has been duly executed and delivered on behalf of the Borrower. This Credit Agreement constitutes, and each other Credit Document upon execution will constitute, a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

 

4.3 No Legal Bar.

 

The execution, delivery and performance of this Credit Agreement and the other Credit Documents, the borrowings hereunder and the use of the proceeds thereof will not (a) conflict with or violate any (i) Requirement of Law or (ii) Contractual Obligation of the Borrower or any

 

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Material Subsidiary (except in the case of this clause (a) to the extent any such violations could not, in the aggregate, reasonably be expected to have a Material Adverse Effect) and (b) result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation.

 

4.4 Liens; Indebtedness.

 

Neither the Borrower nor any of its Subsidiaries has outstanding any Lien except as permitted by Section 5.4.

 

4.5 Litigation.

 

As of the Closing Date, (a) except as disclosed in any public filings of the Borrower or its Subsidiaries prior to the date hereof, no material litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any Material Subsidiary or against any of their respective properties or revenues that could reasonably be expected to have a Material Adverse Effect and (b) no material litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any Material Subsidiary with respect to any of the Credit Documents or any of the transactions contemplated hereby or thereby.

 

4.6 Taxes.

 

Each of the Borrower and each Material Subsidiary has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than (i) where failure to file such returns or pay, discharge or otherwise satisfy such taxes, fees or other charges could not, in the aggregate, reasonably be expected to result in a Material Adverse Effect and (ii) any taxes, fees or other charges the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or such Material Subsidiary).

 

4.7 Governmental and Other Approvals.

 

No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or other regulatory body is required for the due execution, delivery and performance by the Borrower of this Credit Agreement, except for any authorization, order, approval, notice, filing or other action (i) that is not yet required to be obtained, made or taken or (ii) that has duly been obtained, made or taken and is (x) in full force and effect and (y) sufficient for the purposes hereof, or except where the failure to satisfy any of the foregoing could not reasonably be expected to have a Material Adverse Effect.

 

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4.8 Use of the Loans.

 

The proceeds of the Loans will be used to finance acquisitions and for general corporate purposes, including working capital advances; provided, that no portion of the proceeds of any Loan will be used to purchase or otherwise acquire, whether in a single transaction or a series of related transactions, a majority of the voting stock or other ownership interest of a Person or all or substantially all of the Property of a Person if such purchase or acquisition is against the recommendation of, or otherwise opposed by, the board of directors or other governing body of such Person. No part of the proceeds of any Loan hereunder will be used for the purpose of purchasing or carrying Margin Stock or to extend credit to others for such purpose, in violation of Regulation U or Regulation X issued by the Board of Governors of the Federal Reserve System or Section 7 of the Securities Exchange Act of 1934, as amended.

 

4.9 Environmental Compliance.

 

Each of the Borrower and its Subsidiaries is in substantial compliance with all applicable federal, state and local environmental laws, regulations and ordinances governing its business, properties or assets with respect to discharges into the ground and surface water, emissions into the ambient air and generation, storage, transportation and disposal of waste materials or process by-products, except such noncompliances as are not likely to have a Material Adverse Effect.

 

4.10                             Investment Company Act; Other Regulations.

 

The Borrower is not an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness.

 

4.11                             Foreign Assets Control Regulations, Etc.; OFAC Compliance.

 

Neither the execution and delivery of this Credit Agreement or the other Credit Documents by Borrower nor the use of the proceeds of any Loan, will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) of the Anti-Terrorism Order or any enabling legislation or Executive Order relating to any of the same. Without limiting the generality of the foregoing, neither the Borrower nor any of their respective Subsidiaries (a) is or will become a blocked person described in Section 1 of the Anti-Terrorism Order or (b) engages or will engage in any dealings or transactions or be otherwise associated with any such blocked person.

 

None of the Borrower or any Subsidiary thereof is listed on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Asset Control, Department of the Treasury (“OFAC”) pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001), and/or any other list maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders or otherwise subject to any sanction imposed pursuant to an OFAC implemented regulation.

 

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SECTION 5

 

COVENANTS

 

So long as any of the Commitment is in effect and, in any event, until payment in full and discharge of all Obligations to the Lender, including payment of all principal and interest on the Loans, the Borrower shall comply, and shall cause each Subsidiary, to the extent applicable, to comply, with the following covenants:

 

5.1 Corporate Existence.

 

The Borrower shall, and shall cause each of its Subsidiaries to do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business; provided that the foregoing shall not prohibit any merger or consolidation permitted under Section 5.5.

 

5.2 Reports, Certificates and Other Information.

 

The Borrower shall furnish to the Lender:

 

(A)                               as soon as available and in any event within one hundred and twenty (120) days after the end of each fiscal year of the Borrower, the audited balance sheet of the Borrower as at the end of such fiscal year and the statements of income, cash flows and common shareholders’ equity of the Borrower for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, all in reasonable detail and accompanied by a report or opinion (which shall not be qualified by reason of any limitations imposed by the Borrower) of a registered independent public accounting firm of recognized national standing selected by the Borrower, which shall be prepared in accordance with generally accepted auditing standards relating to reporting, to the effect that such financial statements present fairly, in accordance with GAAP consistently applied (except for changes in which such accountants concur), the financial condition of the Borrower as at the end of such fiscal year and its results of operations and the cash flows for such fiscal year;

 

(B)                               as soon as available and in any event within ninety (90) days after the end of each quarterly period (other than the last quarterly period) in each fiscal year of the Borrower, the condensed balance sheet of the Borrower as at the end of such quarterly period and the condensed statements of income and cash flows of the Borrower for that part of the fiscal year ended with such quarterly period, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified by a principal financial officer of the Borrower subject to normal year-end adjustments;

 

(C)                               immediately upon a senior officer in the Borrower’s finance department becoming aware of (i) the existence of a Default or an Event of Default; and (ii) any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including, without limitation, (a) any dispute, litigation, investigation, proceeding

 

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or suspension between the Borrower or any of its Subsidiaries and any Governmental Authority; (b) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any of its Subsidiaries, including pursuant to any applicable environmental law; (c) any litigation, investigation or proceeding affecting the Borrower in which the amount involved exceeds $500,000, or in which injunctive relief or similar relief is sought, in the cases of subclauses (ii) (a) through (c) which could reasonably be expected to have a Material Adverse Effect; and (iii) any development or event that has had or could reasonably be expected to have a Material Adverse Effect.

 

(D)                               promptly after the sending or filing thereof, copies of all reports which the Borrower may from time to time furnish its stockholders.

 

At any reasonable time and from time to time, upon ten (10) Business Days’ prior written notice, the Borrower shall permit the Lender or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of and visit the properties of the Borrower and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower and any of its Subsidiaries, in each case to the extent regarding this Credit Agreement, (i) with any of the Borrower’s senior officers or any of the Borrower’s officers within the Borrower’s finance department and (ii) with the Borrower’s registered independent public accounting firm, in the presence of one or more officers of the Borrower if so requested by the Borrower (it being understood that information obtained by the Lender pursuant to this Section shall be kept confidential except to the extent any such information becomes public or is required to be disclosed by law or requested to be disclosed by any Governmental Authority); provided that none of the Lender and the agents and representatives thereof shall be entitled to examine or make copies of or abstracts from the records of the Borrower or any Subsidiary if the Borrower shall be advised by counsel, in good faith, that the examination, copying or abstracting of such information or material could result in a waiver of any attorney-client privilege relating to such information or material or otherwise compromise the Borrower’s or a Subsidiary’s position in any litigation, investigation or other legal proceeding to which the Borrower or any Subsidiary is a party or is subject.

 

5.3 Compliance Certificate.

 

The Borrower shall supply a Compliance Certificate to the Lender with each set of its financial statements delivered pursuant to Section 5.2. Each Compliance Certificate supplied by the Borrower shall be signed by the Chief Financial Officer of the Borrower.

 

5.4 Liens.

 

The Borrower shall not create or suffer to exist, or permit any of its Subsidiaries to create or suffer to exist, any Lien upon any of its properties, whether now owned or hereafter acquired, other than:

 

(i)                                     Liens for taxes or other governmental charges, (A) which are either not yet delinquent or the amount, applicability or validity of which are being contested in good faith by the Borrower or any Subsidiary by appropriate means or (B) which do not in the

 

21

 

aggregate materially impair the value or use of their respective properties and assets in the conduct of their respective businesses;

 

(ii)                                  Liens incurred or deposits made in the ordinary course of business in connection with worker’s compensation, unemployment insurance, social security and other similar laws and which do not in the aggregate materially impair the value or use of their respective properties and assets in the conduct of their respective businesses; and

 

(iii)                               Liens arising and continuing in the ordinary course of business (but not related to Indebtedness) which are incidental to the businesses of the Borrower and its Subsidiaries (including, without limitation, carriers’, lessors’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens) and which do not in the aggregate materially impair the value or use of their respective properties and assets in the conduct of their respective businesses.

 

5.5 Mergers and Consolidations.

 

The Borrower shall not, and shall not permit any of its Material Subsidiaries to, directly or indirectly, merge or consolidate with any Person, except that, if after giving effect thereto no Default or Event of Default would exist, this Section 5.5 shall not apply to (a) any merger or consolidation of the Borrower with any one or more Persons (including any Subsidiary), so long as the successor entity (if other than the Borrower) (i) is a Person organized and duly existing under the law of any state of the United States and (ii) assumes, in form reasonably satisfactory to the Lender, all of the obligations of the Borrower under this Credit Agreement, (b) any merger or consolidation of a Material Subsidiary with another Subsidiary, provided that the continuing Person shall be a Material Subsidiary, and (c) any merger or consolidation of a Material Subsidiary with another Person if after giving effect thereto the survivor is no longer a Material Subsidiary and the assets of such Material Subsidiary could have been Disposed of pursuant to the provisions of Section 5.16 if such transaction were treated as a Disposition of the assets of such Material Subsidiary. In the event of any merger or consolidation of or by the Borrower in which the Borrower is not the surviving entity, the surviving entity of such merger or consolidation shall deliver to the Lender all information reasonably necessary to comply with the identification requirements of the Act (as defined in Section 7.12).

 

5.6 Payment of Obligations and Taxes.

 

The Borrower shall, and shall cause each Subsidiary to pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all of its obligations (including, without limitation, obligations with respect to material taxes) of whatever nature, except that neither the Borrower nor any Subsidiary shall be required to pay, discharge or otherwise satisfy any such obligation or taxes (i) whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary has provided adequate reserves in accordance with GAAP or (ii) where failure to pay, discharge or otherwise satisfy such obligation could not, in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

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5.7 Insurance.

 

The Borrower shall, and shall cause each Subsidiary to, maintain insurance, which may include self-insurance, in such amounts and covering such risks as is consistent with sound business practice; provided that the Borrower and each Subsidiary may self-insure the risks of damage to its Properties and other losses resulting from named and other windstorms and related causes without establishing any reserve relating to such retained risks.

 

5.8 Compliance with Laws.

 

The Borrower shall, and shall cause each of its Subsidiaries to, comply in all material respects with the requirements of all federal, state and local laws, rules, regulations, ordinances and orders (including, without limitation, environmental laws) applicable to or pertaining to their Properties or business operations except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or where the failure to comply is not likely to either (i) have a Material Adverse Effect or (ii) result in a Lien upon any of their Property.

 

5.9 Maintenance of Properties, Etc.

 

The Borrower shall, and shall cause each of its Subsidiaries to, maintain and preserve all of their Properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear expected, to the extent that failure to maintain any of such Property would be reasonably likely to have a Material Adverse Effect.

 

5.10                             Change in the Nature of Business.

 

The Borrower shall not, and shall not permit any of its Subsidiaries to, engage, in any material respect, in a business other than the manufacturing and provision of such products and services as the Borrower and its Subsidiaries currently manufacture and provide or products and services that are similar to the services and products currently provided and activities related and complementary to any of the foregoing.

 

5.11                             Ownership of Subsidiaries.

 

The Borrower shall at all times, directly or indirectly own, beneficially and of record, except as permitted by Section 5.5, 100% of each class of issued and outstanding common stock of each Material Subsidiary.

 

5.12                             Transactions with Affiliates.

 

The Borrower will not, nor will it cause or permit any of its Subsidiaries to, enter into any transaction of any kind with any Affiliate of the Borrower of (i) any shares, interests, participations or other equivalent of Capital Stock (if any such Subsidiary is a corporation), (ii) any equivalent ownership interests (if any such Subsidiary is other than a corporation) and (iii) any warrants, rights or options to purchase any of the foregoing) in other than arm’s-length transactions with Affiliates that are otherwise permitted hereunder; provided, that the Borrower and its Subsidiaries may enter into transactions that are not on an arm’s-length basis with such

 

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Affiliates so long as the fair market value of any such transaction does not exceed $100,000 at any time.

 

5.13                             Maintenance of the Minimum Equivalent Amount.

 

(A)                               For so long as any of the Obligations is outstanding, if at any time such Obligations are in excess of 97% of the Dollar Equivalent of the remaining undrawn amount of all Letters of Credit, the Lender shall have a right to issue a margin call (a “Margin Call”) to the Borrower, requiring the Borrower to promptly (i) deposit or cause to be deposited an amount in U.S. dollars (as calculated and determined by the Lender) in a bank account opened and maintained in the name of the Borrower at the office of the Lender (the “New York Deposit Account”), or (ii) deposit or cause an Affiliate of the Borrower acceptable to the Lender (the “Account Holder”) to deposit an amount in RMB (as calculated and determined by the Lender) in a bank account opened and maintained in the name of the Borrower or the Account Holder at a branch or office of the Lender located in China designated by the Lender (the “China Deposit Account”, and each of the New York Deposit Account and China Deposit Account, a “Deposit Account” and together the “Deposit Accounts”), such that the outstanding Obligations hereunder will be no more than 95% of the Dollar Equivalent of the sum of the undrawn amount of all Letters of Credit and the balance in the applicable Deposit Account. The Borrower hereby covenants that upon its receipt of a Margin Call from the Lender, it will promptly, but in any event within three (3) Business Days, wire transfer, or cause the Account Holder to wire transfer, the additional deposit in the amount required by the Lender to the applicable Deposit Account.

 

(B)                               With respect to the New York Deposit Account, the Borrower hereby pledges and grants to the Lender a first priority security interest in the New York Deposit Account and all the funds that may be credited thereto from time to time to secure its Obligations to the Lender.

 

(C)                               With respect to the China Deposit Account, (x) the Borrower shall, or shall cause the Account Holder of such account to, as the case may be, pledge and grant to the Lender a first priority security interest in the Deposit Account and all the funds that may be credited thereto from time to time to secure the Borrower’s Obligations to the Lender and (y) to the extent required by laws of China to establish, perfect, preserve and protect the security interest in the China Deposit Account and the funds credited thereto in favor of the Lender, the Borrower shall, or shall cause the Account Holder to, as the case may be, at the expense of the Borrower or the Account Holder, make, execute, endorse, acknowledge, file and/or deliver to the Lender the security agreements, financing statements, transfer endorsements, powers of attorney, certificates, account control agreements, registration or approval by Governmental Authorities with respect to foreign exchange control and other assurances or instruments and take such further steps relating to the China Deposit Account as the Lender may require. Furthermore, the Borrower shall, or shall cause the Account Holder to, as the case may be, deliver to the Lender such opinions of counsel and other related documents as may be requested by the Lender to assure itself that this Section 5.13 has been complied with.

 

(D)                               The documents or instruments related the security interest in the Deposit Account and the funds credited thereto shall have been duly recorded or filed in such manner and in such places to the extent required by law to establish, perfect, preserve and protect the security interest

 

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in favor of the Lender required to be granted pursuant to this Section 5.13 and all taxes, fees and other charges payable in connection therewith shall have been paid in full.

 

The Borrower agrees that each action required by clause (B) through (D) of this Section 5.13 shall be completed as soon as possible, but in no event later than ten (10) days after such action is requested to be taken by the Lender.

 

5.14                             Foreign Assets Control Regulations.

 

The Borrower shall not use the proceeds of any Loan in any manner that will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or the Anti-Terrorism Order of any enabling legislation or Executive Order relating to any of the same. Without limiting the foregoing, the Borrower will not permit itself or any of its Subsidiaries to (a) become a blocked person described in Section 1 of the Anti-Terrorism Order or (b) knowingly engage in any dealings or transactions or be otherwise associated with any person who is known by the Borrower or who (after such inquiry as may be required by Applicable Law) should be known by the Borrower to be a blocked person. (2) Each member or other direct or indirect principal of Borrower shall be at all times during the term of the Loans an entity or person which (a) is (as whose principals shall be) a reputable entity or person of good character and in good standing as reasonably determined by the Lender, (b) is creditworthy and not adverse to the Lender in any pending litigation or arbitration in which the Lender is also a party, (c) is not a Prohibited Person, and (d) is in good standing in its state or country or organization.

 

5.15                             Inspection of Property; Books and Records; Discussions.

 

The Borrower shall and shall cause each of its Material Subsidiaries to (a) keep proper books of records and account in which full, true and correct (in all material respects when taken as a whole) entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) from time to time, but not to exceed once in any twelve month period, during normal business hours and on reasonable prior notice, permit representatives of any Lender to visit and inspect any of its properties (subject to such physical security requirements as the Borrower or the applicable Material Subsidiary may require) and examine and make abstracts from any of its books and records (except to the extent that such access is restricted by law or by a bona fide non-disclosure agreement not entered into for the purpose of evading the requirements of this Section 5.15) and to discuss the business, operations, properties and financial and other condition of the Borrower and the Material Subsidiaries with officers and employees of the Borrower and the Material Subsidiaries and with their independent certified public accountants; provided, however, that during the occurrence and continuance of an Event of Default, the Borrower shall and shall cause each of its Material Subsidiaries to permit representatives of any Lender to engage in the activities permitted in clause (b), above at any reasonable time and as often as may reasonably be desired.

 

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5.16                        Disposition of Property.

 

The Borrower shall not, directly or indirectly, Dispose of, in one transaction or a series of transactions, all or substantially all of its business or property, whether now owned or hereafter acquired. For the avoidance of doubt, it is understood and agreed that this Section 5.16 shall not relieve the Borrower from complying with Section 5.12.

 

5.17                        Clauses Restricting Subsidiary Distributions.

 

The Borrower shall not, and shall not permit any of its Material Subsidiaries to, directly or indirectly, enter into or suffer to exist or become effective (including by way of amendment, supplement or other modification of an agreement existing on the Closing Date) any consensual encumbrance or restriction on the ability of any Material Subsidiary of the Borrower to make payments, directly or indirectly, to its shareholders by way of dividends, repayment of loans or intercompany charges, or other returns on investments that is more restrictive than any such encumbrance or restriction applicable to such Material Subsidiary on the Closing Date; provided that this Section 5.17 shall not apply to (a) limitations or restrictions imposed by law or in regulatory proceedings or (b) financial covenants contained in any agreement or indenture requiring compliance with financial tests or ratios, so long as such financial covenants could not reasonably be expected to impair the Borrower’s ability to repay the Obligations as and when due.

 

5.18                        Proceeds of Bond Offering

 

The proceeds of any bond offering conducted by the Borrower or any of its Affiliates prior to the Maturity Date hereunder shall be used to repay the Obligations hereunder.

 

SECTION 6

 

EVENTS OF DEFAULT

 

6.1                               Events of Default.

 

Each of the following occurrences shall constitute an “Event of Default” under this Credit Agreement:

 

(A)                               any representation or warranty made or deemed made by the Borrower herein or in any other Credit Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Credit Agreement or any such other Credit Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made;

 

(B)                               the Borrower shall fail to pay

 

(i)                                     any principal of any Loan as and when the same shall become due and payable in accordance with the terms hereof, or

 

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(ii)                                  any interest on any Loan, any fees, any costs and expenses or other Obligation as and when the same shall become due and payable in accordance with the terms hereof, and such failure shall continue unremedied for more than three (3) days;

 

(C)                               the Borrower shall fail to pay when due, whether by acceleration or otherwise, one or more evidences of Indebtedness (other than the Loans hereunder) having an aggregate unpaid balance of more than $100,000, and such failure shall continue for more than the period of grace, if any, applicable thereto and shall not have been waived;

 

(D)                               (i) the Borrower shall fail to perform or observe any term, covenant or agreement contained in Sections 5.1, 5.4, 5.5, 5.10, and 5.12 of this Credit Agreement on its part to be performed or observed or (ii) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Credit Agreement or any other Credit Document on its part to be performed or observed, and such failure shall continue unremedied for a period of thirty (30) days after (I) the Borrower shall have received notice of such failure from the Lender or (II) a senior officer in the finance department of the Borrower shall have knowledge of such failure, which ever shall first occur;

 

(E)                                the Borrower or any Material Subsidiary shall (i) apply for or consent to the appointment of a receiver, custodian, trustee or liquidator of the Borrower or such Subsidiary or any of their respective properties or assets, (ii) generally fail or admit in writing its inability to pay its debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under the Bankruptcy Code (as now or hereafter in effect), (v) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or readjustment of debts, (vi) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against the Borrower or such Material Subsidiary in an involuntary case under the Bankruptcy Code or (vii) take any corporate action for the purpose of effecting any of the foregoing;

 

(F)                                 a proceeding or case shall be commenced, without the application or consent of the Borrower or any Material Subsidiary, in any court of competent jurisdiction seeking (i) its liquidation, reorganization, dissolution or winding-up or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian or liquidator of the Borrower or such Material Subsidiary or of all or any substantial part of its assets or (iii) similar relief in respect of the Borrower or such Material Subsidiary under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of sixty (60) days;

 

(G)                               any final judgment, final consent decree or final order for the payment of money (or for the performance of any remedial action or other services that would result in the expenditure of funds by the Borrower or any of its Subsidiaries) shall be rendered

 

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against the Borrower or any of its Subsidiaries by any federal, state or local court or administrative agency and the same shall fail to be discharged, stayed or bonded for a period of sixty (60) days after such final judgment, final consent decree or final order for the payment of money (or, in the case of performance obligations, shall fail to be performed in the manner and at the times required in such final judgment, final consent decree or final order or shall fail to otherwise be discharged, stayed or bonded, in any such case, for a period of sixty (60) days after the performance of such obligations is required); provided that no occurrence described in this subsection (H) shall constitute an Event of Default unless the aggregate outstanding liability of the Borrower and its Subsidiaries which has resulted from all such occurrences shall exceed $500,000 (or its equivalent in any other currency); or

 

(H)                                   a Change of Control shall have occurred.

