AGREEMENT AND PLAN OF MERGER among TECH FULL ELECTRIC COMPANY LIMITED, TECH FULL ELECTRIC ACQUISITION, INC. and HARBIN ELECTRIC, INC. Dated as of June 19, 2011 TABLE OF CONTENTS

 

Section 4.15           Voting Support Agreement.  Concurrently with the execution and delivery of this Agreement, Parent has delivered to the Company a true, complete and correct copy of a voting support agreement (the “Voting Support Agreement”), to be executed concurrently herewith by the Company and the other parties thereto, pursuant to which all Persons contributing shares pursuant to the Contribution Agreement have agreed, among other things, to vote all Shares owned by them at the time of the Company Stockholders’ Meeting in favor of the Merger.  The Voting Support Agreement shall be in full force and effect as of the date of this Agreement and is and shall remain a legal, valid and binding obligation of Parent and the other parties thereto for so long as it is in full force and effect.  The Voting Support Agreement has not been nor will it be amended or modified, except as permitted thereunder to allow Affiliates of Parent who initially acquire Shares subsequent to the date hereof to execute joinders to the Voting Support Agreement.

 

Section 4.16           No Other Agreements.  As of the date of this Agreement, other than the Contribution Agreement, the Guarantee, the Voting Support Agreement and the 2011 Warrant Agreement, there are no oral or written agreements or undertakings (a) between Holdco, Parent, Merger Sub or any of their Affiliates (excluding the Company and its Subsidiaries), on the one hand, and any of the Company’s or its Subsidiaries’ directors, officers, employees, or stockholders, on the other hand, that relate in any way to the transactions contemplated hereby, or (b) pursuant to which any stockholder of the Company would be entitled to receive consideration of a different form or amount than the Merger Consideration.

 

Section 4.17           Nevada Takeover Statutes.  Assuming the representations in Sections 3.2(b) and 3.3(a) are true and correct, neither Parent nor Merger Sub has any reason to believe that any of the requirements or restrictions of the Nevada Takeover Laws would apply to prevent the consummation of any of the transactions contemplated hereby, including the Merger.

 

Section 4.18           Non-Reliance on Company Estimates.  The Company has made available to Parent and Merger Sub, and may continue to make available, certain estimates, projections, forecasts, plans and budgets for the business of the Company and its Subsidiaries.  Each of Parent and Merger Sub acknowledges that these estimates, projections, forecasts, plans and budgets and the assumptions on which they are based were prepared for specific purposes and may vary significantly from each other.  Further, each of Parent and Merger Sub acknowledges that there are uncertainties inherent in attempting to make such estimates, projections, forecasts, plans and budgets, that Parent and Merger Sub are taking full responsibility for making their own evaluation of the adequacy and accuracy of all estimates, projections, forecasts, plans and budgets so furnished to them (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans and budgets), and that neither Parent nor Merger Sub is relying on any estimates, projections, forecasts, plans or budgets furnished by the Company, its Subsidiaries or their respective Affiliates and Representatives, and, absent fraud or willful misconduct on the part of the Company, neither Parent nor Merger Sub shall, and shall cause its Affiliates and their respective Representatives not to, hold any such Person liable with respect thereto.

 

Section 4.19           No Other Representations or Warranties.  Except for the representations and warranties contained in this Article IV, the Company acknowledges that none of Parent, Merger Sub or any other Person on behalf of Parent or Merger Sub makes any express or implied representation or warranty to the Company.

 

 

Section 5.1           Conduct of Business.

 

(a)          The Company covenants and agrees that, during the period from the date hereof until the Effective Time, except (i) as contemplated or permitted by this Agreement, (ii) as disclosed in Section 5.1 of the Company Disclosure Letter, (iii) as required by applicable Law, or (iv) unless Parent shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned, or delayed), the Company shall, and shall cause each of its Subsidiaries to use reasonable best efforts to conduct its business in the ordinary course of business, to preserve substantially intact its business organization and to preserve its present relationships with customers, suppliers and other Persons with which it has material business relations; provided, however, that no action by the Company or its Subsidiaries with respect to matters specifically addressed by any provision of Section 5.1(b) shall be deemed a breach of this sentence unless such action constitutes a breach of such provision of Section 5.1(b).