 

6.2 Rights and Remedies.

 

In the case of an Event of Default described in subsection (E) or (F) of Section 6.1 relating to the Borrower or a Material Subsidiary, the Commitment of the Lender shall be immediately terminated and the Loans, including all interest thereon, and all other Obligations shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower. In the case of any other Event of Default, and in any such event (other than an event described in subsection (E) or subsection (F) of Section 6.1 relating to the Borrower or a Material Subsidiary), the Lender may, by notice to the Borrower (i) terminate forthwith the Commitment of the Lender and/or (ii) declare the Loans, including all interest thereon, and all other Obligations to be forthwith due and payable, whereupon the Loans and all such other Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower. In case of any Event of Default, the Lender shall have the right to (A) make a drawing under any and all Letters of Credit and apply the proceeds of such drawings toward the discharge of the Obligations and/or (B) exercise any rights or remedies available to the Lender under the Credit Documents or at law or equity. For the avoidance of doubt, notwithstanding anything to the contrary in the Credit Documents, the Lender shall have the right to make a drawing under any Letter of Credit and apply the proceeds of such drawing toward the discharge of the Obligations relating to any borrowing under this Credit Agreement.

 

SECTION 7

 

MISCELLANEOUS

 

7.1 Notices.

 

Except as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (i) when delivered, (ii) when transmitted via confirmed telecopy (or other confirmed facsimile device) to the number set out below (provided, however, that notices regarding Defaults and Events of Default or amounts owing under Sections

 

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2.4, 2.5, or 2.6 may not be given by telecopy), (iii) the Business Day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service for next day delivery, or (iv) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, return-receipt requested, in each case to the respective parties at the address set forth below:

 

if to the Borrower:

 

	
VIPSHOP INTERNATIONAL   HOLDINGS LIMITED
    
	
Address:
    	
Unit 2209 22/F
    
	
 
    	
Wu Chung House
    
	
 
    	
213 Queen’s Rd East Wanchai
    
	
 
    	
Hong Kong
    
	
Telephone:
    	
(0852) 39737795
    
	
Fax:
    	
[·]
    

 

if to the Lender

 

	
CHINA MERCHANTS BANK CO., LTD.,   NEW YORK BRANCH
    
	
Address:
    	
535 Madison Avenue, 18th Floor
    
	
 
    	
New York, New York 10022
    
	
Telephone: 
    	
+1 212 593 2679
    
	
Fax:
    	
+1 212 753 1319
    

 

provided that any notice, request or demand to or upon the Lender shall not be effective until received.

 

Unless and until the Lender is notified in writing by the Borrower to the contrary, the Borrower hereby authorizes the Lender to rely on any notices in respect of the making, extension, conversion or continuation of the Loans given by any Responsible Officer or any designee of a Responsible Officer of which the Lender is notified in writing. Notices by the Borrower in respect of the making, extension, conversion or continuation of the Loans may be given telephonically, and the Borrower agrees that the Lender may rely on any such notices made by any person or persons which the Lender in good faith believes to be acting on behalf of the Borrower. The Borrower agrees to deliver promptly to the Lender a written confirmation of any telephonic notice, if such confirmation is requested by the Lender. Notices and other communications to the Lender hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Lender; provided that the foregoing shall not apply to notices pursuant to Section 2 unless otherwise agreed by the Lender. The Lender or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

 

Information required to be delivered pursuant to Sections 5.2 shall be deemed to have been delivered on the date on which the Borrower provides notice to the Lender that such information has been posted on the SEC website on the Internet at sec.gov/edaux/searches.htm,

 

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on the Borrower’s IntraLinks site at intralinks.com or at another website identified in such notice and accessible by the Lender without charge.

 

7.2 Benefit of Agreement.

 

(a)                                 Generally. This Credit Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided that the Borrower may not assign and transfer any of its interests without prior written consent of the Lender; provided further that the rights of the Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth in this Section 7.2, provided, however, that nothing herein shall prevent or prohibit the Lender from (i) pledging or assigning its Loan hereunder to a Federal Reserve Bank in support of borrowings made by the Lender from such Federal Reserve Bank, or (ii) granting assignments or participations in the Lender’s Loan and/or Commitments hereunder to its parent company and/or to any of its Affiliate.

 

(b)                                 Assignments. (i) The Lender may, upon obtaining the consent of the Borrower and to assign all of its rights and obligations hereunder pursuant to an Assignment and Acceptance to another bank or financial institution; provided that (A) no such consent shall be unreasonably withheld or delayed and (B) no such consent shall be required with respect to any assignment by the Lender to its Affiliate and no such consent shall be required from the Borrower after the occurrence and during the continuation of any Event of Default. Any assignment hereunder shall be effective upon execution by all necessary parties of the applicable Assignment and Acceptance. The assigning Lender will give prompt notice to the Borrower of any such assignment. Upon the effectiveness of any such assignment (and after notice to the Borrower as provided herein), the assignee shall become a “Lender” for all purposes of this Credit Agreement and the other Credit Documents and, to the extent of such assignment, the assigning Lender shall be relieved of its obligations hereunder to the extent of the Loans and Commitment components being assigned.

 

(ii)                                  Subject to acceptance and recording thereof pursuant to paragraph (a)(iii) below, from and after the effective date specified in each Assignment and Assumption the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Credit Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Credit Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Credit Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.5, 2.7, 2.8 and 7.4 in respect of the period that it was a Lender). Any assignment or transfer by the Lender of rights or obligations under this Credit Agreement that does not comply with this Section 7.2 shall be treated for purposes of this Credit Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

 

(iii)                               The Borrower shall maintain a register at one of its offices (the “Register”) on which it will record the Commitments from time to time of each of the Lender and each repayment in respect of the principal amount and stated interest of such Commitments

 

30

 

of each Lender. Failure to make any such recordation, or any error in such recordation shall not affect the Borrower’s obligations under this Credit Agreement. The entries in the Register shall be conclusive absent manifest error, and the Borrower and the Lender shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Credit Agreement. No assignment shall be effective for purposes of this Credit Agreement unless it has been recorded in the Register as provided in this paragraph.

 

(c)                                  Participations. (i) The Lender may sell, transfer, grant or assign participations in all or any part of its interests and obligations hereunder to one or more banks or other entities (each a “Participant”); provided that (i) the selling Lender shall remain the “Lender” for all purposes under this Credit Agreement (the selling Lender’s obligations under the Credit Documents remaining unchanged) and the Participant shall not constitute a Lender hereunder, (ii) no such Participant shall have, or be granted, rights to approve any amendment or waiver relating to this Credit Agreement or the other Credit Documents except to the extent any such amendment or waiver would (A) reduce the principal of or rate of interest on or fees in respect of any Loan in which the Participant is participating, or (B) postpone the date fixed for any payment of principal (including extension of the Maturity Date or the date of any mandatory prepayment), interest or fees in which the Participant is participating and (iii) sub-participations by the Participant (except to an affiliate, parent company or affiliate of a parent company of the Participant) shall be prohibited. In the case of any such participation, except as contemplated in clause (ii) of the proviso of the first sentence of this Section, the Participant shall not have any rights under this Credit Agreement or the other Credit Documents (the Participant’s rights against the selling Lender in respect of such participation to be those set forth in the participation agreement with the Lender creating such participation) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation.

 

(ii)                                  Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest acquired pursuant to this Section 7.2(c) (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Credit Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Credit Agreement notwithstanding any notice to the contrary.

 

(d)                                 Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Credit Agreement to secure obligations to a Federal Reserve Bank.

 

(e)                                  The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes in the form attached as Exhibit B hereto.

 

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7.3 No Waiver; Remedies Cumulative.

 

No failure or delay on the part of the Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between or among the parties hereto shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Lender would otherwise have. No notice to or demand on any party hereto in any case shall entitle any such party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Lender to take any other or further action in any circumstances without notice or demand.

 

7.4 Payment of Expenses and Taxes.

 

The Borrower agrees (a) to pay or reimburse the Lender for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Credit Agreement and the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including the reasonable fees and disbursements of counsel to the Lender and filing and recording fees and expenses; provided, however, the Borrower shall only be liable for the fees and expenses of one counsel for the Lender, from time to time, in connection with the preparation, execution, delivery and administration of this Credit Agreement and the other Credit Documents, with statements with respect to the foregoing to be submitted to the Borrower prior to the Closing Date (in the case of amounts to be paid on the Closing Date) and from time to time thereafter on a quarterly basis or such other periodic basis as the Lender shall deem appropriate, (b) to pay or reimburse the Lender for all its reasonable costs and expenses incurred in connection with the enforcement or preservation of any rights under this Credit Agreement, the other Credit Documents and any such other documents, including the reasonable fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to the Lender, (c) to pay, indemnify, and hold the Lender harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, that may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Credit Agreement, the other Credit Documents and any such other documents other than any net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Lender as a result of the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Credit Agreement or any other Credit Document), and (d) to pay, indemnify, and hold the Lender and its officers, directors, employees, affiliates, agents and controlling persons (each, an “Indemnitee”) harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Credit Agreement, the other

 

32

 

Credit Documents and any such other documents, including any of the foregoing relating to the use of proceeds of any Loan or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower or any of its Subsidiaries or any of their properties and the reasonable fees and expenses of legal counsel in connection with claims, actions or proceedings by any Indemnitee against the Borrower under any Credit Document (all the foregoing in this clause (d), collectively, the “Indemnified Liabilities”), provided, that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities have resulted from the gross negligence or willful misconduct of such Indemnitee. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries to waive, all rights for contribution or any other rights of recovery that arise as a result of such Indemnitee’s status as a Lender, or an officer, director, employee, affiliate, agent or controlling person thereof, with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have by statute or otherwise against any Indemnitee, except to the extent that such claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses have resulted from the gross negligence or willful misconduct of such Indemnitee. All amounts due under this Section 7.4 shall be payable not later than ten (10) days after written demand therefor, and such demand shall set forth in reasonable detail the basis for and calculation of any such amounts claimed as owing by the Borrower. Statements payable by the Borrower pursuant to this Section 7.4 shall be submitted to the Borrower at the address of the Borrower set forth in Section 7.1, or to such other Person or address as may be hereafter designated by the Borrower in a written notice to the Lender. The agreements in this Section 7.4 shall survive repayment of the Loan and all other amounts payable hereunder and the termination of this Credit Agreement.

 

7.5 Amendments, Waivers and Consents.

 

Neither this Credit Agreement nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing signed by the Lender and the Borrower. Any such waiver and any such amendment, supplement or modification shall be binding upon the Borrower and the Lender and all future holders of the Loans. In the case of any waiver, the Borrower and the Lender shall be restored to their former position and rights hereunder and under the other Credit Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver, except to the extent expressly provided therein, shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.

 

7.6 Adjustments; Set-off.

 

If (i) an Event of Default has occurred and is continuing and (ii) the Lender has declared the Loans to be immediately due and payable pursuant to Section 6.2, or the Loans have become immediately due and payable without notice as otherwise provided herein, then the Lender or any of its Affiliates, is hereby authorized by the Borrower at any time and from time to time, to the extent permitted by applicable law, without notice to the Borrower (any such notice being expressly waived by the Borrower), to set off and apply all deposits (general or special, time or

 

33

 

demand, provisional or final) at any time held and other indebtedness at any time owing by the Lender or any of its Affiliates, to or for the account of the Borrower against any obligations of the Borrower to the Lender now or hereafter existing under this Credit Agreement, regardless of whether any such deposit or other obligation is then due and payable or is in the same currency or is booked or otherwise payable at the same office as the obligation against which it is set off and regardless of whether the Lender shall have made any demand for payment under this Credit Agreement. The Lender agrees promptly to notify the Borrower after any such set-off and application made by the Lender or any of its Affiliates; provided that any failure to give such notice shall not affect the validity of such setoff and application. The rights of the Lender under this subsection are in addition to any other rights and remedies which it may have. For the avoidance of doubt, nothing in this Section shall impair the right of the Lender to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness in respect of the Loans.

 

7.7 Counterparts.

 

This Credit Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Credit Agreement by facsimile or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Credit Agreement.

 

7.8 Headings.

 

The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement.

 

7.9 Survival of Indemnification.

 

All indemnities set forth herein, including, without limitation, in Sections 2.5, 2.7, 2.8 2.11 and 7.4 shall survive the execution and delivery of this Credit Agreement, and the making of the Loans, the repayment of the Loans and other obligations and the termination of the Commitments hereunder; provided, however, that payment of any such amounts shall be subject to the limitations, if any, regarding requirements for notice set out in such Sections.

 

7.10                        Governing Law; Submission to Jurisdiction, Venue, Waiver of Jury Trial.

 

(a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES). ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, IN EACH CASE WHICH ARE LOCATED IN THE COUNTY OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS

 

34

 

AGREEMENT OR ANY OTHER CREDIT DOCUMENT, EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER THE BORROWER, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN ANY OF THE AFOREMENTIONED COURTS, THAT SUCH COURTS LACK PERSONAL JURISDICTION OVER HOLDINGS OR THE BORROWER. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO HOLDINGS OR THE BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST HOLDINGS OR THE BORROWER IN ANY OTHER JURISDICTION.

 

(b)                                 THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

(c)                                  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

7.11        Confidentiality.

 

The Lender agrees to keep confidential all information provided to it by or on behalf of the Borrower pursuant to or in connection with this Credit Agreement and to use such information solely in connection with evaluating, administering, structuring and/or approving the credit facility contemplated hereby; provided that nothing herein shall prevent the Lender from disclosing any such information (a) to the Lender or any affiliate thereof, solely for the purpose

 

35

 

of evaluating, administering, structuring and/or approving the credit facility contemplated hereby, (b) subject to an agreement to comply with the provisions of this Section, to any actual or prospective Transferee or any direct or indirect counterparty (or any professional advisor to such counterparty) to any Swap Agreement with respect to this Credit Agreement, the Loans or the Commitments, or to any credit insurance provider in connection with insuring and/or approving the credit facility contemplated hereby, (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, solely for the purpose of evaluating, administering, structuring and/or approving the credit facility contemplated hereby, (d) upon the request or demand of any Governmental Authority having regulatory or oversight jurisdiction over the Lender, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law; provided that it agrees to use commercially reasonable efforts (to the extent practicable or legally permissible) to notify the Borrower reasonably in advance thereof to permit the Borrower the opportunity to contest such disclosure, (f) if requested or required to do so in connection with any litigation or similar proceeding; provided that it agrees to use commercially reasonable efforts (to the extent practicable or legally permissible) to notify the Borrower reasonably in advance thereof to permit the Borrower the opportunity to contest such disclosure, (g) that has been publicly disclosed other than as a result of a breach of this Section 7.11, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to such Lender, (i) in connection with the exercise of any remedy hereunder or under any other Credit Document.

 

7.12        USA Patriot Act Notice.The Lender hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT ACT (Title III of Pub. L. 107-56 (signed into law on November 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow the Lender to identify the Borrower in accordance with the Act.

 

7.13        Severability.

 

Any provision of this Credit Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

7.14        Entirety.

 

This Credit Agreement and the other Credit Documents represent the entire agreement of the Borrower and the Lender with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents.

 

36

 

7.15        Survival of Representations and Warranties.

 

All representations and warranties made by the Borrower herein shall survive the execution of this Credit Agreement and the making of the Loans hereunder.

 

7.16        Fiduciary Relationship.

 

The Borrower, on behalf of itself and its Subsidiaries, agrees that in connection with all aspects of the transactions contemplated hereby and any communications in connection therewith, the Borrower, its Subsidiaries and their Affiliates, on the one hand, and the Lender and its Affiliates, on the other hand, will have a business relationship that does not create, by implication or otherwise, any fiduciary duty on the part of the Lender or its Affiliates, and no such duty will be deemed to have arisen in connection with any such transactions or communications.

 

[Remainder of Page Intentionally Left Blank and Signature Page Follows]

 

37

 

IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written.

 

	
 
    	
VIPSHOP INTERNATIONAL HOLDINGS LIMITED
    
	
 
    
	
as   the Borrower
    
	
 
    
	
 
    
	
by
    	
/s/   Eric Ya Shen
    
	
 
    	
Name:
    	
Eric   Ya Shen
    
	
 
    	
Title:
    	
CEO   and Chairman
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
CHINA MERCHANTS BANK CO., LTD., NEW YORK BRANCH
    
	
 
    	
as   the Lender
    
	
 
    	
 
    
	
 
    	
by
    	
/s/   Cynthia Fotheringham For Kevin Ding
    
	
 
    	
 
    	
Name:
    	
Cynthia   Fotheringham
    
	
 
    	
 
    	
Title:
    	
Senior   Credit Analyst
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
by
    	
/s/   Chengyue Jiao
    
	
 
    	
 
    	
Name:
    	
Chengyue   Jiao
    
	
 
    	
 
    	
Title:
    	
General   Manager
    

 

Signature Page to Credit Agreement

 

 

EXHIBIT A

 

FORM OF NOTICE OF BORROWING

 

China Merchants Bank Co., Ltd., New York Branch,

535 Madison Avenue, 18th Floor

New York, New York 10022

Attn: Kevin Ding

 

Ladies and Gentlemen:

 

The undersigned, VIPSHOP INTERNATIONAL HOLDINGS LIMITED (the “Borrower”), refers to the Credit Agreement dated as of February 21, 2014 (as amended, restated or otherwise modified from time to time, the “Credit Agreement”), between the Borrower, China Merchants Bank Co., Ltd., New York Branch, as the Lender. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice that it requests a Loan borrowing pursuant to the provisions of Section 2.1(b) of the Credit Agreement and in connection herewith sets forth below the terms on which such borrowing is requested to be made:

 

(A)                               Borrowing Date

(which shall be a Business Day)

 

(B)                               The proposed borrowing is a Term Loan.

 

(C)                               Principal Amount of

Borrowing

 

(D)                               Interest rate basis                                                3-Month LIBOR.

 

(E)                                Letter of Credit Number

 

(F)                                 Wire Instructions:

 

(i)                           Bank Name:

(ii)                        Bank Address:

(iii)                     Bank Account Number:

(iv)                    Bank Account Name:

(v)                       Swift Code:

 

In accordance with the requirements of Section 3.1, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in such Section, and confirms that the condition referenced in such Section is satisfied as of the date hereof.

 

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the Borrowing Date:

 

 

(A)                               the representations and warranties contained in the Credit Agreement and in the other Credit Documents are and will be true and correct in all material respects, before and after giving effect to the borrowing being requested hereunder and to the application of the proceeds thereof, as though made on such date, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date;

 

(B)                               no Default or Event of Default has occurred and is continuing, or would result from such borrowing being requested hereunder or from the application of the proceeds thereof; and

 

(C)                               the condition set forth in Section 3.2 of the Credit Agreement will be met on the date of the Borrowing Date and immediately after giving effect thereto.

 

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
VIPSHOP INTERNATIONAL HOLDINGS
    
	
 
    	
LIMITED
    
	
 
    	
 
    
	
 
    
	
 
    	
by
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
				

 

3

 

EXHIBIT B

 

FORM OF PROMISSORY NOTE

 

	
$150,000,000
    	
New York, New York
    
	
February 21, 2014
    

 

FOR VALUE RECEIVED, VIPSHOP INTERNATIONAL HOLDINGS LIMITED, a Hong Kong corporation (the “Borrower”), hereby promises to pay to CHINA MERCHANTS BANK CO., LTD, NEW YORK BRANCH or its registered assigns (the “Lender”), in lawful money of the United States of America in immediately available funds, at the Payment Office (as defined in the Credit Agreement referred to below) initially located at 535 Madison Avenue, 18th Floor, New York, New York 10022 on the Maturity Date (as defined in the Credit Agreement) the principal sum of ONE HUNDRED AND FIFTY MILLION DOLLARS ($150,000,000) or, if less, the unpaid principal amount of the Loans (as defined in the Credit Agreement) made by the Lender pursuant to the Credit Agreement, payable at such times and in such amounts as are specified in the Credit Agreement.

 

The Borrower also promises to pay interest on the unpaid principal amount of each Loan made by the Lender in like money at said office from the date hereof until paid at the rates and at the times provided in Section 2.1 of the Credit Agreement.

 

This Note is one of the Notes referred to in the Credit Agreement, dated as of February 21, 2014, among the Borrower and China Merchants Bank Co., Ltd., New York Branch, as the Lender (as amended, restated, modified and/or supplemented from time to time, the “Credit Agreement”) and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Credit Agreement). As provided in the Credit Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Maturity Date, in whole or in part.

 

In case an Event of Default (as defined in the Credit Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Credit Agreement.

 

The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note.

 

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

 

	
 
    	
VIPSHOP INTERNATIONAL HOLDINGS
    
	
 
    	
LIMITED
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    

 

 

	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

3

 

EXHIBIT C

 

FORM OF ASSIGNMENT AND ASSUMPTION

 

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between CHINA MERCHANTS BANK CO., LTD., NEW YORK BRANCH (the “Assignor”) and [NAME OF ASSIGNEE] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

 

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

 

	
1.
    	
Assignor:
    	
China Merchants Bank Co., Ltd., New York Branch
    
	
 
    	
 
    	
 
    
	
2.
    	
Assignee:
    	
[NAME OF ASSIGNEE]
    
	
 
    	
 
    	
 
    
	
3.
    	
Borrower(s):
    	
VIPSHOP INTERNATIONAL HOLDINGS LIMITED
    
	
 
    	
 
    	
 
    
	
4.
    	
Credit Agreement:
    	
CREDIT AGREEMENT dated as of February 21, 2014 (as the same may   be amended, restated or otherwise modified from time to time) between VIPSHOP   INTERNATIONAL HOLDINGS LIMITED as the Borrower and China Merchants bank   Co., Ltd. as the Lender.
    

 

 

6.                                      Assigned Interest:

 

	
 
    	
 
    	
Aggregate Amount of
    	
 
    	
Amount of
    	
 
    	
Percentage Assigned
    	
 
    
	
 
    	
 
    	
Commitment/Loans
    	
 
    	
Commitment/Loans
    	
 
    	
of
    	
 
    
	
Facility Assigned
    	
 
    	
for all Lenders
    	
 
    	
Assigned
    	
 
    	
Commitment/Loans
    	
 
    
	
Term Commitment/Loan
    	
 
    	
$
    	
[·]
    	
 
    	
$
    	
[·]
    	
 
    	
[·]
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
										

 

Effective Date:             , 20   

 

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

 

	
 
    	
ASSIGNOR
    
	
 
    	
 
    
	
 
    	
CHINA MERCHANTS BANK CO., LTD., NEW YORK BRANCH
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ASSIGNEE
    
	
 
    	
 
    
	
 
    	
[NAME OF ASSIGNEE]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Title:
    

 

3

 

ANNEX 1

 

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

 

1. Representations and Warranties.

 

1.1  Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Credit Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Credit Document.

 

1.2.  Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, and (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.2 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Lender; and (b) agrees that (i) it will, independently and without reliance on the Assignor, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Credit Documents are required to be performed by it as a Lender.

 

2.    Payments. From and after the Effective Date, the Borrower shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

 

4

 

3.  General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

 

5

 

EXHIBIT D

 

FORM OF COMPLIANCE CERTIFICATE

 

To:                   China Merchants Bank Co., Ltd., New York Branch (the “Lender”)

 

From:  VIPSHOP INTERNATIONAL HOLDINGS LIMITED (the “Borrower”)

 

Dated: [·]

 

Dear Sirs

 

US$150,000,000 Credit Agreement

dated February 21, 2014 (as the same may be amended, restated or otherwise modified

from time to time) (the “Agreement”) between the Borrower and the Lender

 

1.                                      We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

 

2.                                      We confirm that (i) no Default or Event of Default has occurred or is continuing; and (ii) there shall not have occurred, nor otherwise exist, an event or condition which has a Material Adverse Effect on the Borrower.

 

 

	
 
    	
VIPSHOP INTERNATIONAL HOLDINGS
    
	
 
    	
LIMITED
    
	
 
    	
as the Borrower
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
by
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:Exhibit 4.19

 

EXECUTION COPY

 

 

SHARE PURCHASE AND SUBSCRIPTION AGREEMENT

 

by and among

OVATION ENTERTAINMENT LIMITED

 

EACH OF THE PERSONS LISTED IN EXHIBIT A HERETO

 

MS. YUAN LI

 

and

 

VIPSHOP HOLDINGS LIMITED

February 21, 2014

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE I   PURCHASE AND SUBSCRIPTION TRANSACTIONS   
    	
1
    
	
 
    	
1.1
    	
Purchase and Sale of Acquired and Subscribed Shares
    	
1
    
	
 
    	
1.2
    	
Considerations for Acquired and Subscribed Shares
    	
2
    
	
 
    	
1.3
    	
Closing
    	
2
    
	
 
    	
1.4
    	
Withholding
    	
3
    
	
ARTICLE II   REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER PARTIES 
    	
3
    
	
 
    	
2.1
    	
Organization
    	
3
    
	
 
    	
2.2
    	
Authority
    	
3
    
	
 
    	
2.3
    	
Execution and Delivery of   Valid and Binding Agreements
    	
3
    
	
 
    	
2.4
    	
No Breach
    	
3
    
	
 
    	
2.5
    	
Title to Acquired Shares
    	
4
    
	
 
    	
2.6
    	
Litigation
    	
4
    
	
 
    	
2.7
    	
Compliance with Laws
    	
4
    
	
 
    	
2.8
    	
Acquisition Proposals
    	
5
    
	
 
    	
2.9
    	
Brokerage
    	
5
    
	
 
    	
2.10
    	
Maintenance of Relationships
    	
5
    
	
ARTICLE III   REPRESENTATIONS AND WARRANTIES REGARDING THE GROUP COMPANIES 
    	
5
    
	
 
    	
3.1
    	
Organization and Corporate   Power
    	
6
    
	
 
    	
3.2
    	
Share Capital and Related   Matters
    	
6
    
	
 
    	
3.3
    	
Indebtedness
    	
7
    
	
 
    	
3.4
    	
No Breach; Authorization;   Execution & Enforceability
    	
7
    
	
 
    	
3.5
    	
Management Accounts
    	
8
    
	
 
    	
3.6
    	
Absence of Undisclosed   Liabilities
    	
9
    
	
 
    	
3.7
    	
Products and Services   Warranty
    	
9
    
	
 
    	
3.8
    	
No Material Adverse Effect
    	
9
    
	
 
    	
3.9
    	
Absence of Certain   Developments
    	
9
    
	
 
    	
3.10
    	
Assets
    	
11
    
	
 
    	
3.11
    	
Real Property
    	
11
    
	
 
    	
3.12
    	
Tax Matters
    	
12
    
	
 
    	
3.13
    	
Contracts and Commitments
    	
15
    
	
 
    	
3.14
    	
Intellectual Property Rights   and IT Infrastructure
    	
17
    
	
 
    	
3.15
    	
Government Licenses and   Permits
    	
18
    
	
 
    	
3.16
    	
Litigation, etc.
    	
18
    
	
 
    	
3.17
    	
Brokerage
    	
19
    
	
 
    	
3.18
    	
Insurance
    	
19
    
	
 
    	
3.19
    	
Employees
    	
19
    
	
 
    	
3.20
    	
Employee Benefits Matters
    	
20
    
	
 
    	
3.21
    	
Compliance with Laws
    	
21
    
	
 
    	
3.22
    	
Affiliate Transactions
    	
22
    
	
 
    	
3.23
    	
Suppliers and Customers
    	
23
    
	
 
    	
3.24
    	
Officers and Directors; Bank   Accounts
    	
23
    
	
 
    	
3.25
    	
Product and Media Liability
    	
23
    
	
 
    	
3.26
    	
Privacy and Security
    	
24
    
	
 
    	
3.27
    	
Disclosure
    	
24
    

 

i

 

TABLE OF CONTENTS (Continued)

 

	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE IV   REPRESENTATIONS AND WARRANTIES REGARDING THE PURCHASER 
    	
24
    
	
 
    	
4.1
    	
Organization; Power and   Authority
    	
24
    
	
 
    	
4.2
    	
Authorization; No Breach
    	
25
    
	
 
    	
4.3
    	
Litigation
    	
25
    
	
 
    	
4.4
    	
Brokerage
    	
25
    
	
ARTICLE V   SURVIVAL; INDEMNIFICATION 
    	
25
    
	
 
    	
5.1
    	
Survival of Representations   and Warranties
    	
25
    
	
 
    	
5.2
    	
Indemnification
    	
25
    
	
 
    	
5.3
    	
Remedies
    	
32
    
	
ARTICLE VI   PRE-CLOSING COVENANTS AND AGREEMENTS 
    	
32
    
	
 
    	
6.1
    	
Further Assurances
    	
35
    
	
ARTICLE VII   CLOSING CONDITIONS 
    	
36
    
	
 
    	
7.1
    	
Conditions Precedent to Each   Party’s Obligations
    	
36
    
	
 
    	
7.2
    	
Additional Conditions   Precedent to Obligations of the Purchaser
    	
38
    
	
 
    	
7.3
    	
Additional Conditions   Precedent to Obligations of the Seller
    	
39
    
	
ARTICLE VIII   TERMINATION 
    	
40
    
	
 
    	
8.1
    	
Terminations
    	
40
    
	
 
    	
8.2
    	
Effect of Termination
    	
40
    
	
ARTICLE IX   TAX MATTERS 
    	
40
    
	
 
    	
9.1
    	
Cooperation on Tax Matters
    	
40
    
	
 
    	
9.2
    	
Transfer Taxes
    	
41
    
	
 
    	
9.3
    	
Circular 698 Tax Matters
    	
41
    
	
 
    	
9.4
    	
Compliance with Chinese SAFE   Regulations
    	
42
    
	
ARTICLE X   ADDITIONAL AGREEMENTS 
    	
42
    
	
 
    	
10.1
    	
Press Releases and   Announcements
    	
42
    
	
 
    	
10.2
    	
Further Transfers
    	
42
    
	
 
    	
10.3
    	
Maintenance of Relationships
    	
42
    
	
 
    	
10.4
    	
Confidentiality
    	
43
    
	
 
    	
10.5
    	
Expenses
    	
43
    
	
 
    	
10.6
    	
Waivers   of Breaches
    	
43
    
	
 
    	
10.7
    	
Post-Closing   Covenants
    	
43
    
	
ARTICLE XI   DEFINITIONS; CROSS-REFERENCES TO OTHER DEFINED TERMS 
    	
44
    
	
 
    	
11.1
    	
Definitions
    	
44
    
	
 
    	
11.2
    	
Cross-References
    	
49
    
	
ARTICLE XII   MISCELLANEOUS 
    	
50
    
	
 
    	
12.1
    	
Arbitration
    	
50
    
	
 
    	
12.2
    	
Consent to Amendments
    	
51
    
	
 
    	
12.3
    	
Successors and Assigns
    	
51
    
	
 
    	
12.4
    	
Counterparts
    	
51
    
	
 
    	
12.5
    	
Descriptive Headings;   Interpretation
    	
51
    

 

ii

 

TABLE OF CONTENTS (Continued)

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.6
    	
Governing law
    	
51
    
	
 
    	
12.7
    	
Notices
    	
52
    
	
 
    	
12.8
    	
No Strict Construction
    	
52
    
	
 
    	
12.9
    	
Entire Agreement
    	
52
    
	
 
    	
12.10
    	
Severability
    	
53
    
	
 
    	
12.11
    	
No Third-Party Beneficiaries
    	
53
    
	
 
    	
12.12
    	
Schedules
    	
53
    
	
 
    	
12.13
    	
Guarantee
    	
53
    

 

iii

 

INDEX OF EXHIBITS

 

	
Exhibit A
    	
 
    	
Schedule of Acquired Shares
    
	
Exhibit B
    	
 
    	
Form of   Shareholders Agreement
    
	
Exhibit C
    	
 
    	
Form of   Restated Articles
    

 

iv

 

SHARE PURCHASE AND SUBSCRIPTION AGREEMENT

 

THIS SHARE PURCHASE AND SUBSCRIPTION AGREEMENT (this “Agreement”) is made as of February 21, 2014, by and among Vipshop Holdings Limited, an exempted company incorporated in the Cayman Islands (the “Purchaser”), Ovation Entertainment Limited, an exempted company incorporated in the Cayman Islands (the “Company”), the Persons indicated on Exhibit A hereto (each a “Seller”, and collectively, the “Sellers”), Ms. Yuan Li (the “Guarantor” and together with the Sellers, the “Seller Parties”).  The Purchaser, the Company, the Sellers and the Guarantor are referred to herein collectively as the “Parties” and individually as a “Party.”  Capitalized terms used herein, but not defined herein, are defined in Article XI below.

 

WHEREAS, the authorized share capital of the Company consist of, immediately prior to the Closing, (i) 500,000,000 ordinary shares with a par value of $0.0001 each (the “Ordinary Shares”), of which 24,055,232 are issued and outstanding.  The Ordinary Shares are collectively referred to as the “Company Shares.”

 

WHEREAS, the Guarantor is the sole beneficial owner of the entire share capital of Chic Group Limited.

 

WHEREAS, upon the terms and subject to the conditions set forth herein, the Purchaser desires to acquire from each Seller and, and each Seller desires to sell to the Purchaser, the number of Company Shares set forth opposite such Seller’s name on Exhibit A (the “Acquired Shares” of such Seller); and the Purchaser desires to subscribe for from the Company, and the Company desires to authorize, issue and allot to the Purchaser, 1,707,321 shares, with the rights and preferences as set forth in the Restated Articles (as defined below)] (the “Subscribed Shares”).

 

NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants which are to be made and performed by the respective Parties, the receipt and sufficiency of which are hereby acknowledged, each of the Parties hereto, intending to be legally bound, hereby agrees as follows:

 

ARTICLE I

 

PURCHASE AND SUBSCRIPTION TRANSACTIONS

 

1.1  Purchase and Sale of Acquired and Subscribed Shares.

 

1.1.1       On the basis of the representations, warranties, covenants and other agreements contained herein and in the other Transaction Documents, and subject to the terms and conditions of this Agreement, at the Closing, the Purchaser shall purchase from each Seller, and each Seller shall sell, assign, transfer and convey to the Purchaser, free and clear of all Encumbrances, all of the Acquired Shares of such Seller for an aggregate consideration as set forth in Section 1.2.1.

 

1.1.2       On the basis of the representations, warranties, covenants and other agreements contained herein and in the other Transaction Documents, and subject to the terms and conditions of this Agreement, at the Closing, the Purchaser shall subscribe for and purchase from the Company, and the Company shall authorize, issue and allot to the Purchaser, free and clear of all Encumbrances, all of the Subscribed Shares for an aggregate consideration as set forth in Section 1.2.2.

 

1

 

1.2  Considerations for Acquired and Subscribed Shares.

 

1.2.1       The aggregate consideration to be paid by the Purchaser to each Seller for the Acquired Shares of such Seller pursuant to this Agreement shall consist of an aggregate amount in cash equal to $8.786 per share multiplied by the number of the Acquired Shares of such Seller (the “Acquisition Price” of such Seller).

 

1.2.2       The aggregate consideration to be paid by the Purchaser to the Company for the Subscribed Shares pursuant to this Agreement shall consist of an aggregate amount in cash equal to $15,000,522.306 (the “Subscription Price”, together with the aggregate Acquisition Price of the Sellers, the “Total Purchase Price”).

 

1.3  Closing.

 

1.3.1       The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Kirkland & Ellis, 26/F Gloucester Tower, The Landmark, 15 Queen’s Road Central, Central, Hong Kong, at 10:00 a.m., Hong Kong Time, on the date when all of the conditions to the Closing set forth in Article VII (other than those to be satisfied at the Closing) have been satisfied or waived in accordance with the terms herein, or at such other time or place as is mutually agreeable to the Parties. The date and time of the Closing are referred to herein as the “Closing Date.”

 

1.3.2       On or prior to the date that is the tenth (10th) Business Day after the Closing Date (the “Payment Due Date”), the Purchaser shall pay to each Seller such Seller’s Acquisition Price, and pay to the Company the Subscription Price, in each case by wire transfer of immediately available funds to a bank account designated before the Closing Date by such Seller or the Company (as the case may be), upon which each Seller and the Company shall deliver to the Purchaser a cross-receipt for such payment. If the Purchaser fails to pay any portion of such amount on or prior to the Payment Due Date, the Purchaser shall pay interest on the overdue sum from the Payment Due Date to the actual date of payment at a rate of 0.05% per day.

 

1.3.3       At the Closing, (i) each Seller will deliver to the Purchaser free and clear of Encumbrances, one or more certificates representing the Acquired Shares of such Seller, duly endorsed in blank or accompanied by share powers or other instruments of transfer duly executed in blank, and bearing or accompanied by all requisite share transfer stamps; and (ii) the Company will issue and allot to the Purchaser as fully paid up, non-assessable, free and clear of Encumbrances, the Subscribed Shares, and deliver to the Purchaser one or more certificates representing the Subscribed Shares and shall submit the Restated Articles for registration with the Registrar of Companies in the Cayman Islands.

 

1.4  Withholding. Notwithstanding any other provision in this Agreement, the Purchaser (and any other Person that has any withholding obligation with respect to any payment made pursuant to this Agreement) shall be entitled to deduct and withhold from the payments to be made pursuant to this Agreement an amount or amounts equal to any Taxes required to be deducted and withheld with respect to the making of such payments under any applicable provision of law.  To the extent that amounts are so withheld and deducted pursuant to this Section 1.4, such withheld amounts shall be treated for all purposes of this Agreement as having been paid by such Person in respect of which such deduction and withholding was made; provided that such Person withholding such amounts shall provide the Seller with relevant evidence on payment by such Person of the relevant Taxes.

 

2

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER PARTIES

 

As a material inducement to the Purchaser to enter into this Agreement and to purchase the Acquired Shares from the Sellers and the Subscribed Shares from the Company in accordance with the terms hereof, except as set forth in the disclosure schedule delivered by the Company to the Purchaser on the date hereof (the “Company Disclosure Schedule”), each Seller hereby represents and warrants severally but not jointly to the Purchaser (and, in the case of Chic Group Limited as a Seller, such Seller and the Guarantor represent and warrant jointly and severally to the Purchaser) as of the date hereof and as of Closing that:

 

2.1  Organization. Such Seller is validly existing and in good standing under the laws of its jurisdiction of incorporation.  Such Seller has the corporate power and authority to carry on its business as it is now conducted and to own, lease and operate all of its properties and assets.

 

2.2  Authority. Such Seller (in the case of Chic Group Limited, each of the Seller and the Guarantor) has full power, authority and legal capacity to enter into this Agreement and the other agreements contemplated hereby to which such Seller or such Guarantor is a party and to perform his, her or its obligations hereunder and thereunder.

 

2.3  Execution and Delivery of Valid and Binding Agreements. This Agreement has been duly executed and delivered by such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor), and this Agreement constitutes, and the other agreements contemplated hereby to which such Seller or such Guarantor is a party, when executed and delivered by such Seller and such Guarantor in accordance with the terms thereof shall each constitute, a valid and binding obligation of such Seller and such Guarantor, enforceable in accordance with its terms, subject to the effect of bankruptcy, or other similar laws and to general principles of equity (whether considered in proceedings at law or in equity).

 

2.4  No Breach. The execution and delivery by such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor) of this Agreement and the other agreements contemplated hereby to which such Seller or such Guarantor is a party, and the fulfillment of and compliance with the respective terms hereof and thereof by such Seller and such Guarantor, does not and shall not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under (whether with or without the giving of notice, the passage of time or both), (iii) result in the creation of any Lien upon assets of such Seller or such Guarantor or Encumbrance upon the Company Shares pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of, or (vi) require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any third party or any court or administrative or governmental body or agency pursuant to, (a) any law, statute, rule or regulation to which such Seller or such Guarantor is subject, (b) the memorandum and articles of association of such Seller, or (c) any agreement, instrument, order, judgment or decree to which such Seller or such Guarantor is subject.

 

2.5  Title to Acquired Shares. Such Seller is the record owner and beneficial owner of all the issued and outstanding Acquired Shares of such Seller. The Acquired Shares of such Seller were duly issued and fully paid up and non-assessable. On the Closing Date, such Seller will transfer to the Purchaser (in accordance with Section 1.3 hereof) good and marketable title to the Acquired Shares of such Seller free and clear of all Encumbrances.  Except for the issued and outstanding Ordinary Shares indicated as held by the Sellers in Section 3.2.1 of the Company Disclosure Schedule and the registered capital held by the Guarantor in Beijing Commerce and Beijing Media, none of the Sellers and the Guarantor own or have direct or indirect interest in any other Share Capital of any Group Company or is a party to any option, warrant, right, contract, call, put or other agreement or commitment providing for the acquisition or disposition of any Share Capital of any Group Company

 

3

 

(other than this Agreement).  None of the Sellers and the Guarantor is a party to any voting trust, proxy or other agreement or understanding with respect to the voting of any Share Capital of any Group Company, except for the Control Documents and the Shareholders Agreement.

 

2.6  Litigation. There are no actions, suits, claims, proceedings, orders or investigations (including, without limitation, any condemnation, expropriation or similar proceedings) (collectively, “Legal Proceedings”) pending or threatened against or affecting such Seller (in the case of Chic Group Limited, either such Seller or the Guarantor), at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which could adversely affect the performance of such Seller or such Guarantor under this Agreement, the other agreements contemplated hereby to which such Seller or such Guarantor is a party or the consummation of the transactions contemplated hereby or thereby.

 

2.7  Compliance with Laws.

 

2.7.1       Such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor) has not violated any law, ordinance, code, rule or any governmental regulation or requirements relating to the operation of any Group Company’s business or otherwise relating to the Company Shares (including applicable laws of the United States such as the Foreign Corrupt Practices Act, 15 U.S.C. 78dd-1 et seq (the “FCPA”)), and such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor) has not received any notice of, and no claims have been filed, against such Seller Party alleging any such violation.

 

2.7.2       Such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor) has completed all necessary filings or registrations, obtained all necessary approvals, or complied with any rules or regulations of the State Administration of Foreign Exchange (“SAFE”) and paid all Taxes required to be paid by such Seller Party and such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor) has not received any notice of, and no claims have been filed, against such Seller Party alleging any such violation or failure to pay.

 

2.7.3       Such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor) has not taken any act that will cause the Purchaser (or its Affiliates, including after the Closing, the Company) to violate the FCPA or any applicable anti-corruption law.  Without limiting the foregoing, Such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor) has not paid or authorized the payment of any money (or other property) or corporate fraud, or offered, given a promise to give, or authorized the giving of anything of value, to any government official or agent in any country, state, province, city, region or otherwise, to any political party or official thereof or to any candidate for political office for any unlawful contribution, gift, entertainment or other unlawful expenses relating to a political activity, or for the purpose, or with the effect, of (i) (A) influencing any act or decision of such government official, political party, party official, or candidate in his or its official capacity, (B) inducing such governmental official or agent, political party, party official or candidate to do or omit to do any act in violation of the lawful duty of such government official, political party, party official or candidate, or (C) securing any improper advantage, or (ii) inducing such government official or agent, political party, party official, or candidate to use his or its influence with any governmental authority to affect or influence any act or decision of such Governmental Authority, in order to assist such Person in obtaining or retaining business for or with, or directing business to such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor), the Group Companies or their respective Affiliates.

 

2.7.4       Such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor) is not currently a government official, officer, agent or employee of a non-U.S. government or government-owned enterprise (wholly or partially owned) or any agency, department or instrumentality thereof or political party or public international organization or a

 

4

 

candidate for non-U.S. government or political office or is an agent, officer, or employee of any entity owned by a non-U.S. government (“Non-U.S. Official”).

 

2.7.5       Prior to and until the Closing Date, the Acquired Shares of such Seller were held by such Seller for its own account, not as a nominee or agent.

 

2.7.6       Such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor) has not, whether on its behalf or on behalf of any Group Company, at any time made any payments for political contributions or made any bribes, kickback payments or other illegal payments.

 

2.8  Brokerage.  There are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement or any of the other agreements contemplated hereby based on any arrangement or agreement to which such Seller (in the case of Chic Group Limited, either such Seller or the Guarantor) is a party or to which such Seller Party is subject.  Such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor) shall pay, and hold the Company and the Purchaser harmless against, any liability, loss or expense (including reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any such claim.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES REGARDING THE GROUP COMPANIES

 

As a material inducement to the Purchaser to enter into this Agreement and to purchase the Acquired Shares from the Sellers and the Subscribed Shares from the Company in accordance with the terms hereof, except as set forth in the Company Disclosure Schedule, the Company hereby represents and warrants to the Purchaser as of the date hereof and as of the Closing that:

 

3.1  Organization and Corporate Power.

 

3.1.1       Section 3.1.1 of the Company Disclosure Schedule contains (i) a complete and accurate list of each Person in which any Group Company owns or holds the right to acquire any Share Capital, and (ii) a complete and accurate list for each Group Company of its name, its jurisdiction of incorporation or organization and its capitalization (including the identity of each shareholder or equity holder and the number of shares or other equity interests held by each such shareholder or equity holder).

 

3.1.2       The Company is an exempted company duly organized, validly existing and in good standing under the laws of the Cayman Islands.  Each Group Company is duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation set forth on Section 3.1.1 of the Company Disclosure Schedule. Each Group Company has full corporate power and authority to conduct its businesses as it is now being conducted, to own or use its properties and assets that each purports to own or use and to perform its obligations under the contracts to which each is a party.  Each Group Company is duly qualified to do business as an organization, and is in good standing, under the laws of each jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification.

 

3.1.3       The Company has delivered to the Purchaser correct and complete copies of the certificates of incorporation, the memorandum and articles of association (or analogous governing documents), business licenses, certificates of approval (as applicable) of each Group Company, which documents reflect all amendments made thereto at any time before the date hereof.  Such documents are in full force and effect and will remain in full force and effect following the transactions contemplated by this Agreement, except as amended by the

 

5

 

Restated Articles. Correct and complete copies of the minute books containing the records of meetings of the shareholders and boards of directors (or analogous parties), the share certificate books and the share record books (or equivalent documents) of each Group Company have been furnished to the Purchaser.  No Group Company is in default under or in violation of any provision of its memorandum or articles of association (or analogous governing documents) in any material respect.

 

3.2       Share Capital and Related Matters.

 

3.2.1                     Section 3.2.1 of the Company Disclosure Schedule sets forth the authorized Share Capital of each Group Company, the name of each Person holding any such Share Capital (including any options, warrants or other rights to purchase any equity securities or Share Capital, but excluding options granted under the Company’s existing share incentive plan(s)) and any securities convertible or exchangeable into any equity securities or Share Capital of any Group Company and the amount and type of such securities held by such Persons as of the date hereof.  The Company has delivered to the Purchaser a true, accurate and complete list of outstanding options issued under the Company’s existing share incentive plan(s), including the name of each person holding such options, the number of underlying shares of such options, and the exercise price and vesting periods thereof. When issued at the Closing, the Subscribed Shares will be duly issued and fully paid up and non-assessable. Immediately after the Closing, the Acquired Shares and Subscribed Shares will be held beneficially and of record by the Purchaser free and clear of all Encumbrances.  Except as contemplated under the Control Documents, no Group Company has outstanding any shares or securities convertible or exchangeable for any Share Capital or other ownership interest or containing any profit participation features, nor does any Group Company have outstanding any rights or options to subscribe for or to purchase its Share Capital or other ownership interest or any shares or securities convertible into or exchangeable for its Share Capital or other ownership interest or any share appreciation rights or phantom share plans.  No Group Company is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its Share Capital or other ownership interest or any warrants, options or other rights to acquire its Share Capital.

 

3.2.2                     There are no statutory or contractual preemptive rights, rights of first refusal or similar rights or restrictions with respect to the offer, sale or issuance of any Acquired Shares or Subscribed Shares hereunder.  The Company has not violated any applicable securities or other laws in connection with the offer, sale or issuance of any of its Share Capital, and the offer and sale of the Acquired Shares and the issuance and sale of the Subscribed Shares hereunder do not require any registration or any other filing under any applicable securities or other laws.  There are no agreements between the shareholders of the Company with respect to the voting or transfer of the Company’s Share Capital or with respect to any other aspect of the Company’s affairs.

 

3.2.3                     Neither any Group Company nor any Affiliate, representative, officer, employee, director or agent of any Group Company is a party to or is bound by any agreement (other than this Agreement) with respect to any Acquisition Proposal.

 

3.2.4                     No Person who holds any Share Capital (including options, warrants, convertible securities or otherwise) in the Company has or shall have the right, and neither the Purchaser nor any Group Company has or shall have the obligation, to convert or otherwise transfer such Share Capital in the Company into Share Capital of any Group Company or Affiliates (including, after the Closing, the Purchaser) as a result of the transactions contemplated by this Agreement.

 

3.2.5                     All Share Capital (whether registered or otherwise) of each Group Company has been fully paid in accordance with the terms of the applicable investment

 

6

 

documents, the articles of association (or equivalent documents) of each such Group Company and applicable law (including, if applicable, PRC law), as evidenced by true and complete copies of capital verification reports or other equivalent documents certifying to such effect issued by a certified accountant and by the accounting firm employing such accountant.

 

3.3       Indebtedness.  No Group Company has any Indebtedness.

 

3.4       No Breach; Authorization; Execution & Enforceability.

 

3.4.1                     The execution and delivery by the Company of this Agreement and any other Transaction Documents to which it is a party, and the fulfillment of and compliance with the respective terms thereof by the Company do not and will not, (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under (whether with or without the giving of notice, the passage of time or both), (iii) result in the creation of any Lien upon the assets of the Company or Encumbrance upon the Company’s Share Capital (including any of the Company Shares) pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of, or (vi) require any permit, authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any court or administrative or governmental body or agency pursuant to, (a) any law, statute, rule or regulation to which any Group Company is subject, (b) the memorandum and articles of association of the Company, or (c) any instrument, contract, lease, license, order, judgment, decree or other agreement to which any Group Company is subject.

 

3.4.2                     Each Group Company possesses full power and authority to execute and deliver each Transaction Document to which it is a party and any and all instruments necessary or appropriate in order to fully effectuate the terms and conditions of each such Transaction Document and to perform and consummate the transactions contemplated hereby and thereby.

 

3.4.3                     Each Group Company’s execution, delivery and performance of each Transaction Document to which it is a party has been duly and validly authorized by all necessary action on the part of such Group Company and such Group Company’s stockholders.  Each Transaction Document to which a Group Company is a party has been duly and validly executed and delivered by such Group Company and constitutes, or upon its execution and delivery will constitute, a valid and legally binding obligation of such Group Company, enforceable against such Group Company in accordance with its terms and conditions, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

 

3.4.4                     There are no Legal Proceedings pending or threatened against or affecting any Group Company, at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which could adversely affect the performance of the Company under this Agreement, the other agreements contemplated hereby to which any Group Company is a party or the consummation of the transactions contemplated hereby or thereby.

 

3.4.5                     None of the Seller Parties is a party to or bound by any agreement with respect to any Acquisition Proposal (other than this Agreement) and each of the Seller Parties has terminated all discussions with any third party (other than the Purchaser), if any, regarding any Acquisition Proposal.

 

3.5       Management Accounts.

 

The Company has delivered to the Purchaser the unaudited consolidated balance sheets as of, and the unaudited statements of income and cash flows of the Group Companies for the

 

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twelve months ended, December 31, 2013 (the “Management Accounts”). The Management Accounts have been prepared in accordance with PRC GAAP, applied on a consistent basis, and shows a true and fair view of the state of affairs, assets and liabilities, financial position and profit or loss of the Group Companies as of December 31, 2013 and for the periods covered thereby and are not affected by any unusual or non-recurring items not covered therein.  Each Group Company maintains and, for all periods covered by the Management Accounts, has maintained (i) books, records and accounts which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of such Group Company and (ii) a system of internal accounting controls sufficient to provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in conformity with PRC GAAP.

 

3.6       Absence of Undisclosed Liabilities.

 

No Group Company has any obligation or liability (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known to the Company, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the date hereof (including without limitation any indemnification obligation or liability arising out of transactions entered into at or prior to the date hereof in connection with the disposal of any assets or shares in any Subsidiary), or any action or inaction at or prior to the date hereof, or any state of facts existing at or prior to the date hereof (including any oral agreements), other than: (i) liabilities incurred in the Ordinary Course, and (ii) liabilities set forth in the Management Accounts.

 

3.7       Products and Services Warranty.

 

All products and services licensed, sold or delivered by the Group Companies have been in conformity in all material respects with all applicable contractual commitments and all express and implied warranties, and no Group Company has any liability (or has received written notice of any action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against it giving rise to any such liability) for replacement thereof or other damages in connection therewith, other than replacements or damages in the Ordinary Course.  No products licensed, sold or delivered and no services rendered by any Group Company are subject to any guarantee, warranty or other indemnity beyond the applicable industry standard terms and conditions of such sale or service.

 

3.8       No Material Adverse Effect.

 

Since the Latest Balance Sheet Date, there has occurred no fact, event or circumstance which has had, or could reasonably be expected to have, a Material Adverse Effect, and each of the Group Companies has conducted its business only in the Ordinary Course.

 

3.9       Absence of Certain Developments.

 

3.9.1                     Except as expressly contemplated by this Agreement, since the Latest Balance Sheet Date, no Group Company has:

 

(a)         issued or otherwise sold any notes, bonds or other debt securities or any Share Capital or other equity securities or any securities convertible, exchangeable or exercisable into any Share Capital or other equity securities;

 

(b)         borrowed any amount or incurred or become subject to any Indebtedness or other liabilities, except current liabilities incurred in the Ordinary Course and liabilities under contracts entered into in the Ordinary Course;

 

(c)          discharged or satisfied any Lien or paid any obligation or liability, other than current liabilities paid in the Ordinary Course;

 

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(d)         declared, set aside or made any dividend, payment or distribution of Cash or other property to any of the holders of its Share Capital with respect to such share or purchased, redeemed or otherwise acquired, directly or indirectly, any Share Capital or any outstanding rights or securities exercisable or exchangeable for or convertible into its Share Capital or other equity securities (including, without limitation, any warrants, options or other rights to acquire its Share Capital);

 

(e)          mortgaged or pledged any of its properties or assets or subjected them to any Encumbrances;

 

(f)           sold, assigned, leased, licensed or transferred any of its tangible assets, except in the Ordinary Course, or canceled any debts or claims in aggregate exceeding $100,000;

 

(g)          sold, assigned, leased, licensed, transferred or otherwise encumbered any Intellectual Property Rights or other intangible assets other than in the Ordinary Course, or disclosed any material proprietary confidential information to any Person, or abandoned or permitted to lapse any Intellectual Property Rights or other intangible asset;

 

(h)         delayed or postponed the payment, or modified the payment terms, of any accounts or commissions payable or any other liability or obligations or agreed or negotiated with any party to extend the payment date of any accounts or commissions payable or accelerated the collection of any notes, accounts or commissions receivable other than in the Ordinary Course;

 

(i)             made capital expenditures in an amount materially less than the budgeted amount of capital expenditures for such period or made capital expenditures or commitments for capital expenditures that aggregate in excess of $100,000;

 

(j)            made any charitable contributions or pledges;

 

(k)         suffered any damage, destruction or loss or waived any rights of material value, whether or not in the Ordinary Course, exceeding in the aggregate $100,000 (whether or not covered by insurance);

 

(l)             made any loans or lending to, Investment in, or guarantees for the benefit of, any Person or taken steps to incorporate any Subsidiary;

 

(m)     made any change in any method of accounting or accounting policies, other than those required by US GAAP or PRC GAAP and disclosed in writing to the Purchaser;

 

(n)         except as contemplated under the Restructuring, entered into any employment contract (written or oral) or changed the employment terms for any director, officer or senior manager or made or granted any bonus (including any one-time bonus) or any wage, salary or compensation increase to any director, officer or senior manager, or made or granted any increase in any employee benefit plan or arrangement, or amended or terminated any existing employee benefit plan, incentive arrangement or other benefit covering any of the employees of any Group Company or adopted any new employee benefit plan, incentive arrangement or other benefit covering any of the employees of any Group Company;

 

(o)         entered into any contract, agreement or arrangement outside of the Ordinary Course;

 

(p)         amended its memorandum and articles of association or other organizational documents;

 

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(q)         made or changed any Tax election, changed any annual accounting period, adopted or changed any accounting method, filed any amended Tax Return, entered into any agreement with any taxing authority, settled any Tax claim or assessment relating to any Group Company, surrendered any right to claim a refund of Taxes, consented to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to any Group Company, or took any other similar action relating to the filing of any Tax Return or the payment of any Tax, if such election, adoption, change, amendment, agreement, settlement, surrender, consent or other action would have the effect of increasing the Tax liability of any Group Company for any period ending after the Closing Date or decreasing any Tax attribute of any Group Company existing on the Closing Date;

 

(r)            (i) entered into any transaction other than the transactions contemplated under the Transaction Documents or in the Ordinary Course, or (ii) materially changed any business practice;

 

(s)           suffered any material adverse change in its business, customers or customer relations, suppliers or supplier relations;

 

(t)            organized any new Subsidiary or branch, or acquired any Share Capital, shares or equity interests in the business, of any other company

 

(u)         adopted a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, or other reorganization; or

 

(v)         agreed, resolved or otherwise committed, whether orally or in writing, to do any of the foregoing.

 

3.10                              Assets.

 

Each Group Company has good and marketable title to, or a valid leasehold interest in, or a valid license to use, the properties and assets, tangible or intangible, used by any Group Company free and clear of all Encumbrances, except for inventory disposed of in the Ordinary Course since the Latest Balance Sheet Date and except for Permitted Liens.  All of the equipment and other tangible assets (whether owned or leased) of any Group Company are in good condition and are fit for use in the Ordinary Course.  As of the Closing, each Group Company shall own, or have a valid leasehold interest in, or a valid license to use, all the assets and rights necessary for the conduct of the Company’s and each Group Company’s respective businesses as presently conducted.

 

3.11                              Real Property.

 

3.11.1              Leased Properties.  Section 3.11.1 of the Company Disclosure Schedule sets forth a list of all of the leases, licenses and subleases of real property to which any Group Company is a party to or bound by (each a “Lease” and, collectively, the “Leases”) and each leased, licensed and subleased parcel of real property in which any Group Company has a leasehold or subleasehold interest (the “Leased Real Property”).  Each Group Company holds a valid and existing leasehold or subleasehold interest under each of the Leases.  With respect to each Lease listed on Section 3.11.1 of the Company Disclosure Schedule: (a) there are no disputes, oral agreements or forbearance programs in effect as to such Lease and no Group Company has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in such Lease; (b) the Lease is legal, valid, binding, enforceable and in full force and effect and will continue to be so on substantially identical terms immediately following the Closing; (c) neither any Group Company nor any other party to any Lease is in breach or default, and no event has occurred which, with notice or lapse of time or both, would constitute a breach or default or permit termination, modification or acceleration under the Lease or sublease; (d) such Lease has not been amended or modified in any respect; (e) neither any Group Company nor any Seller has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered

 

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any interest in the leasehold, license agreement or subleasehold; (f) all buildings, improvements and other property leased, licensed or subleased thereunder are supplied with utilities and other services necessary for the operation thereof (including gas, electricity, water, telephone, sanitary and storm sewer, and access to public roads); (g) if required by applicable law or regulation, all of Leases required to be set forth on Section 3.11.1 of the Company Disclosure Schedule have been registered with the competent lease registration authority in the jurisdiction in which such Leases are entered into in accordance with applicable laws and regulations and (h) the transactions contemplated by this Agreement will not require the consent of any landlord, licensor or sublandlord or the Company will provide such consent prior to the Closing.

 

3.11.2              Owned Real Property.    Section 3.11.2 of the Company Disclosure Schedule sets forth a complete and correct legal description of each parcel of real property in which any Group Company holds legal or equitable title (the “Owned Real Property”). The Company and another Group Company, as the case may be, hold good and marketable fee simple title to the Owned Real Property free and clear of any Encumbrances other than Permitted Liens. The Owned Real Property and the Leased Real Property (collectively, the “Real Property”) constitutes all of the real property owned, leased, occupied or otherwise utilized by the Group. No activity of any Group Member on the Real Property encroaches upon the property of any Person or easements or rights-of-way in favor of any Person in any material respect.  No Group Member has received written notice of any pending or contemplated condemnation or eminent domain proceeding affecting the Real Property and, to the knowledge of the Company, no such condemnation or eminent domain proceedings are threatened.

 

3.11.3              Current Use.  There is no known violation of any covenant, condition, restriction, easement, agreement or order of any governmental authority having jurisdiction over any Real Property that affects such real property or the use or occupancy thereof.  No damage or destruction has occurred with respect to any of the Real Property that, individually or in the aggregate, has had or resulted in, or will have or result in, a significant adverse effect on the operation of the business of any Group Company.  No current use by any Group Company of any Real Property is dependent on a nonconforming use or other approval from a governmental authority, the absence of which would limit the use of any of the properties or assets in the operation of any Group Company’s business.

 

3.11.4              Condition and Operation of Improvements.  To the knowledge of the Company, all buildings and all components of all buildings, structures and other improvements included within the Real Property (the “Improvements”) are in good condition and repair and are adequate to operate such facilities as currently used.  All utilities and other similar systems serving the Real Property are installed and operating and are sufficient to enable the Real Property to continue to be used and operated in the manner currently being used and operated.

 

3.12                        Tax Matters.

 

3.12.1              Each Group Company has filed or caused to be filed on a timely basis all Tax Returns required to be filed by or with respect to such Group Company, and all such Tax Returns have been prepared in compliance with all applicable laws and regulations and are true and accurate in all material respects.  No reporting position was taken on any such Tax Return which has not been disclosed to the appropriate Tax authority or in such Tax Return, as may be required by law.  All records relating to such Tax Returns or to the preparation thereof required by applicable laws to be maintained by each Group Company have been duly maintained.  All Taxes due and payable by any Group Company have been timely paid in full (whether or not such Taxes are shown or required to be shown on a Tax Return) and each Group Company has duly and timely withheld and fully paid over to the appropriate taxing authority all Taxes which it was required to withhold in connection with any amounts paid or owed to any employee, independent contractor, shareholder, creditor or other third party.  No Group Company is currently the beneficiary of any extension of time within which to file any Tax Return.  No claim

 

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has ever been made by an authority in a jurisdiction where any Group Company does not file Tax Returns that any Group Company is or may be subject to taxation by that jurisdiction.  There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of any Group Company.

 

3.12.2              No PRC (including any subdivision, municipality, province or locality of the PRC), U.S. federal, state, local, or other non-U.S. Tax audits or administrative or judicial Tax Proceedings are pending or being conducted with respect to any of the Group Company.  No Group Company has received from any PRC (including any subdivision, municipality, province or locality of the PRC), U.S. federal, state, local, or non-U.S. taxation authority (including jurisdictions where the Group Companies have not filed Tax Returns) any (i) written notice indicating an intent to open an audit or other review or Proceeding, (ii) request for information related to Tax matters or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any Taxing authority against any Group Company.

 

3.12.3              No Group Company has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

 

3.12.4              No Group Company is a party to or bound by any Tax allocation or sharing agreement.  No Group Company (i) has been a member of an Affiliated Group filing a consolidated Tax Return, or (ii) has any liability for the Taxes of any Person (other than any Group Company) as a result of any Group Company being part of or owned by, or ceasing to be party of or owned by, any affiliated, combined, consolidated, unitary or other similar group prior to the Closing, as a transferee or successor, by contract or otherwise.

 

3.12.5              The unpaid Taxes of any Group Company (i) did not, as of the Latest Balance Sheet Date, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth in the Management Accounts, and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of such Company in filing its Tax Returns.  Since the Latest Balance Sheet Date, no Group Company has incurred any liability for Taxes arising from any transactions outside of the Ordinary Course.

 

3.12.6              No Group Company will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) agreement with any taxing authority executed on or prior to the Closing Date, (iii) installment sale or open transaction disposition made on or prior to the Closing Date, or (iv) prepaid amount received on or prior to the Closing Date.

 

3.12.7                                No Group Company is resident for Tax purposes or has a branch, permanent establishment, agency of other taxable presence in any jurisdiction other than its jurisdiction of organization.

 

3.12.8                                 The prices and terms for the provision of any property or services undertaken by the Group Companies are arm’s length for purposes of the relevant transfer pricing laws, and all related material documentation required by such laws has been timely prepared or obtained and, if necessary, retained.

 

3.12.9                                The Group Companies have complied with all statutory provisions, rules, regulations, orders and directions in respect of any value added or similar Tax on consumption, has promptly submitted accurate returns, maintains full and accurate records, and has never been subject to any interest, forfeiture, surcharge or penalty and is not a member of a group or consolidation with any other company for the purposes of value added Taxation.

 

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3.12.10                         No Group Company has granted any power of attorney with respect to any matters related to Taxes that is currently in force.

 

3.12.11                         Section 3.12.11 of the Company Disclosure Schedule contains details of any concession, agreements (including agreements for the deferred payment of any Tax liability) or other formal or informal arrangement with any taxation authority relating to the Group Companies.

 

3.12.12                         All Tax credits (including without limitation Tax refunds and rebates) and Tax holidays enjoyed by any Group Companies established under the laws of the PRC under applicable laws since its establishment have been in compliance with all applicable laws and is not subject to reduction, revocation, cancellation or any other changes (including retroactive changes) in the future, except through change in applicable laws published by relevant Governmental Authority.  Neither any Seller Party nor any Group Company has received any notice in relation to or is aware of any event that may result in repeal, cancellation, revocation, or return of any such Tax credits or Tax holidays.

 

3.12.13                         No Group Company has been a party to or otherwise knowingly involved in any transaction or series of transactions which, or any part of which, is intended to avoid, or unlawfully reduce or delay any Tax, including but not limited to using or presenting any invalid, untrue or false invoices or receipts to claim for deduction of business expenses for Tax purposes.

 

3.12.14       The Purchaser and its Affiliates will not be required to include in taxable income under Code Section 951 for any taxable period (or portion thereof) ending after the Closing Date a material amount of income arising from transactions or events occurring in a taxable period (or portion thereof) ending on or prior to the Closing Date.

 

3.12.15       Section 3.12.15 of the Company Disclosure Schedule correctly sets forth each entity classification election that has been made pursuant to Section 301.7701-3 of the U.S. Treasury Regulations with respect to the Group Companies, and with respect to each such election, the effective date thereof, the classification elected pursuant thereto, and whether such election was effective on such entity’s date of formation.

 

3.12.16       The Company (i) is classified as a corporation for U.S. federal income Tax purposes, (ii) has been so classified since the date of its inception, and (iii) has not taken any actions or filed any elections inconsistent with such classification.

 

3.12.17       No Group Company is or ever has been a “passive foreign investment company” within the meaning of Code Section 1297(a) or a “controlled foreign corporation” within the meaning of Code Section 957(a).  No Group Company holds, or at any time has held, a “United States real property interest” within the meaning of Code Section 897(c)(1).  No Group Company has, or at any time has had, an investment in “United States property” within the meaning of Code Section 956(b).  No Group Company is, or any time has been, engaged in the conduct of a trade or business within the United States within the meaning of Code Section 864(b), 882(a) or 887(b).

 

3.13                              Contracts and Commitments.

 

3.13.1              Except as expressly contemplated by this Agreement, no Group Company is a party to or bound by any of the following written or oral Contracts (the “Material Contracts”) other than the Material Contracts listed in Section 3.13.1 of the Company Disclosure Schedule and the Restructuring Contracts:

 

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(a)         any Contract involving payment obligations (contingent or otherwise) in excess of, RMB1,000,000 individually or in the aggregate per annum;

 

(b)         any Contract relating to the sale, issuance, grant, exercise, award, purchase, repurchase or redemption of any Share Capital;

 

(c)          any Contract requiring the consent of any party thereto upon a change in control of any Group Company, containing any provision which could result in a modification of any rights or obligations of any party thereunder upon a change in control of any Group Company or which would provide any party any remedy (including rescission or liquidated damages) in the event of a change in control of any Group Company;

 

(d)         any Contract involving the lease, license, sale, use, disposition or acquisition of a material amount of assets or of a material business (other than in the Ordinary Course) with a contract value in excess of RMB1 million;

 

(e)          any Contract involving the waiver, compromise, or settlement of any material Legal Proceeding;

 

(f)           any Contract involving the ownership or lease of, title to, use of, or any leasehold or other interest in any real property;

 

(g)          any Contract under which such Group Company is obligated or will become obligated to make any severance payment or bonus compensation payment by reason of this Agreement or the consummation of the transactions contemplated hereunder;

 

(h)         any Contract under which such Group Company has advanced or loaned monies to any other Person or otherwise agreed to advance, loan or invest any funds other than any disbursement in the Ordinary Course;

 

(i)             any Contract for Indebtedness, pledging or otherwise placing of a Lien on any asset or group of assets of the Group or any material letter of credit arrangements;

 

(j)            any Contract for the license of any Intellectual Property Rights of any Group Company other than in the Ordinary Course;

 

(k)         any Contract pursuant to which such Group Company has granted a power of attorney, agency or similar authority to a third party other than in the Ordinary Course;

 

(l)             any Contract prohibiting such Group Company from freely engaging in any business or competing anywhere in the world;

 

(m)     any Contract involving the establishment, contribution to, or operation of a partnership, joint venture, franchise or involving a sharing of profits or losses, or any investment in, loan to or acquisition or sale of the securities, equity interests or assets of any Person;

 

(n)         any Contract with a Governmental Entity;

 

(o)         Contract involving any Affiliate Transactions; or

 

(p)         Contract which contains restrictions with respect to payment of dividends or any other distribution in respect of its Share Capital, partnership interests or membership interests.]

 

3.13.2              Section 3.13.1 of the Company Disclosure Schedule contains a true and complete list of all the Material Contracts. All of the Material Contracts set forth on Section

 

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3.13.1 of the Company Disclosure Schedule are valid, binding and enforceable in accordance with their respective terms and shall be in full force and effect without penalty in accordance with their terms upon consummation of the transactions contemplated hereby.  Each Group Company has performed all obligations required to be performed by it under such Contracts and is not in material default under or in material breach of, nor in receipt of any claim of default or breach under, any Contract to which such Group Company is subject; no event has occurred which it is foreseeable with the passage of time or the giving of notice or both could result in a default, breach or event of noncompliance by any Group Company under any contract, agreement or instrument to which any Group Company is subject; no Group Company has a present expectation or intention of not fully performing all such obligations on a timely basis; no Seller Party has any knowledge of any breach or anticipated breach by the other parties to any contract, agreement, instrument or commitment to which any Group Company is a party; and no Group Company is a party to any contract or commitment that might reasonably be expected to have a Material Adverse Effect.

 

3.13.3              The Purchaser has been supplied with or provided access to a true and correct copy of each of the written Material Contracts set forth on Section 3.13.1 of the Company Disclosure Schedule, together with all amendments, waivers or other changes thereto.

 

3.14                              Intellectual Property Rights and IT Infrastructure.

 

3.14.1              Section 3.14.1 of the Company Disclosure Schedule contains a true, complete and correct list of all of the following that are owned by the Group Companies: (i) patented or registered Intellectual Property Rights, (ii) pending patent applications and applications for registration of other Intellectual Property Rights, (iii) computer software material to the conduct of the business of the Group Companies (other than licenses for commercially available, off-the-shelf software with a replacement cost and/or annual license fee of less than $150,000), (iv) trade or corporate names and Internet domain names, and (v) material unregistered trademarks and service marks.

 

3.14.2              The Group Companies own all right, title and interest in and to, or have the right to use pursuant to a valid and enforceable license set forth on Section 3.14.1 of the Company Disclosure Schedule, free and clear of all Liens, all Intellectual Property Rights used in or held for use or necessary to operate the business of any Group Company as currently conducted and as currently proposed to be conducted.  The registered Company Intellectual Property Rights owned by the Group Companies are valid, enforceable and subsisting, and no loss, other than by expiration of patents at the end of their respective statutory terms, of any of the Company Intellectual Property Rights is threatened or pending.  All of the licenses set forth on Section 3.14.1 of the Company Disclosure Schedule are in full force and effect and no default exists on the part of any Group Company or, to the knowledge of the Company, on the part of any other parties thereto. All commercially reasonable, customary or necessary action, including the payment of all fees and taxes (to the extent applicable), have been taken to maintain and protect the Intellectual Property Rights.

 

3.14.3              (i) There are no claims against any Group Company that were either made within the past five years or are presently pending contesting the validity, use, enforceability, ownership or registrability of any of the Company Intellectual Property Rights owned by any Group Company, and to the knowledge of the Company, there is no reasonable basis for any such claim, (ii) no Group Company has infringed, misappropriated or otherwise conflicted with, and the operation of the business of any Group Company as currently conducted does not infringe, misappropriate or otherwise conflict with, any Intellectual Property Rights of any other Persons and no Group Company has any knowledge of any facts or circumstances that indicate a likelihood of the foregoing, (iii) no Group Company or Seller Party has received any notices (including cease-and-desist letters or offers to license) alleging infringement or misappropriation of, or other conflict with, any Intellectual Property Rights of any other Person,

 

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except to the extent Losses arising from any such infringement, misappropriation or conflicts are indemnified by Section 5.2.1(b)(iv) to the knowledge of the Company, no other Person is infringing, misappropriating or otherwise conflicting with any of the Company Intellectual Property Rights.  The transactions contemplated by this Agreement will not impair the right, title or interest of any Group Company in and to the Company Intellectual Property Rights and the Company Systems, and all of the Company Intellectual Property Rights and the Company Systems will be owned or available for use by the Group Companies immediately after the Closing on terms and conditions identical to those under which the Group Companies owned or used the Company Intellectual Property Rights and the Company Systems immediately prior to the Closing.  To the knowledge of Company, no current or former employee, consultant, director or officer of any Group Company has disclosed to any Third Party or otherwise used any confidential information of such Group Company except in the course of their employment or engagement with such Group Company and at the direction of such Group Company.

 

3.14.4              The Group Companies own all right, title and interest in and to the Intellectual Property Rights authored, developed or otherwise created by each current and former employee, consultant, director and officer of the Group Companies, without any restrictions or obligations owed to such employee, consultant or officer with respect to such Group Company’s use or ownership of such Intellectual Property Rights.  Without limiting the generality of the foregoing sentence, all author’s and moral rights in any such Intellectual Property Rights have been waived.

 

3.14.5              The Group Companies are in compliance with (i) all applicable data protection or privacy laws governing the collection or use of personal information and (ii) any privacy policies or related policies, programs or other notices that concern any Group Company’s collection or use of personal information.

 

3.15                              Government Licenses and Permits.

 

All permits, licenses, franchises, certificates (excluding good standing certificates), approvals, registrations, accreditations and other authorizations of domestic and foreign governments or agencies or other similar rights owned, possessed or used by the Group Companies in the conduct of their business and the ownership of their properties (collectively, the “Licenses”) are in full force and effect and contain no materially burdensome restrictions or conditions and will remain in full force and effect without such restrictions or conditions following the consummation of the transactions contemplated by this Agreement.  The Licenses constitute all permits, licenses, franchises, certificates, approvals, registrations, accreditations and other authorizations necessary for the conduct of the business of the Group Companies.  To the knowledge of the Company, no regulatory body is considering modifying, suspending or revoking any of the Licenses.  Each Group Company is in compliance with the terms and conditions of the Licenses in all material respects and has received no notices that it is in violation of any of the terms or conditions of such Licenses or alleging the failure to hold or obtain any permit, license, franchise, certificate, approval or authorization.  Each Group Company has taken all necessary action to maintain valid such Licenses.  No loss, termination, expiration or revocation of any License is pending or to the knowledge of the Company, threatened, other than expiration in accordance with the terms thereof and all of such Licenses shall be owned or available for use by the any Group Company on substantially identical terms immediately following the Closing.

 

3.16                              Litigation, etc.

 

There are no Legal Proceedings pending or threatened against or affecting any Group Company or any assets any Group Company (or pending or threatened against or affecting any of the officers, directors, members, partners, managers or employees of any Group Company with respect to his, her or its business or proposed business activities), or pending or threatened by any Group Company against any third party, at law or in equity, or before or by any governmental department,

 

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commission, board, bureau, agency or instrumentality (including, without limitation, any actions, suits, proceedings or investigations with respect to the transactions contemplated by this Agreement); no Group Company is subject to any arbitration proceedings under collective bargaining agreements or otherwise or any governmental investigations or inquiries; and there is no basis for any of the foregoing.  The foregoing includes, without limitation, actions pending or threatened involving the prior employment of any employee of any Group Company, the Group Companies’ use in connection with their respective businesses of any information or techniques allegedly proprietary to any such employee’s former employers or such employee’s obligations under any agreements with former employers.  The Group Companies are fully insured with respect to each of the matters set forth on Section 3.16 of the Company Disclosure Schedule.  No Group Company or its assets are subject to any judgment, order or decree of any court or other governmental agency, and neither any Group Company nor any Seller Party has received any opinion or memorandum or legal advice from legal counsel to the effect that the any Group Company is exposed, from a legal standpoint, to any liability which may be material to any business of such Group Company.

 

3.17                              Brokerage.

 

There are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon any Group Companies.

 

3.18                              Insurance.

 

Section 3.18 of the Company Disclosure Schedule contains a description of all insurance policies maintained by any Group Company with respect to its properties, assets or business.  Each such insurance policy (i) is legal, valid, binding and enforceable and in full force and effect and (ii) will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated by this Agreement. No Group Company is in default with respect to its obligations under any insurance policy maintained by it and has not been denied insurance coverage.  Section 3.18 of the Company Disclosure Schedule also sets forth a list of all claims, if any, made by any Group Company during the past three years against an insurer in respect of coverage under an insurance policy and there have been neither denials of claims nor reservation of rights letters with regard to such claims.  No Group Company has any self-insurance or co-insurance programs, and the reserves set forth in the Management Accounts are adequate to cover all of the Group Companies’ anticipated liabilities with respect to any such self-insurance or co-insurance programs.

 

3.19                              Employees.

 

3.19.1              Section 3.19.1 of the Company Disclosure Schedule sets forth a true, complete and correct list of all key employees employed by any Group Company (the “Key Employees”) and their positions.

 

3.19.2              To the knowledge of the Company, neither any executive nor any key Employee or any group of Employees has any plans to terminate his or her employment with such Group Company.

 

3.19.3              Each Group Company has complied in all material respects with all laws relating to the employment of labor (including, without limitation, provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social welfare benefits and the payment or withholding of payroll or similar taxes for employees, or any other applicable law or regulation concerning the employees of any Group Company); no Group Company has failed to contribute or make payment to pension insurance, occupational injury insurance, medical insurance, maternity insurance, unemployment insurance, the social insurance premiums, housing funds or other statutory welfare funds for the benefit of each of its employees

 

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in full and on time as required by applicable law; and neither any Group Company nor any Seller Party is aware of any present or threatened, or has ever experienced any historical, labor relations problems (including, without limitation, any union organization activities, threatened or actual strikes or work stoppages or material grievances).

 

3.19.4              Neither any Group Company nor, to the knowledge of the Company, any Employee is subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreements relating to, affecting or in conflict with the present or proposed business activities of any Group Company.  Neither any Group Company nor any Seller has received any notice alleging that any violation of any such agreements has occurred.  Section 3.19.4 of the Company Disclosure Schedule contains a correct and complete list of all key Employees which have executed and delivered to the Group Company any (i) agreement providing for the nondisclosure by such Person of any confidential information of such Group Company or (ii) agreement providing for the assignment or license by such Person to such Group Company of any Company Intellectual Property Rights (an “Inventions Agreement”).  No current employee or consultant of any Group Company has excluded works or inventions made prior to his or her employment with such Group Company from any Inventions Agreement between such Group Company and such Person.

 

3.20                              Employee Benefits Matters.

 

3.20.1              Section 3.20.1 of the Company Disclosure Schedule sets forth an accurate and complete list of each employee benefit plan, program or arrangement at any time maintained, sponsored or contributed to by any Group Company.  Each such item listed on Section 3.20.1 of the Company Disclosure Schedule is referred to herein as a “Plan” and collectively as the “Plans.”

 

3.20.2              There are no pending or threatened actions, suits, investigations or claims with respect to any Plan (other than routine claims for benefits) which could result in material liability to any Group Company.

 

3.20.3              Each of the Plans and all related trusts, insurance contracts and funds have been maintained, funded and administered in compliance with their terms and in compliance with the applicable laws.  With respect to each Plan, all required payments, premiums, contributions, distributions and reimbursements for all periods ending prior to or as of the Closing Date have been made or properly accrued.

 

3.20.4              Each Plan which is subject to health care continuation requirements has been administered in compliance with such requirements.  No Plan provides medical or life or other welfare benefits to any current or future retired or terminated employee (or any dependent thereof) of any Group Company other than as required pursuant to applicable laws.

 

3.20.5              With respect to each Plan, any Seller Party or the Company has provided the Purchaser with true, complete and correct copies of (to the extent applicable) all documents pursuant to which the Plan is maintained, funded and administered (including the Plan and trust documents, any amendments thereto, the summary Plan descriptions and any insurance contracts or service provider agreements).

 

3.21                              Compliance with Laws.

 

3.21.1              No Group Company has violated any law, ordinance, code, rule or any governmental regulations, rules, circulars, notices or requirements relating to the operation of its respective business, the maintenance and operation of its properties and assets and the payment of any dividend or other distribution in respect of any equity interest of any Group Company (including applicable laws of the United States such as the FCPA, U.S. Bank Secrecy Act, and USA PARIOT Act of 2011, and applicable laws, regulations, rules, circulars or notices of the

 

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PRC such as applicable SAFE rules and Circular 698 [2009] No. 698 issued by the State Administration of Taxation of the PRC on December 10, 2009 (“Circular 698”)), and neither any Group Company nor any Seller Party has received any notice of, and no claims have been filed, against any Group Company alleging any such violation. To the knowledge of the Company, no Group Company has sold, or facilitated the sale of, any products or goods that infringe any Person’s Intellectual Property Rights or in connection with which Tax (including custom duties) has not been paid in accordance with applicable laws.

 

3.21.2              Neither any Group Company nor any of its respective Affiliates, directors, officers, employees, or agents has taken any act that will cause the Purchaser or any of its Affiliates (including, after the Closing, the Company) to violate the FCPA or any applicable anti-corruption law.  Without limiting the generality of the foregoing, neither any Group Company nor any director, officer, agent, employee, or any other Person associated with or acting for or on behalf of the foregoing, has offered, paid, promised to pay, or authorized the payment of any money or corporate fraud, or offered, given a promise to give, or authorized the giving of anything of value, to any government official, to any political party or official thereof or to any candidate for political office for any unlawful contribution, gift, entertainment or other unlawful expenses relating to a political activity, or for the purpose of (i) (A) influencing any act or decision of such government official, political party, party official, or candidate in his or its official capacity, (B) inducing such government official, political party, party official or candidate to do or omit to do any act in violation of the lawful duty of such government official, political party, party official or candidate, or (C) securing any improper advantage, or (ii) inducing such government official, political party, party official, or candidate to use his or its influence with any governmental authority to affect or influence any act or decision of such Governmental Authority, in order to assist such Person in obtaining or retaining business for or with, or directing business to any Group Company.

 

3.21.3              Neither any Group Company nor any of its respective Affiliates, directors, officers, employees, representatives, or agents is currently a Non-U.S. Official.  Further, as of the date of execution of this Agreement, no Non-U.S. Official or any agency, department, political party, public international organization, or instrumentality thereof is associated with, or presently owns an interest, whether direct or indirect, in any Group Company or has any legal or beneficial interest in any such Person or the payments to be made by the Purchaser hereunder.

 

3.21.4              Neither any Group Company nor any of its respective Affiliates, directors, officers, employees, representatives, or agents nor any person acting on behalf of any of the foregoing, has made a promise to make anything of value (“Payment”) (i) to or for the use or benefit of any Non-U.S. Official; (ii) to any other person either for an advance or reimbursement, if it knows or has reason to know that any part of such Payment will be directly or indirectly given or paid by such other person, or will reimburse such other person for Payments previously made, to any Non-U.S. Official; or (iii) to any other person or entity, the payment of which would violate, or implicate any of the Purchaser or its Affiliates in the violation of, the laws or regulations of the United States or any other governmental entity having jurisdiction over the activities being carried out by the Purchaser.

 

3.21.5              Each Group Company has effective disclosure controls and procedures and an internal accounting controls system that is sufficient to provide reasonable assurances that violations of applicable anti-corruption laws have been and will be prevented, detected and deterred.

 

3.21.6              No Group Company (nor any Seller Party on behalf of any Group Company) has at any time made any payments for political contributions or made any bribes, kickback payments or other illegal payments.

 

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3.21.7              No part of the funds used by any Group Company or its Affiliates have been or will be, directly or indirectly derived from, or related to, any activity that contravenes domestic or applicable international laws and regulations, including anti money laundering laws and regulations, or would cause the Purchaser or any of its Affiliates (including, after the Closing, the Company) to be in violation of any anti-money laundering or other laws in any jurisdiction, including the United States.  No payment by any of the parties hereunder (whether pursuant to their indemnification obligations or otherwise) shall cause the Purchaser or any of its Affiliates (including, after the Closing, the Company) to be in violation of any anti money laundering laws and regulations of the PRC, the United States or any other relevant jurisdiction applicable to its business or operations.

 

3.22                              Affiliate Transactions.

 

3.22.1              Except those between the members of the Group Companies, no employee, officer, director, or Affiliate of the Group Companies, or any Person in the Family Group of any of the foregoing (each, a “Company Affiliate”) (i) is a party to any agreement, contract, commitment, arrangement, or transaction with any Group Company or that pertains to the business of the Group Companies other than any employment, non-competition, confidentiality or other similar agreements between any Group Company and any Person who is an officer, director or employee of the Group Companies (each, an “Affiliate Agreement”); or (ii) owns, leases, or has any economic or other interest in any asset, tangible or intangible, that is used by any Group Company in carrying out its business (together with the Affiliate Agreements, collectively the “Affiliate Transactions”).

 

3.22.2              As of the Closing, except those between the members of the Group Companies, there will be no outstanding or unsatisfied obligations of any kind (including inter-company accounts, notes, guarantees, loans, or advances) between any Group Company, on the one hand, and a Company Affiliate on the other hand, except to the extent arising out of the post-Closing performance of an Affiliate Agreement that is in writing and is set forth on Section 3.22.2 of the Company Disclosure Schedule (and a true, complete and correct copy of which has been provided to the Purchaser).  With respect to any Affiliate Agreement set forth on Section 3.22.2 of the Company Disclosure Schedule, (i) the terms and conditions of any such Affiliate Agreement are no less favorable to any Group Company than could have been obtained from an unrelated Third Party, and (ii) such Affiliate Agreement was negotiated and entered into on an arms-length, commercially reasonable basis.

 

3.23                              Suppliers and Customers.

 

Section 3.23 of the Company Disclosure Schedule accurately sets forth a list of the top ten logistics service provider of the Company and a list of top ten OEMs of the Company by U.S. dollar or RMB (or other applicable currency) volume for the past twelve months ending December 31, 2013.  No material supplier, vendor or service provider of any Group Company (including, without limitation, any supplier, vendor or service provider referenced above) has given notice to any Seller Party or any Group Company that it intends to stop or materially decrease the rate of, or materially and adversely change the terms (whether related to payment, price or otherwise) with respect to, paying any commissions to such Group Company or supplying materials, products or services to such Group Company (whether as a result of the transactions contemplated by this Agreement or otherwise).  No material customer of any Group Company (including, without limitation, any customer referenced above) has given any Seller Party or any Group Company notice that it intends to stop or materially decrease the rate of, buying services, materials or products from such Group Company (whether as a result of the transactions contemplated by this Agreement or otherwise).  To the knowledge of the Company, the consummation by each Group Company of the transactions contemplated by this Agreement will not adversely affect the relationship of the Group Companies with any of such customers and suppliers.

 

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3.24                              Officers and Directors; Bank Accounts.

 

Section 3.24 of the Company Disclosure Schedule lists all directors of the Group Companies.

 

3.25                              [Reserved].

 

3.26                              Privacy and Security.

 

3.26.1              Without limiting the generality of Section 3.21.1, each Group Company (i)  has taken commercially reasonable steps to prevent the violation by any Group Company of the rights of any person or entity with respect to Personally Identifiable Information provided under applicable laws, including PRC, U.S. and state laws, rules and regulations, including all rights respecting (x) privacy generally, (y) the obtaining, storing, using or transmitting of Personally Identifiable Information of any type, whether via electronic means or otherwise, and (z) spyware and adware (clauses (x)-(z), including, without limitation, as “Privacy Rights”) and (ii) complies with applicable governing industry standards and such Group Company’s policy in effect as of the date hereof. For purposes of this Agreement, the term “Personally Identifiable Information” means data in control of any Group Company that would enable such Group Company to identify or locate a particular person, including but not limited to name, address, telephone number, electronic mail address, personal identification number, social security number, bank account number or credit card number; provided, however, that data shall not be Personally Identifiable Information for purposes of this Agreement if no Group Company (x) intentionally collects or intentionally receives any such data or (y) actually uses any such data to identify the identity or location of, or identify or locate, a particular person as a result of any receipt of such data.

 

3.26.2              Each Group Company: (i) takes commercially reasonable steps to protect the confidentiality, integrity and security of their software, databases, systems, networks and Internet sites and all information stored or contained therein or transmitted thereby from unauthorized or improper access, modification, transmittal or use; and (ii) does not use in connection with the provision of their products or services or intentionally collect or intentionally receive any of the following types of Personally Identifiable Information about individuals (other than personnel records for their own employees maintained in the Ordinary Course and in compliance with all applicable laws): social security numbers or credit card numbers.

 

3.27                              Disclosure.

 

Neither this Agreement nor any of the exhibits, schedules, attachments, written statements, documents, certificates or other items prepared and supplied to the Purchaser by or on behalf of the Group Companies with respect to the transactions contemplated hereby contain any untrue statement of a material fact or omit a material fact necessary to make any statement contained herein or therein not misleading.  There is no fact which the Group Companies have not disclosed to the Purchaser in writing and of which any of the Group Companies or their respective officers, directors or executive employees is aware, which has had or could reasonably be expected to have a Material Adverse Effect.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES
 REGARDING THE PURCHASER

 

As a material inducement to the Sellers and the Company to enter into this Agreement and to sell the Acquired Shares and Subscribed Shares to the Purchaser in accordance with the terms hereof, the Purchaser hereby represents and warrants to the Seller Parties and the Company on and as of the date hereof that:

 

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4.1       Organization; Power and Authority.

 

The Purchaser is a company duly organized, validly existing and in good standing under the laws of the Cayman Islands.  The Purchaser possesses all requisite power and authority necessary to carry out the transactions contemplated by this Agreement.

 

4.2       Authorization; No Breach.

 

The execution, delivery and performance of this Agreement and the other agreements contemplated hereby to which the Purchaser is a party have been duly authorized by the Purchaser.  This Agreement constitutes, and each of the other agreements contemplated hereby to which the Purchaser is a party, when executed and delivered in accordance with the terms thereof, will constitute, a valid and binding obligation of the Purchaser, enforceable in accordance with its terms.  The execution and delivery by the Purchaser of this Agreement does not and shall not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under (whether with or without the giving of notice, the passage of time or both), (iii) result in the creation of any Lien upon the Purchaser’s assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of, or (vi) require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any court or administrative or governmental body or agency pursuant to, the organizational documents of the Purchaser, or any law, statute, rule or regulation to which the Purchaser is subject, or any agreement, instrument, order, judgment or decree to which the Purchaser is subject.

 

4.3       Litigation.

 

There are no Legal Proceedings pending or, to the best of the Purchaser’s knowledge, threatened against or affecting the Purchaser, at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which would adversely affect the Purchaser’s performance under this Agreement or the other agreements contemplated hereby or the consummation of the transactions contemplated hereby or thereby.

 

4.4       Brokerage.

 

There are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon the Purchaser.  The Purchaser shall pay, and hold the Sellers and the Company harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any such claim.

 

ARTICLE V

 

SURVIVAL; INDEMNIFICATION

 

5.1       Survival of Representations and Warranties.

 

All of the representations and warranties set forth in this Agreement or in any writing delivered by the Purchaser, the Group Companies or the Seller Parties in connection with this Agreement shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (regardless of any investigation, inquiry or examination made by or on behalf of, or any knowledge of, or the acceptance of any certificate or opinion by or on behalf of, any Party).

 

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5.2       Indemnification.

 

5.2.1                     Indemnification Obligations of the Seller Parties.

 

(a)         Subject to the limitations set forth in Section 5.2.2 and Section 5.2.3, each Seller shall, severally but not jointly, indemnify the Purchaser, the Purchaser’s Affiliates and each of their respective officers, directors, employees, agents, representatives, successors and assigns (each an “Indemnitee”), and save and hold each of them harmless from and against, and pay on behalf of or reimburse each of them as and when incurred for, all Losses which such Indemnitee may suffer, sustain or become subject to as a result of:

 

(i)                                     any breach of any representation or warranty made by such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor) in Article II of this Agreement or in any related schedule or exhibit attached to this Agreement (determined in each case without giving effect to any “knowledge,” “material” or “Material Adverse Effect” qualifiers, or qualifiers of similar import, therein);

 

(ii)                                  any nonfulfillment or breach of any covenant, agreement or other provision by or in respect of such Seller (in the case of Chic Group Limited, each of such Seller and the Guarantor) under this Agreement; and

 

(iii)                               any PRC Taxes imposed on the Purchaser or any of its Affiliates as a result of the failure by such Seller to timely pay any Taxes in connection with any Circular 698 Return or any other required payment under any Tax Return required to be filed or otherwise paid by such Seller.

 

(b)         Subject to the limitations set forth in Section 5.2.2 and Section 5.2.3, the Company shall indemnify the Indemnitees, save and hold each of them harmless from and against, and pay on behalf of or reimburse each of them as and when incurred for, all Losses which such Indemnitee may suffer, sustain or become subject to as a result of:

 

(i)                                     any breach of any representation or warranty made in Article III of this Agreement or in any related schedule or exhibit attached to this Agreement (determined in each case without giving effect to any “knowledge,” “material” or “Material Adverse Effect” qualifiers, or qualifiers of similar import, therein);

 

(ii)                                  any nonfulfillmlent or breach of any covenant, agreement or provisions by or in respect of any Group Company under this Agreement;

 

(iii)                               except to the extent sufficient provisions or reserves have been made in the Management Accounts, the non-payment of any Taxes of the Group Companies for (A) all taxable periods ending on or before the Closing Date for any taxable period that includes (but does not end on) the Closing Date (“Pre-Closing Tax Period”), or (B) in respect of or attributable to transactions or events occurring, or contracts or agreements entered into by any Group Company, on or prior to the Closing Date, whether such Taxes arise before or after the Closing Date, in each case when such Taxes are due;

 

(iv)                              the sale of any product prior to the Closing Date by any Group Company that infringes any

 

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Intellectual Property Right of any Person or with respect to which Tax (including custom duties) failed to be paid in accordance with applicable laws;

 

(v)                                 any indemnification made by the Company in satisfaction of any claim brought under or in connection with the Share Purchase Agreement or any transaction contemplated thereunder;

 

(vi)                              the portion of any dividends or distribution made to the shareholders of the Company out of the proceeds received by the Company from the Purchaser under the Share Purchase Agreement (the “Disposal Proceeds”), exceeding the Disposal Proceeds net of (i) all Taxes that the Company is required to pay on the Disposal Proceeds pursuant to Circular 698; and (ii) other costs and expenses incurred by the Company in connection with the negotiation, execution and performance of the Share Purchase Agreement and the transactions contemplated thereunder.

 

5.2.2                     Survival Date.  Any Seller Party and the Company will not be liable with respect to any claim made pursuant to Section 5.2.1 above for the breach of any representation or warranty contained in Article II and/or Article III of this Agreement unless written notice of a possible claim for indemnification with respect to such breach is given by an Indemnitee to such Seller Party and/or the Company:

 

(a)         with respect to claims arising under any representation or warranty contained in Section 3.12 (Tax Matters), Sections 3.14.1 through 3.14.4 (Intellectual Property Rights) or Section 3.21 (Compliance with Laws, but excluding Section 3.21.1), on or before the date which is ninety days after the expiration of the applicable statute of limitations (including any extension or waivers thereof) for any claim that any Person may make against a Group Company or a Indemnitee in connection with such representation or warranty; and

 

(b)         with respect to claims arising under any other representation or warranty contained in Article II or Article III, on or before the date which is two years after the Closing (such date as set forth in clause (a) or (b) of this Section 5.2.2, as applicable, with respect to each applicable Section of Article II and Article III is referred to herein as its “Survival Date”);

 

it being understood that so long as written notice is given on or prior to the applicable Survival Date with respect to any claim, the Seller Parties or the Company shall be required to indemnify the Indemnitees for all Losses that the Indemnitees may suffer with respect to such claim through the date of the claim, the end of the survival period and beyond.

 

5.2.3                     Limitations.

 

(a)         With respect to any claim for indemnification being made by an Indemnitee against any Seller pursuant to Section 5.2.1(a), such Seller shall not have any obligation to indemnify any Indemnitee from and against any Losses unless the Indemnitees collectively have suffered Losses in excess of US$100,000 (the “Seller Deductible”), in which case such Seller shall be liable for all amounts related to such Loss(es) (including the amounts otherwise constituting the Seller Deductible).

 

(b)         With respect to any claim for indemnification being made by an Indemnitee pursuant to Section 5.2.1(b), the Company shall not have any obligation to indemnify any Indemnitee from and against any Losses unless the Indemnitees collectively have suffered Losses in excess of

 

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US$500,000 (the “Company Deductible”), in which case the Company shall be liable for all amounts related to such Loss(es) (including the amounts otherwise constituting the Company Deductible).

 

(c)          With respect to any claim for indemnification being made by the Indemnitees for a breach of any representation or warranty contained in Article II by a Seller (in the case of Chic Group Limited, such Seller and the Guarantor), the aggregate liabilities of such Seller (in the case of Chic Group Limited, such Seller and the Guarantor), for all such claims shall not exceed an amount equal to 100% of the Acquisition Prices of such Seller; and with respect to any claim for indemnification being made by the Indemnitees for a breach of any representation or warranty contained in Article II other than a Seller Fundamental Representation by a Seller (in the case of Chic Group Limited, such Seller and the Guarantor), the aggregate liabilities of such Seller (in the case of Chic Group Limited, such Seller and the Guarantor), for all such claims shall not exceed an amount equal to 50% of the Acquisition Prices of such Sellers.

 

(d)         With respect to any claim for indemnification being made by the Indemnitees for a breach of any representation or warranty contained in Article III, the liabilities of the Company for all such claims shall not exceed an amount equal to 100% of the Subscription Price; and with respect to any claim for indemnification being made by the Indemnitees for a breach of any representation or warranty contained in Article III other than a Company Fundamental Representation, the aggregate liabilities of the Company for all such claims shall not exceed an amount equal to 50% of the Total Purchase Price.

 

(e)          Notwithstanding the foregoing or anything else to the contrary contained herein, the limitations on indemnification set forth in this Agreement (including, without limitation, the limitations set forth in this Section 5.2.3) shall not apply to any claim based on fraud or willful misconduct of any Seller Party or the Company.

 

5.2.4                     Indemnification Obligations of the Purchaser.  The Purchaser shall indemnify and hold harmless each Seller and the Company from and against all Losses which such Seller or the Company may suffer, sustain or become subject to as the result of (i) any breach of any representation or warranty made by the Purchaser in this Agreement or (ii) any breach of any covenant made by or in respect of the Purchaser under this Agreement.  The Purchaser will not be liable with respect to any claim for breach of any representation or warranty of the Purchaser contained in this Agreement unless written notice of a possible claim with respect to such breach is given by such Seller or the Company to the Purchaser on or before the ninetieth day following the Closing Date.

 

5.2.5                     Defense of Claims.  If any Party seeks indemnification under this Section 5.2 (the “Indemnified Party”), such Party shall give written notice (an “Indemnification Notice”) to the other applicable Party (it being understood that the Purchaser need only deliver notice to the Company) (the “Indemnifying Party”) of the facts and circumstances giving rise to the claim.

 

(a)         Claims Between or Among the Parties.  Following the Purchaser’s, any Seller’s or the Company’s notice, as applicable, of any Indemnification Notice, the applicable Parties shall meet in person or via teleconference as soon as reasonably practicable following delivery of an Indemnification Notice in order to resolve or settle such claim (if it relates to a claim for money damages).  If the applicable Parties are unable to resolve or settle such claim for money damages within ten Business Days (unless an extension is agreed to in writing between such Seller or the Company, as applicable, and the Purchaser), then the claim shall be determined as set forth in Section 12.1.

 

(b)         Third-Party Claims.  If any Legal Proceeding shall be brought or asserted by any third party (a “Third Party Proceeding”) which, if adversely determined, would entitle the Indemnified Party to indemnity pursuant to this Section 5.2, the Indemnified Party shall within thirty days notify

 

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the Indemnifying Party of the same in writing, specifying in detail the basis of such claim and the facts pertaining thereto and attaching a copy of any summons, complaint or other pleading served upon the Indemnified Party; provided that the failure to so notify an Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent such failure shall have materially harmed the Indemnifying Party.  The Indemnifying Party may, in its discretion and at its sole expense, elect to assume and control the defense of such Third Party Proceeding, provided that:

 

(i)                                     the Indemnifying Party must consult with the Indemnified Party with respect to the handling of such Third Party Proceeding and the Indemnifying Party must employ counsel satisfactory to the Indemnified Party;

 

(ii)                                  the Indemnifying Party must (A) furnish the Indemnified Party with evidence to the Indemnified Party’s satisfaction that the Indemnifying Party is and will be able to satisfy any such liability and (B) agree in writing to be fully responsible for all Losses relating to such claims and provide full indemnification to the Indemnified Party for all Losses relating to such claim;

 

(iii)                               the Indemnifying Party must not settle, compromise or cease to defend any claim or action without the express written consent of the Indemnified Party, which consent may be withheld for any reason or no reason, if (A) pursuant to or as a result of such settlement, compromise or cessation, injunctive or other equitable relief will be imposed against the Indemnified Party, (B) if settlement, compromise or cessation does not expressly and unconditionally release the Indemnified Party from all Losses with respect to such Third Party Claim, with prejudice, or (C) such settlement, compromise or cessation would involve any admission of liability, responsibility, culpability or guilt on the part of the Indemnified Party or which has any collateral estoppel effect on the Indemnified Party;

 

(iv)                              the Indemnifying Party shall not be entitled to assume control of any Third Party Proceeding and shall pay the fees and expenses of counsel retained by the Indemnified Party if (A) the Third Party Proceeding relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation, (B) the claim seeks non-monetary or other injunctive or equitable relief against the Indemnified Party, (C) the claim relates to the Intellectual Property Rights of the Indemnified Party, (D) the claim involves a claim to which the Indemnified Party reasonably believes would be materially detrimental to or materially injure the Indemnified Party’s reputation or customer or supplier relations, (E) is one in which the Indemnifying Party is also a party and joint representation would be inappropriate or there may be legal defenses available to the Indemnified Party which are different from or additional to those available to the Indemnifying Party, or (F) involves a claim which, upon petition by the Indemnified Party, the appropriate court, arbitration or other body determines that the Indemnifying Party failed or is failing to vigorously prosecute or defend.  With respect to the actions, lawsuits, investigations, proceedings and

 

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other claims that are the subject of this Section 5.2.5(b)(iv), the Indemnifying Party shall have the right to retain its own counsel (but the expenses of such counsel shall be at the expense of the Indemnifying Party) and participate therein, and no Indemnifying Party shall be liable for any settlement of any such action, proceeding or claim without its written consent (which consent shall not be unreasonably withheld); and

 

(v)                                 in the event any Third Party Proceeding shall be brought or asserted which, if adversely determined, would not entitle the Indemnified Party to full indemnity pursuant to this Section 5.2, by reason of the limitations set forth in Section 5.2.3 or otherwise, the Indemnified Party may elect to participate in a joint defense of such Third Party Proceeding (a “Joint Defense Proceeding”), the Indemnifying Party shall pay for the expenses of such joint defense and the employment of counsel shall be satisfactory to the Indemnified Party.

 

If the Indemnifying Party is permitted to assume and control the defense of a Third Party Proceeding and elects to do so, it shall provide notice thereof to the Indemnified Party within thirty days after the Indemnified Party has given notice of the matter.  The Indemnified Party shall have the right to employ counsel separate from counsel employed by the Indemnifying Party in any such action and to participate in the defense thereof, but the fees and expenses of such counsel employed by the Indemnified Party shall be at the expense of the Indemnified Party unless (i) the employment thereof has been specifically authorized by the Indemnifying Party in writing, (ii) the Indemnifying Party has failed to assume the defense and employ counsel, or (iii) the Legal Proceeding is a Joint Defense Proceeding.  Notwithstanding anything to the contrary above, this Section 5.2.5 shall not apply to any claim or action relating to Taxes.

 

5.2.6                     Payments.

 

(a)         Subject to Section 5.2.6(b), any payment pursuant to a claim for indemnification shall be made by wire transfer or delivery of other immediately available funds to the account(s) designated by the Indemnified Party(ies) no later than thirty days after receipt by the Indemnifying Party(ies) of written notice from the Indemnified Party(ies) stating the amount of the claim, unless the claim is subject to defense as provided in Section 5.2.5 above, in which case payment shall be made not later than five days after the amount of the claim is finally determined.  Any payment required under this Section 5.2 which is not made when due shall bear interest at the maximum allowable rate permitted by applicable usury laws (not to exceed 18%).  Interest on any such unpaid amount shall be compounded monthly, computed on the basis of a 360-day year and shall be payable on demand.  In addition, such Party shall reimburse the other Party for any and all costs or expenses of any nature or kind whatsoever (including but not limited to all attorneys’ fees) incurred in seeking to collect such Losses.  All payments and related calculations of amounts due therefor of any amounts by any Person pursuant to this Article V shall, unless otherwise agreed to by the Purchaser, the Sellers and the Company in writing, be made in U.S. dollars based on U.S. dollar/RMB exchange rate as of the applicable payment date.

 

(b)         With respect to any payment to be made by the Company pursuant to a claim for indemnification under Section 5.2.1(b)(v), in lieu of making such payment, the Company shall issue to the Purchaser, for no additional consideration, such number of Ordinary Shares as equal to the quotient of (i) the sum of such payment plus any interest that may be accrued thereon pursuant to Section 5.2.6(a) above), divided by (ii) a per share price equal to $8.786 (subject to appropriate adjustment for share splits, share dividends, combinations, recapitalizations and similar events).

 

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5.2.7                     Other Indemnification Provisions.  Each Seller Party hereby agree that he, she, or it will not make any claim for indemnification against any Group Company or any Affiliate of any Group Company by reason of the fact that such Seller Party was a shareholder, director, officer, employee or agent of any such entity or is or was serving at the request of any such entity as a partner, trustee, director, officer, employee or agent of another entity (whether such claim is for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses or expenses) with respect to any action, suit, proceeding, complaint, claim or demand brought by an Indemnitee against such Seller Party (if such action, suit, proceeding, complaint, claim or demand arises under this Agreement).  Each Seller Party hereby acknowledge that he, she or it will have no claims or right to contribution or indemnity from any Group Company with respect to amounts paid by such Seller Party pursuant to this Section 5.2.

 

5.2.8                     Adjustment For Tax Purposes.  All payments made pursuant to this Section 5.2 shall be treated as an adjustment to the Total Purchase Price for Tax purposes unless otherwise required by applicable laws.

 

5.3       Remedies.

 

The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory, equitable or common law remedy that any Party may have with respect to a breach of the provisions hereof, any other agreement or contract or the transactions contemplated by this Agreement; provided that the foregoing indemnification provisions are the sole remedy that any Party may have with respect to a breach of any representation and warranty contained in Article II, Article III or Article IV of this Agreement.  Subject to the proviso in the immediately preceding sentence, the Purchaser, each Seller Party and the Company have and retain all other rights and remedies existing in their favor at law or equity, including, without limitation, any actions for specific performance and/or injunctive or other equitable relief (without posting a bond or other security) to enforce or prevent any violations of any provision of this Agreement.

 

ARTICLE VI

 

PRE-CLOSING COVENANTS AND AGREEMENTS

 

6.1                               Further Assurances.

 

Subject to the terms of this Agreement, each party hereto shall use its commercially reasonable efforts to take all actions and do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the conditions set forth in Article VII).

 

ARTICLE VII

 

CLOSING CONDITIONS

 

7.1                               Conditions Precedent to Each Party’s Obligations. The obligations of the Purchaser, the Sellers and the Company under this Agreement to consummate the transactions contemplated hereby will be subject to the satisfaction or waiver (if permitted by applicable laws and, in any event, in each party’s sole discretion), at or prior to the Closing, of all of the following conditions:

 

7.1.1                     Injunction.  There shall be no effective injunction, writ or preliminary restraining order of any nature issued by a Government Entity of competent jurisdiction to the effect that the transactions contemplated by this Agreement may not be consummated as provided in this Agreement.

 

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7.1.2                                                   Legal Prohibition.  No law, judgment or order shall have been enacted, promulgated, entered or enforced by any court or Government Entity which would prohibit, materially restrict, impact or delay implementation of the transactions contemplated under this Agreement.

 

7.1.3                                                   Government Entity Consents.  All consents, authorizations, waivers or approvals of any Government Entity as may be required to be obtained in connection with the execution, delivery or performance of this Agreement, the failure to obtain of which would prevent the legal and valid consummation of the transactions contemplated hereby, shall have been obtained.

 

7.1.4                                                   Transaction Documents.  Each of the Transaction Documents (excluding the Restated Articles) shall have been executed and delivered by each party thereto at the Closing; and the Restated Articles shall have been duly adopted by shareholders of the Company.

 

7.2                               Additional Conditions Precedent to Obligations of the Purchaser. The obligations of the Purchaser under this Agreement to consummate the transactions contemplated hereby will be subject to the satisfaction, at or prior to the Closing, of all of the following conditions, any one or more of which may be waived in writing by the Purchaser:

 

7.2.1                                                   Accuracy of Representations and Warranties; Performance of Covenants.  The representations and warranties of the Seller Parties set forth in Article II and the Group Companies set forth in Article III (A) that are qualified by materiality or Material Adverse Effect shall be true and correct in all respects, and (B) that are not qualified by materiality or Material Adverse Effect shall be true and correct in all material respects, in each case, as of the date hereof and as if made on and as of the Closing Date (except for representations and warranties that expressly speak only as of a specific date or time other than the Closing Date, which need only be true and correct as of such other date or time).  Each of the Group Companies and the Seller Parties shall have performed and complied with, in all material respects, all covenants and agreements required by this Agreement to be performed or complied with by it on or prior to the Closing.

 

7.2.2                                                   No Material Adverse Effect.  No fact, event or circumstance shall have occurred which has had or could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and no material change in any relevant laws, regulations or policies in any of the jurisdictions or sectors in which any Group Company does business (whether coming into effect prior to, on or after the Closing Date) shall have occurred that could reasonably be expected to materially and adversely affect any Group Company since the Latest Balance Sheet Date.

 

7.2.3                                                   Closing Certificate.  The Purchaser shall have received at the Closing a certificate dated as of the Closing Date and validly executed by a director or officer of the Company, certifying the fulfillment of the conditions set forth in Section 7.2.1 and Section 7.2.2.

 

7.2.4                                                   Consents and Approvals.  The Group Companies shall have made all filings and shall have obtained all permits, authorizations, consents and approvals required to be obtained by the Group Companies for the Closing and shall have delivered true, complete and correct copies of such to the Purchaser.

 

7.2.5                                                   Corporate Procedures.  The Company and the Sellers shall have duly attended to and carried out all corporate procedures that are required under the laws of its place of incorporation or establishment to effect its execution, delivery and performance of each Transaction Document to which it is a party and the transactions contemplated thereby, and shall have provided true, complete and correct copies of all relevant resolutions (and all attachments thereto) from such procedures to the Purchaser.

 

7.2.6                                                   Good Standing Certificates. Each Group Company shall have delivered to the Purchaser evidence to the satisfaction of the Purchaser that each Group Company is validly existing and in good standing.

 

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7.2.7                                                   Register of Members. The Company shall have delivered to the Purchaser a copy of the register of members of the Company, certified by a duly authorized director of the board of directors or the registered agent of the Company to be true, complete and correct copies thereof, and reflecting the Purchaser holding 6,348,390 Ordinary Shares at the Closing.

 

7.2.8                                                   Register of Directors. The Company shall have delivered to the Purchaser a copy of the register of directors of the Company, certified by a duly authorized director of the board of directors or the registered agent of the Company to be true, complete and correct copies thereof, and reflecting Mr. Eric Ya Shen being elected as a member of the board of directors of the Company at the Closing.

 

7.2.9                                                   Legal Opinions. The Purchaser shall have received legal opinions from: (i) Han Kun Law Offices, the Company’s PRC legal counsel; (ii) Global Law Offices, the Purchaser’s PRC legal counsel, and (iii) Maples & Calder, the Company’s Cayman Islands legal counsel, each dated as of the Closing Date in form and substance satisfactory to the Purchaser.

 

7.3                               Additional Conditions Precedent to Obligations of the Company and the Seller. The obligations of the Sellers and the Company under this Agreement to consummate the transactions contemplated hereby will be subject to the satisfaction, at or prior to the Closing, of all the following conditions, any one or more of which may be waived in writing by the Sellers and the Company:

 

7.3.1                                                   Accuracy of Representations and Warranties; Performance of Covenants.  The representations and warranties of the Purchaser set forth in Article IV shall be true and correct (disregarding for these purposes all qualifications and exceptions contained therein regarding materiality) as of the date hereof and as if made on and as of the Closing Date (except for representations and warranties that expressly speak only as of a specific date or time other than the Closing Date, which need only be true and correct as of such other date or time), except in the case of this clause (ii) where the failure of such representations and warranties to be so true and correct has not prevented or materially delayed the ability of the Purchaser to effect the Closing and to consummate the transactions contemplated by this Agreement.  The Purchaser shall have performed and complied with, in all material respects, all covenants and agreements required by this Agreement to be performed or complied with by the Purchaser on or prior to the Closing.

 

7.3.2                                                   Closing Certificate.  The Sellers and the Company shall have received at the Closing a certificate dated as of the Closing Date and validly executed by a director or officer of the Purchaser, certifying the fulfillment of the conditions set forth in Section 7.3.1.

 

ARTICLE VIII

 

TERMINATION

 

8.1       Terminations.  This Agreement may be terminated at any time prior to the Closing:

 

8.1.1                                                   by the Purchaser, the Sellers or the Company in writing and without liability of any Party on account of such termination (provided that the terminating party is not otherwise in material default or material breach of this Agreement), if the Closing shall not have occurred on or before March 31, 2014;

 

8.1.2                                                   by the Purchaser, if any Seller Party or the Company materially breaches any of his, her or its representations, warranties or covenants contained herein such that the conditions set forth in Section 7.2.1 would not be satisfied, without liability of the Purchaser on account of such termination (provided that (i) the Purchaser is not otherwise in material default or material breach of this Agreement and (ii) if such breach is curable by such breaching Person, the Purchaser may not terminate this Agreement under this Section 8.1.2 unless such breach remains uncured for ten

 

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Business Days after written notice of such breach is given to any Seller Party or the Company by the Purchaser); or

 

8.1.3                                                   by any Seller or the Company, if the Purchaser materially breaches any of its representations, warranties or covenants contained herein such that the conditions set forth in Section 7.3.1 would not be satisfied, without liability of any Group Company or Seller Party on account of such termination (provided that (i) none of the Company and the Seller Parties is otherwise in material default or material breach of this Agreement and (ii) if such breach is curable by such breaching Person, the Company and the Seller Parties may not terminate this Agreement under this Section 8.1.3 unless such breach remains uncured for ten Business Days after written notice of such breach is given to the Purchaser by any of the Company and the Seller Parties).

 

8.2       Effect of Termination.

 

If any party terminates this Agreement pursuant to, and in accordance with, Section 8.1, this Agreement shall forthwith become void and of no further force and effect, except for provisions of Section 5.2 (Indemnification), Section 5.3 (Remedies), Section 10.1 (Press Release and Announcements), Section 10.5 (Expenses), Article XII (Miscellaneous), and this Section 8.2 which shall survive such termination indefinitely, provided that nothing in Section 8.1 or this Section 8.2 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or impair the right of any party to compel specific performance by another party of its obligations under this Agreement.

 

ARTICLE IX

 

TAX MATTERS

 

9.1       Cooperation on Tax Matters.

 

9.1.1                     The Seller Parties and the Company will (i) retain all of its books and records with respect to Tax matters pertinent to the Company Shares and the Group Companies relating to any Pre-Closing Tax Period until the expiration of the statute of limitations with respect to such Tax period (including, to the extent notified by the representative of the Purchaser, as the case may be, of any extensions thereof), and abide by all record retention agreements entered into with any taxing authority, and (ii) give the Purchaser reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the Purchaser so requests, allow the Purchaser to take possession of such books and records.

 

9.1.2                     Without limiting the Seller Parties’ obligations under Section 9.3, the Purchaser, the Seller Parties and the Company, will, upon request from each other, use their reasonable best efforts to obtain any certificate or other document from any governmental authority or any other Person that may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, without limitation, with respect to the transactions contemplated hereby).

 

9.2       Transfer Taxes.

 

All federal, state, national, provincial, municipal, local or non-U.S. or other excise, sales, use, transfer (including real property transfer), stamp, documentary, filing, recordation and other similar Taxes that may be imposed or assessed on any Seller as a result of the sale of the Acquired Shares, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties (“Transfer Taxes”), shall be borne by such Seller. Each party shall promptly pay all Transfer Taxes for which it is responsible pursuant to this Section 9.2.

 

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9.3       Circular 698 Tax Matters.

 

9.3.1                     Filing of Circular 698 Returns. Within the period required by Circular 698, each Seller and its Affiliates shall timely file, or cause to be timely filed, all information and Tax Returns that are due under PRC law (including, without limitation, pursuant to Circular 698) in connection with the transactions hereunder or which are otherwise required in connection with any internal restructuring done by such Seller or its Affiliates prior to the date hereof (the “Circular 698 Returns”), and such Circular 698 Returns shall be true, accurate and complete in all respects.  Each Seller shall provide the final draft of such Circular 698 Returns to the Purchaser for its review prior to filing such Circular 698 Returns and shall obtain the Purchaser’s consent if such Circular 698 Returns do not allocate 100% of the proceeds received by such Seller from the transactions contemplated under this Agreement to Dongfang Huanyue (Beijing) Multimedia & Technology Co., Ltd.(东方欢跃(北京)多媒体科技有限公司), Dongfang Fengxing (Shanghai) Life and Multimedia Co., Ltd. (东方风行(上海)生活多媒体有限公司) and Lefeng (Shanghai) Information Technology Co., Ltd .  Within ten days of filing the Circular 698 Returns, each Seller shall provide the Purchaser with final, accurate copies of all such Circular 698 Returns that were filed.

 

9.3.2                     Assessment and Payment of Circular 698 Taxes.  Each Seller shall provide the Purchaser with accurate copies of any official assessments of the PRC Tax authorities with respect to its Circulate 698 Returns within ten days of receipt thereof, and such Seller shall pay, or cause to be timely paid, all Taxes due and payable with respect to such official assessments.

 

9.3.3                     Seller Tax Contests.  Each Seller shall notify the Purchaser within ten days upon receipt by it or any of its Affiliates of notice of any pending or threatened PRC Tax audit, assessment or other review affecting the Circular 698 Returns (a “Seller C698 Claim”), and it shall (i) keep the Purchaser informed on the status of any such Seller C698 Claim, and (ii) provide the Purchaser with copies of all written correspondence with respect to such Seller C698 Claim.

 

9.4       Compliance with Chinese SAFE Regulations. Each Seller Party and the Company covenants and agrees that it shall (i) as soon as commercially practicable following the date hereof (but in any event prior to or contemporaneously with filing any Circular 698 Return), submit the application for the registration required by Circular 75 issued by SAFE on October 21, 2005, titled “Notice Regarding Certain Administrative Measures on Financing and Inbound Investments by PRC Residents Through Offshore Special Purpose Vehicles,” effective as of November 1, 2005, or any successor PRC law, rule or regulation, in relation to each Seller’s acquisition or sale of the Company Shares and/or the Company’s issuance of the Company Shares subject to the terms of this Agreement, and (ii) use its best efforts to complete such registration as soon as practicable thereafter.

 

ARTICLE X

 

ADDITIONAL AGREEMENTS

 

10.1                              Press Releases and Announcements.

 

Except as otherwise required by applicable laws, press releases related to this Agreement or the transactions contemplated hereby, or other announcements to the employees, customers, suppliers, vendors or service providers of the Company will be issued solely by the Purchaser or its Affiliates.  Notwithstanding the foregoing, in the event that any Seller Party or the Company is required by applicable laws to issue a press release or otherwise make an announcement related to the foregoing, such Seller Party or the Company shall notify the Purchaser in advance and provide the Purchase with the opportunity to review such press release or announcement and shall

 

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limit the disclosure therein to that required by applicable laws (except to the extent otherwise agreed by the Purchaser).

 

10.2                              Further Transfers.

 

Each Seller Party will execute and deliver such further instruments of conveyance and transfer and take such additional actions as the Purchaser may reasonably request to effect, consummate, confirm and/or evidence the transfer of the Acquired Shares to the Purchaser and any other transactions contemplated hereby.

 

10.3                              [Reserved].

 

10.4                              Confidentiality.

 

10.4.1              Each Party undertakes to the other Parties that it shall not reveal, and that it shall use its commercially reasonable efforts to procure that its respective directors, equity interest holders, officers, employees, agents, counsel and advisors (collectively, “Representatives”) who are in receipt of any Confidential Information do not reveal, to any third party any Confidential Information without the prior written consent of the Company or the concerned Party, as the case may be.  The term “Confidential Information” as used in this Section 10.4 means (a) any information concerning the organization, structure or business of any Party; (b) the terms of this Agreement and the terms of any of the other Transaction Documents, and the identities of the Parties and their respective Affiliates; and (c) any other information or material prepared by a Party or its Representatives that contains or otherwise reflects, or is generated from, Confidential Information.

 

10.4.2              The provisions of Section 10.4.1 shall not apply to:

 

(a)         disclosure of Confidential Information that is or becomes generally available to the public other than as a result of disclosure by or at the direction of a Party or any of its/his/her Representatives in violation of this Agreement;

 

(b)         disclosure by a Party to a Representative or an Affiliate, provided that such Representative or Affiliate (i) is under a similar obligation of confidentiality or (ii) is otherwise under a binding professional obligation of confidentiality;

 

(c)          disclosure, after giving prior notice to the other Parties to the extent practicable under the circumstances and subject to any practicable arrangements to protect confidentiality, to the extent required under the rules of any stock exchange on which the shares of a Party or its Affiliate are listed or by applicable laws or governmental regulations or judicial or regulatory process or in connection with any judicial process regarding any legal action, suit or proceeding arising out of or relating to this Agreement; provided that no prior notice to any Party shall be required to be given under this Section 10.4.2(c) with respect to any dispute arising out of or relating to a Transaction Document; or

 

10.5                              Expenses.

 

Except as otherwise specifically provided herein, each Party hereto shall pay all of its own fees, costs and expenses (including, without limitation, fees, costs and expenses of legal counsel, investment bankers, brokers or other representatives and consultants and appraisal fees, costs and expenses) incurred in connection with the negotiation of this Agreement and the other agreements contemplated hereby, the performance of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby (whether consummated or not).

 

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10.6                              Waivers of Breaches.

 

Each Seller hereby unconditionally and irrevocably waives, and shall procure all Affiliates of such Seller to waive, any and all past and present breach and defaults by, or any past or present claim they may have against, the Company or any other Group Company under any transactions or dealings between any Group Company on one side and such Seller or any Affiliate of such Seller on the other side.

 

ARTICLE XI

 

DEFINITIONS; CROSS-REFERENCES TO OTHER DEFINED TERMS

 

11.1                              Definitions.

 

When used in this Agreement, the following terms have the meanings set forth below:

 

“Acquisition Proposal” means any proposal or offer to acquire all or a substantial part of the business or properties of the Company or any Share Capital of any Group Company, whether by merger, tender offer, exchange offer, sale of assets or similar transaction involving the Company, divisions or operating or principal business units.

 

“Affiliate” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise.

 

“Affiliated Group” means any affiliated, combined, consolidated, unitary or other similar group that has filed a consolidated return for income Tax purposes for a period during which any Group Company was a member.

 

“Beijing Commerce” means Dongfang Fengxing (Beijing) Commerce & Trade Co., Ltd.

 

“Beijing Huanyue” means Dongfang Huanyue (Beijing) Multimedia & Technology Co., Ltd.

 

“Beijing Media” means Dongfang Fengxing (Beijing) Medium & Culture Co., Ltd.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in Hong Kong or the PRC are required or authorized by law or executive order to be closed or on which a tropical cyclone warning no. 8 or above or a “black” rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m. Hong Kong time.

 

“Cash” means all cash, cash equivalents and marketable securities classified as a current asset on the Company’s balance sheet.

 

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

 

“Company Fundamental Representations” means the representations and warranties contained in Sections 3.1 (Organization and Corporate Power, but excluding Section 3.1.3), and 3.2 (Share Capital and Related Matters), 3.4 (No Breach; Authorization; Execution & Enforceability)

 

“Company Intellectual Property Rights” means all of the Intellectual Property Rights owned, used or held for use by any Group Company, including all of the Intellectual Property Rights set forth on Section 3.14.1 of the Company Disclosure Schedule.

 

“Contract” means any agreement, contract or other binding obligation.

 

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“Control Documents” means (a) the following agreements by which Beijing Huanyue controls Beijing Commerce: (i) Exclusive Option Agreement by and among Beijing Huanyue, Beijing Commerce and the shareholders of Beijing Commerce, (ii) Share Pledge Agreement by and among Beijing Huanyue, Beijing Commerce and the shareholders of Beijing Commerce, (iii) Power of Attorney by each of the shareholders of Beijing Commerce, and (iv) Exclusive Business Cooperation Agreement by and between Beijing Huanyue and Beijing Commerce, each of which is dated as of January 7, 2011; and (b) the following agreements by which Beijing Huanyue controls Beijing Media: (i) Exclusive Option Agreement by and among Beijing Huanyue, Beijing Media and the shareholders of Beijing Media, (ii) Share Pledge Agreement by and among Beijing Huanyue, Beijing Media and the shareholders of Beijing Media, (iii) Power of Attorney by each of the shareholders of Beijing Media, and (iv) Exclusive Business Cooperation Agreement by and between Beijing Huanyue and Beijing Media, each of which is dated as of February 21, 2008.

 

“dollar” or “dollars” or “$” means the lawful currency of the United States of America, unless otherwise specified.

 

“Encumbrances” means any Lien, voting agreement, voting trust, proxy, option, right of purchase, right of first refusal, right of first offer, restriction on transfer or any other similar arrangement or restriction of any kind whatsoever, including any restriction on transfer of other assignment, as security or otherwise, of or relating to use, quiet enjoyment, voting, receipt of income or exercise of any other attribute of ownership.

 

“Family Group” means, with respect to any natural person, such person’s spouse, parents and siblings, and each of their respective descendants (whether natural or adopted) and any trust or other entity (including a corporation, partnership or limited liability Companies) formed solely for the benefit of such person and/or such person’s spouse, parents, siblings and/or their respective descendants (whether natural or adopted).

 

“Government Entity” means the United States of America or any other nation, any state, province or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government, including any court, in each case having jurisdiction over any Group Company.

 

“Group Companies” means the Company and its direct or indirect Subsidiaries.

 

“Hong Kong” means the Hong Kong Special Administrative Region of the People’s Republic of China.

 

“Indebtedness” means at a particular time, without duplication, any indebtedness of the Group Companies (i) for borrowed money or issued in substitution for or exchange of indebtedness for borrowed money, (ii) evidenced by any note, bond, debenture or other debt security, (iii) for the deferred purchase price of property or services with respect to which a Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the ordinary course of business which are not more than six months past due), (iv) arising from any commitment by which a Person assures a creditor against loss (including, without limitation, contingent reimbursement obligations with respect to letters of credit), (v) guaranteed in any manner by a Person (including, without limitation, guarantees in the form of an agreement to repurchase or reimburse), (vi) arising from any obligations under capitalized leases with respect to which a Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or with respect to which obligations a Person assures a creditor against loss, (vii) secured by a Lien on a Person’s assets, , and (viii) arising from accrued interest to and including the Closing Date in respect of any of the obligations described in the foregoing clauses (i) through (vii) of this definition and all premiums, penalties, charges, fees, expenses and other amounts due in connection with the payment and satisfaction in full of such obligations which will be paid or prepaid at the Closing.

 

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“Intellectual Property Rights” means all (i) patents, patent applications, patent disclosures and inventions, (ii) trademarks, service marks, trade dress, trade names, logos and corporate names and registrations and applications for registration thereof together with all of the goodwill associated therewith, (iii) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof, (iv) mask works and registrations and applications for registration thereof, (v) computer software, data, data bases and documentation thereof, (vi) trade secrets and other confidential information (including, without limitation, ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial and marketing plans and customer and supplier lists and information), (vii) internet domain names and web sites, (viii) other intellectual property rights, (ix) registrations and applications for any of the foregoing, and (x) copies and tangible embodiments thereof (in whatever form or medium).

 

“Investment” as applied to any Person means (i) any direct or indirect purchase or other acquisition by such Person of any notes, obligations, instruments, shares, securities or ownership interest (including partnership interests and joint venture interests) of any other Person and (ii) any capital contribution by such Person to any other Person.

 

“knowledge” and “aware” and any other term of similar import means, with respect to any Person, the actual knowledge of such Person and the knowledge that such Person could be reasonably expected to have after making a reasonable inquiry and exercising reasonable diligence with respect to the particular matter in question.

 

“Latest Balance Sheet Date” means December 31, 2013.

 

“Lefeng.com” means Lefeng.com Limited.

 

“Lien” or “Liens” means any mortgage, pledge, security interest, encumbrance, lien, limitation, condition, or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with recourse against the Company or any of its Affiliates, any filing or agreement to file a financing statement as debtor under any statute other than to reflect ownership by a third party of property leased to the Company or any of its Affiliates under a lease which is not in the nature of a conditional sale or title retention agreement, or any subordination arrangement in favor of another Person (other than any subordination arising in the ordinary course of business).

 

“Loss” or “Losses” means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, liabilities, obligations, Taxes, liens, losses, diminutions in value, expenses and fees (including, without limitation, arbitral tribunal costs and reasonable attorneys’ fees and expenses).

 

“Material Adverse Effect” means any event, fact, circumstance or condition that has had or could reasonably be expected to have a material adverse effect upon the business, operations, financial condition, operating results, earnings, assets, customer, supplier, employee or sales representative relations, or business prospects, whether individually or in the aggregate, in each case of the Group Companies taken as whole.

 

“Options” means options issued by the Company to acquire Ordinary Shares or any other Share Capital of the Company.

 

“Ordinary Course” means the ordinary course of business consistent with past custom and practice.

 

36

 

“Permitted Liens” means (i) Tax Liens with respect to Taxes not yet due and payable or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established in accordance with US GAAP or PRC GAAP; (ii) deposits or pledges made in connection with, or to secure payment of, utilities or similar services, workers’ compensation, unemployment insurance, old age pensions or other social security obligations; (iii) interests or title of a lessor under any of the Leases; (iv) mechanics’, materialmen’s or contractors’ Liens or encumbrances or any similar Lien or restriction for amounts not yet due and payable; and (v) easements, rights-of-way, restrictions and other similar charges and encumbrances not interfering with the ordinary conduct of the business of such Person or detracting from the value of the assets of such Person.

 

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

 

“PRC” means the People’s Republic of China.

 

“PRC GAAP” means the PRC generally accepted accounting principles.

 

“Restated Articles” means the Fourth Amended and Restated Memorandum and Articles of Association of the Company to be adopted by the shareholders of the Company at the Closing in substantially the form attached as Exhibit C hereto.

 

“RMB” means Renminbi, the law currency of the PRC.

 

“Restructuring” means (i) the transfer of the assets (including but not limited to Intellectual Property Rights) and business owned or controlled by the Company or its Subsidiaries in connection with the third-party online retail platform under their operation to Lefeng.com or its relevant Subsidiaries, (ii) the termination of employment of the relevant employees by the Company or its Subsidiaries, and (iii) such employees entering into employment relationship with Lefeng.com or its relevant Subsidiaries, in each case as set forth and described in Restructuring Schedule as defined under the Share Purchase Agreement, dated as of February 14, 2014, by and among Ovation Entertainment Limited, Lefeng.com and Vipshop Holdings Limited.

 

“Restructuring Contracts” means Contracts entered into in connection with or in relation to the Restructuring.

 

“Seller Fundamental Representations” means representations or warranties contained in Article II but excluding those contained in Sections 2.7 (Compliance with Laws), and 2.9 (Brokerage).

 

“Share Capital” means (i) in the case of a corporation, any and all share capital, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of share capital, (iii) in the case of a partnership or limited liability company, any and all partnership or membership interests (whether general or limited), (iv) in any case, any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, and (v) in any case, any right to acquire any of the foregoing.

 

“Share Purchase Agreement” means the share purchase agreement by and among the Company, the Purchaser and Lefeng.com dated February 14, 2014.

 

“Shareholders Agreement” means the Third Amended and Restated Shareholders Agreement to be entered into by and among the Sellers, the Company, the Purchaser and other parties thereto on or before the Closing in substantially the form attached as Exhibit B hereto.

 

37

 

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, 50% or more of the total voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of members of the board of directors or similar body governing the affairs of such entity, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, 50% or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes hereof, a Person or Persons shall be deemed to have a 50% or more ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated 50% or more of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity.  With respect to the Company, the Seller or the Purchaser, a Subsidiary shall include any corporation, partnership, limited liability company, association or other business entity that the Company consolidates in its consolidated financial statements as a variable interest entity in accordance with US GAAP.

 

“Tax” and “Taxes” means, with respect to any Group Company, any (i) PRC (including any subdivision, municipality, province or locality of the PRC or any agency thereof) or other non-PRC taxes, charges, fees, levies, deficiencies or other similar assessments or liabilities (including, without limitation, income, receipts, ad valorem, premium, value added, excise, severance, property (whether real or personal property, or whether tangible or intangible property), sales, use, occupation, windfall profits, service, service use, stamp, transfer, transfer gains, licensing, withholding, employment, unemployment, payroll, share, customs duties, profits, license, lease, insurance, social security (or similar), capital, franchise, surplus, alternative or add-on minimum, estimated franchise or any other taxes, charges, fees, levies, deficiencies or other similar assessments or liabilities of any kind whatsoever), whether computed on a separate, consolidated, unitary or combined basis or in any other manner, and includes any interest, fines, penalties, assessments, deficiencies or additions thereto; (ii) liability for the payment of any amounts of the type described in clause (i) arising as a result of being (or ceasing to be) a member of any Affiliated Group (or being included (or required to be included) in any Tax Return relating thereto); and (iii) liability for the payment of any amounts of the type described in clause (i) as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other person. For the avoidance of doubt, “Tax” and “Taxes” includes any “Tax” and “Taxes” payable, suffered or incurred as a result of the “base cost”, “investment cost” or “tax basis” in any asset (including shares of any other interest in any Group Company) being reduced or suffering a reduction or being a smaller amount that would have otherwise been the case as a result of (x) the failure of any Seller to file any Tax Return or other report in respect of Taxes or (y) pay Tax on the disposal by it of any shares or any other interest in any person as contemplated by this Agreement, including in each case, for the avoidance of doubt, in connection with Circular 698.

 

“Tax Returns” means any payments, returns, renditions, declarations, reports, claims or filings for refund or payment, and any informational returns or statements or other documents filed or paid or required to be filed or paid with a taxing authority in connection with the determination, assessment or collection of Tax or the administration of any laws, regulations or administrative requirements relating to Taxes, including any schedule or attachment thereto, and including any amendment thereto (including for the avoidance of doubt in connection with Circular 698).

 

“Third Party” means any Person other than a party to this Agreement.

 

“Transaction Documents” means this Agreement, the Restated Articles, the Shareholders Agreement and any other agreement contemplated by this Agreement.

 

“United States” or “US” or “U.S.” means the United States of America.

 

38

 

“US GAAP” means the US generally accepted accounting principles.

 

11.2                              Cross-References.

 

The following terms are defined in the following Sections of this Agreement:

 

	
Term
    	
 
    	
Section
    
	
 
    	
 
    	
 
    
	
Acquisition Price
    	
 
    	
Section 1.2.1
    
	
Acquired Shares
    	
 
    	
Recitals
    
	
Affiliate Agreement
    	
 
    	
Section 3.22.1
    
	
Affiliate Transaction
    	
 
    	
Section 3.22.1
    
	
Agreement
    	
 
    	
Preface
    
	
Circular 698
    	
 
    	
Section 3.21.1
    
	
Circular 698   Returns
    	
 
    	
Section 9.3.1
    
	
Closing
    	
 
    	
Section 1.3
    
	
Closing Date
    	
 
    	
Section 1.3
    
	
Company
    	
 
    	
Preface
    
	
Company Affiliate
    	
 
    	
Section 3.22.1
    
	
Company Deductible
    	
 
    	
Section 5.2.3
    
	
Company Disclosure   Schedule
    	
 
    	
Article II
    
	
Company Shares
    	
 
    	
Recitals
    
	
Confidential   Information
    	
 
    	
Section 10.4.1
    
	
Disposal Proceeds
    	
 
    	
Section 5.2.1
    
	
FCPA
    	
 
    	
Section 2.7.1
    
	
Guarantor/Guarantors
    	
 
    	
Preface
    
	
HKIAC
    	
 
    	
Section 12.1
    
	
Improvements
    	
 
    	
Section 3.11.4
    
	
Indemnification Notice
    	
 
    	
Section 5.2.5
    
	
Indemnified Party
    	
 
    	
Section 5.2.5
    
	
Indemnifying Party
    	
 
    	
Section 5.2.5
    
	
Indemnitee
    	
 
    	
Section 5.2.1
    
	
Inventions Agreement
    	
 
    	
Section 3.19.4
    
	
Joint Defense Proceeding
    	
 
    	
Section 5.2.5
    
	
Key Employees
    	
 
    	
Section 3.19.1
    
	
Lease/Leases
    	
 
    	
Section 3.11.1
    
	
Leased Real Property
    	
 
    	
Section 3.11.1
    
	
Legal Proceedings
    	
 
    	
Section 2.6
    
	
Licenses
    	
 
    	
Section 3.15
    
	
Management Accounts
    	
 
    	
Section 3.5
    
	
Material Contracts
    	
 
    	
Section 3.13
    
	
Non-U.S. Official
    	
 
    	
Section 2.7.4
    
	
Ordinary Shares
    	
 
    	
Recitals
    
	
Owned Real Property
    	
 
    	
Section 3.11.1
    
	
Party/Parties
    	
 
    	
Preface
    
	
Payment
    	
 
    	
Section 3.21.4
    
	
Payment Due Date
    	
 
    	
Section 1.3.2
    
	
Personally   Identifiable Information
    	
 
    	
Section 3.26.1
    
	
Plan/Plans
    	
 
    	
Section 3.20
    
	
Pre-Closing Tax   Period
    	
 
    	
Section 5.2.1
    
	
Privacy Rights
    	
 
    	
Section 3.26.1
    
	
Purchaser
    	
 
    	
Preface
    
	
Real Property
    	
 
    	
Section 3.11.1
    
	
Representatives
    	
 
    	
Section 10.4.1
    
	
SAFE
    	
 
    	
Section 2.7.2
    

 

39

 

	
Term
    	
 
    	
Section
    
	
 
    	
 
    	
 
    
	
Seller/Sellers
    	
 
    	
Preface
    
	
Seller C698 Claim
    	
 
    	
Section 9.3.3
    
	
Seller Deductible
    	
 
    	
Section 5.2.3
    
	
Seller   Party/Seller Parties
    	
 
    	
Preface
    
	
Series A   Preferred Shares
    	
 
    	
Recitals
    
	
Series A-1   Preferred Shares
    	
 
    	
Recitals
    
	
Series B   Preferred Shares
    	
 
    	
Recitals
    
	
Subscribed Shares
    	
 
    	
Recitals
    
	
Subscription Price
    	
 
    	
Section 1.2.2
    
	
Survival Date
    	
 
    	
Section 5.2.2
    
	
Third Party Proceeding
    	
 
    	
Section 5.2.5
    
	
Total Purchase   Price
    	
 
    	
Section 1.2.2
    
	
Transfer Taxes
    	
 
    	
Section 9.2
    

 

ARTICLE XII

 

MISCELLANEOUS

 

12.1                              Arbitration.

 

All disputes, actions and proceedings arising out of or relating to this Agreement shall be referred to and finally resolved by arbitration in Hong Kong under the UNCITRAL Arbitration Rules in accordance with the Hong Kong International Arbitration Centre (“HKIAC”) Procedures for the Administration of International Arbitration in force at the date of this Agreement which rules are deemed to be incorporated by reference in this Section 12.1.  The place of the arbitration shall be Hong Kong and the language of the arbitration shall be English.  The appointing authority shall be the HKIAC.  There shall be one arbitrator agreed to by the Seller Parties and the Purchaser, and if they cannot so agree on such arbitrator within five Business Days of the commencement of the notice of arbitration proceedings, three arbitrators shall be appointed.  In such case, two of the arbitrators shall be nominated by the Seller Parties and the Purchaser, respectively, and if either of them shall abstain from nominating its arbitrator, the HKIAC shall appoint such arbitrator. The two arbitrators so chosen shall select a third arbitrator, provided that if such two arbitrators shall fail to choose a third arbitrator within thirty days after such two arbitrators have been selected, the HKIAC, upon the request of either the Seller Parties or the Purchaser, shall appoint a third arbitrator.  The third arbitrator shall be the presiding arbitrator.  The arbitration shall be conducted in private.  Each Party agrees that all documents and evidence submitted in the arbitration (including without limitation any statements of case and any interim or final award, as well as the fact that an arbitral award has been made) shall remain confidential both during and after any final award that is rendered unless the Parties otherwise agree in writing.  The arbitral award is final and binding upon all Parties.

 

12.2                              Consent to Amendments.

 

Except as otherwise expressly provided herein, the provisions of this Agreement may be amended only with the written consent of the Purchaser, the Seller Parties and the Company.  No course of dealing between or among any persons having any interest in this Agreement will be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions, whether or not similar, nor shall any waiver constitute a continuing waiver.

 

40

 

12.3                              Successors and Assigns.

 

Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the Parties shall bind and inure to the benefit of the successors and assigns of the respective Parties whether so expressed or not.  The Purchaser may assign its rights and obligations under this Agreement (including its right to indemnification) at its sole discretion, in whole or in part, to a wholly owned Subsidiary, to one or more of its Affiliates, to any subsequent purchaser of the Purchaser or any material portion of its assets (whether such sale is structured as a sale of shares, a sale of assets, a merger or otherwise) and, for collateral security purposes, to any lender providing financing to the Purchaser and all extensions, renewals, replacements, refinancings and refundings thereof in whole or in part.  Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by any of the Seller Parties or the Company, without the prior written consent of the Purchaser, or by the Purchaser (except as otherwise provided in this Section 12.3) without the prior written consent of the Seller Parties and the Company.

 

12.4                              Counterparts.

 

This Agreement may be executed simultaneously in counterparts (including by means of facsimiled signature pages), any one of which need not contain the signatures of more than one Party, but all such counterparts taken together shall constitute one and the same Agreement.

 

12.5                              Descriptive Headings; Interpretation.

 

The descriptive headings of this Agreement and the table of contents are inserted for convenience only and do not constitute a substantive part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.  The use of the word “including” in this Agreement shall be by way of example rather than by limitation.  The Parties intend that each representation, warranty and covenant contained herein shall have independent significance.  If any Party has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty or covenant.

 

12.6                              Governing law.

 

All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of New York (United States) without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.  In furtherance of the foregoing, the internal law of the State of New York shall control the interpretation and construction of this Agreement (and all schedules and exhibits hereto), even though under State of New York’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would otherwise apply.

 

12.7                              Notices.

 

All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when (i) delivered personally to the recipient, (ii) one day after being sent to the recipient by reputable overnight courier service (charges prepaid), five days after being mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid, or (iv) sent by facsimile to the recipient if sent before 5:00 p.m. Hong Kong time on a Business Day.  Such notices, demands and other communications shall be sent to the Purchaser, the Seller Parties and the Company at the addresses indicated below or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party:

 

41

 

To the Purchaser:

 

Vipshop Holdings Limited

No. 20 Huahai Street,

Liwan District

Guangzhou 510370

PRC

Facsimile: +86 (20) 2233-0111

Attention: Mr. Donghao Yang

 

with copies (which shall not constitute notice) to:

 

Kirkland & Ellis 
 26/F Gloucester Tower, The Landmark
 15 Queen’s Road Central, Central
 Hong Kong
 Facsimile No.:  +852-3761-3301
 Attn:                    David Zhang/Jesse Sheley/Frank Sun

 

To any Seller:

 

At the address as indicated opposite such Seller’s name on Exhibit A hereto

 

To Ms. Yuan Li:

 

CN13, Legend Town

NO.1, Ba Li Zhuang Dong Li, Chaoyang District

Beijing, 100025, PRC

Facsimile: 86 (10)-5218-6104

Attention: Ms. Yuan Li

 

To the Company:

 

CN13, Legend Town

NO.1, Ba Li Zhuang Dong Li, Chaoyang District

Beijing, 100025, PRC

Facsimile: 86 (10)-5218-6104

Attention: Mr. Yu Zhihui

 

12.8                              No Strict Construction.

 

The Parties have participated jointly in the negotiation and drafting of this Agreement and the other agreements contemplated hereby.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.

 

12.9                              Entire Agreement.

 

This Agreement and the agreements and documents referred to herein contain the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersede any prior understanding, agreements or representations by or between the Parties, written or oral, which may relate to the subject matter hereof in any way.

 

42

 

12.10                       Severability.

 

Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable laws, but if any provision of this Agreement or the application of any such provision to any Person or circumstance is held to be invalid, illegal or unenforceable in any respect under any applicable law in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

12.11                       No Third-Party Beneficiaries.

 

This Agreement is for the sole benefit of the Parties, the Indemnitees and their permitted successors and assigns and nothing herein expressed or implied shall give or be construed to give any Person, other than the Parties, the Indemnitees and such permitted successors and assigns, any legal or equitable rights hereunder.

 

12.12                       Schedules.

 

Nothing in the Company Disclosure Schedule shall be adequate to disclose an exception to a representation or warranty made in this Agreement unless such schedule identifies the exception with particularity and describes the relevant facts in reasonable detail.  Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be adequate to disclose an exception to a representation or warranty made in this Agreement, unless the representation or warranty has to do with the existence of the document or such other item itself.  No exceptions to any representations or warranties disclosed in the corresponding section of the Company Disclosure Schedule shall constitute an exception to any other representations or warranties made in this Agreement unless a specific cross-reference is made therein to such other representations or warranties or it is reasonably apparent that such exception applies to such other representations or warranties. All schedules and exhibits attached hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if fully set forth herein.

 

12.13                       Guarantee.

 

12.13.1                                     Each of Chic Group Limited and the Guarantor (the “Guaranteeing Seller Party”) hereby unconditionally and irrevocably guarantees to the Purchaser the performance of all the obligations of each other Guaranteeing Seller Party under and in accordance with this Agreement, and agrees, on demand and without any other notice whatsoever, to perform or cause to be performed all the obligations of such other Guaranteeing Seller Party hereunder, and it shall not be necessary for the Purchaser, in order to enforce such performance by the Guaranteeing Seller Party, first to institute suit or pursue or exhaust any rights or remedies against any other Guaranteeing Seller Party or others liable for the performance of any such obligation, or to join any other Guaranteeing Seller Party in any action to enforce the Guaranteeing Seller Party’s obligations hereunder, or to resort to any other means of obtaining performance from the Guaranteeing Seller Party.

 

12.13.2                                     Each Guaranteeing Seller Party hereby waives all defenses based upon suretyship or impairment of collateral, together with any defenses that it may have or assert with respect to the applicable guaranteed obligations (other than actual performance), including, without limitation, discharge in bankruptcy, failure of consideration, breach of warranty, statute of frauds, statute of limitations, accord and satisfaction, release, usury, lack of legal capacity, delay or lack of diligence.

 

*  *  *  *  *

 

43

 

IN WITNESS WHEREOF, the parties hereto have executed this Share Purchase and Subscription Agreement on the date first written above.

 

	
 
    	
THE PURCHASER:
    
	
 
    	
 
    
	
 
    	
VIPSHOP HOLDINGS LIMITED
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Shen Ya
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Shen Ya
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
CEO and Director
    

 

 

	
 
    	
THE SELLERS:
    
	
 
    	
 
    
	
 
    	
CHIC GROUP LIMITED
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Li Yuan
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Li Yuan
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Director
    

 

 

	
 
    	
SEQUOIA   CAPITAL CHINA II, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kok Wai Yee
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
KOK WAI YEE
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Authorized Signatory
    

 

 

	
 
    	
SEQUOIA   CAPITAL CHINA PARTNERS FUND II, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kok Wai Yee
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
KOK WAI YEE
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Authorized Signatory
    

 

Signature Page to Share Purchase and Subscription Agreement

 

 

	
 
    	
SEQUOIA   CAPITAL CHINA PRINCIPALS FUND II L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kok Wai Yee
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
KOK WAI YEE
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Authorized Signatory
    

 

 

	
 
    	
CHINA   BROAD CAPITAL PARTNERS II, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/. Authorized Signatory
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

	
 
    	
CICC PRINCIPAL INVESTMENT LIMITED.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Shirley Shiyou CHEN
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Shirley Shiyou CHEN
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Director
    

 

 

	
 
    	
HUAXING   CAPITAL PARTNERS, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Bao Fan
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Bao Fan
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Managing Director
    

 

 

	
 
    	
THE GUARANTOR:
    
	
 
    	
 
    
	
 
    	
MS. YUAN LI
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Li Yuan
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Li Yuan
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    

 

Signature Page to Share Purchase and Subscription Agreement

 

 

	
 
    	
THE COMPANY:
    
	
 
    	
 
    
	
 
    	
OVATION ENTERTAINMENT LIMITED
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Li Jing
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Li Jing
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Director
    

 

Signature Page to Share Purchase and Subscription Agreement

 

 

Exhibit A
  Schedule of Acquired Shares

 

	
Name of Seller
    	
 
    	
Type of Acquired
   Shares
    	
 
    	
Number of
   Acquired Shares
    	
 
    	
Address of Seller
    
	
Chic Group Limited
    	
 
    	
Ordinary Share
    	
 
    	
4,250,680
    	
 
    	
CN13, Legend Town

NO.1, Ba Li Zhuang Dong Li, Chaoyang

District

Beijing, 100025, PRC

Facsimile: 86 (10)-5218-6104

Attention: Ms. Yuan Li
    
	
Sequoia Capital   China II, L.P.
    	
 
    	
Ordinary Share
    	
 
    	
210,042
    	
 
    	
Cricket Square,   Hutchins Dr.

P.O. Box   2681, Grand Cayman KY1-1111,

CAYMAN ISLANDS

Attn: Neil Shen
    
	
Sequoia Capital   China Partners Fund II, L.P.
    	
 
    	
Ordinary Share
    	
 
    	
5,242
    	
 
    	
Cricket Square,   Hutchins Dr.

P.O. Box 2681,   Grand Cayman KY1-1111

CAYMAN ISLANDS

Attn: Neil Shen
    
	
Sequoia Capital   China Principals Fund II L.P.
    	
 
    	
Ordinary Share
    	
 
    	
35,279
    	
 
    	
Cricket Square,   Hutchins Dr.

P.O. Box   2681, Grand Cayman KY1-1111

CAYMAN ISLANDS

Attn: Neil Shen

 

With a copy to:

 

Attn: Neil Shen

Address: 2408, Air   China Plaza 36 Xiao

Yun Road, Chaoyang   District, Beijing

100027, China

Fax: 86 10 8447 5669
    
	
China Broad   Capital Partners II, L.P.
    	
 
    	
Ordinary Share
    	
 
    	
52,435
    	
 
    	
Unit 906, Level 9,    Cyberport 2, 100

Cyberport Road,   Hong Kong

Attention: Jiang   Jian
    
	
CICC Principal   Investment Limited.
    	
 
    	
Ordinary Share
    	
 
    	
80,400
    	
 
    	
Attention: Gu Rui

Address: 28/F,   China World Tower 2, 1

Jian Guo Men Wai   Avenue, Beijing

100004, P.R. China

Fax: 86-10 6505   3796
    
	
HUAXING CAPITAL   PARTNERS, L.P.
    	
 
    	
Ordinary Share
    	
 
    	
6,991
    	
 
    	
21st Floor, Tower   C Central International

Trade Center, 6   Jianguomenwai Avenue

Beijing 100022,   China

 

Attention: Zhou   Xiang

Fax: 010 85679989
    
	
Total
    	
 
    	
-
    	
 
    	
4,641,069
    	
 
    	
-
    

 

 

Exhibit B
  Form of Shareholders Agreement

 

 

Exhibit C
  Form of Restated Articles

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