 

(b)          Between the date of this Agreement and the Effective Time, except (w) as contemplated or permitted by this Agreement, (x) as disclosed in Section 5.1 of the Company Disclosure Letter, (y) as required by applicable Law, or (z) unless Parent shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned, or delayed), neither the Company nor any of its Subsidiaries shall:

 

(i)             amend or otherwise change its articles of incorporation or bylaws or any similar governing instruments;

 

(ii)             issue, deliver, sell, pledge, authorize, dispose of or encumber any shares of its capital stock, or grant to any Person any right to acquire any shares of its capital stock, except (A) pursuant to the exercise of Company Stock Options, Company Warrants or settlement of other awards outstanding as of the date hereof (or permitted hereunder to be granted after the date hereof) and in accordance with the terms of such instruments, (B) issuances in accordance with the Company Stock Plans, or (C) the grant of Company Stock Options (and issuances of Shares pursuant thereto) made in the ordinary course of business consistent with past practice;

 

(iii)           declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock (except for any dividend or distribution by a Subsidiary of the Company to the Company or to other Subsidiaries);

 

(iv)           adjust, split, combine, redeem, repurchase or otherwise acquire any shares of capital stock of the Company (except in connection with cashless exercises or similar transactions pursuant to the exercise of Company Stock Options, Company Warrants or settlement (including settlement of tax withholding obligations) of other awards or obligations outstanding as of the date hereof or permitted to be granted after the date hereof), or directly or indirectly reclassify, combine, split, subdivide, repurchase, or otherwise amend the terms of its capital stock;

 

(v)           (A) acquire (whether by merger, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or division thereof or any assets, in each case, which is or are material to the Company and its Subsidiaries taken as a whole, other than purchases of inventory and other assets in the ordinary course of business consistent with past practice or pursuant to existing agreements; or (B) sell, transfer, mortgage, encumber, or otherwise dispose of (whether by merger, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or division thereof or any assets, in each case, which is or are material to the Company and its Subsidiaries taken as a whole, other than sales or dispositions of inventory and other assets in the ordinary course of business consistent with past practice or pursuant to existing agreements;

 

(vi)           other than in the ordinary course of business consistent with past practice, enter into, materially amend or terminate any Material Contract;

 

(vii)          commit to any material new capital expenditures which are, in the aggregate, in excess of the Company’s capital expenditure budget set forth on Section 5.1(b)(vii) of the Company Disclosure Letter;

 

(viii)         (A) make any loans, advances or capital contributions to, or investments in, any other Person (other than a Subsidiary of the Company), (B) incur any indebtedness for borrowed money or issue any debt securities, or (C) assume, guarantee, endorse or otherwise become liable or responsible for the indebtedness or other obligations of another Person (other than a guarantee by the Company on behalf of its Subsidiaries), in each case, (1) in excess of $250,000 individually or $1,000,000 in the aggregate, or (2) other than in the ordinary course of business consistent with past practice;

 

(ix)            other than in the ordinary course of business consistent with past practice, (A) materially increase the compensation or benefits of any director or executive officer of the Company or any of its Subsidiaries, (B) amend or adopt any Plan (other than any such adoption or amendment that does not materially increase the cost to the Company or any of its Subsidiaries of maintaining the applicable Plan) with or for the benefit or its employees or directors, (C) accelerate the vesting of, or the lapsing of restrictions with respect to, any stock options or other stock-based compensation, or (D) enter into any employment agreement with any director or officer of the Company or its Subsidiaries;

 

(x)             implement or adopt any material change in its methods of accounting, except as may be appropriate to conform to changes in Law or regulatory accounting rules or GAAP or regulatory requirements with respect thereto;

 

(xi)           compromise, settle or agree to settle any Action (including any Action relating to this Agreement or the transactions contemplated hereby), or consent to the same, other than compromises, settlements or agreements in the ordinary course of business consistent with past practice that involve only the payment of money damages (A) not in excess of $250,000 individually or $1,000,000 in the aggregate, or (B) consistent with the reserves reflected in the Company’s balance sheet at December 31, 2010; or

 

(xii)           agree to take any of the actions described in Sections 5.1(b)(i) through 5.1(b)(xi).

 

Section 5.2           Conduct of Business of Parent and Merger Sub Pending the Merger.  From and after the date hereof and prior to the Effective Time, and except as may otherwise be required by applicable Law, each of Parent and Merger Sub agrees that it shall not, directly or indirectly, take any action which is intended to or which would reasonably be expected to (a) materially adversely affect or materially delay the ability of Parent or Merger Sub to obtain any approvals of any Governmental Entity necessary for the consummation of the transactions contemplated hereby, (b) prevent it from performing its covenants or agreements, (c) cause its representations and warranties set forth in Article IV to be untrue in any material respect, or (d) otherwise, individually or in the aggregate, have a Parent Material Adverse Effect.

 

Section 5.3           No Control of Other Party’s Business.  Nothing contained in this Agreement shall give Parent, directly or indirectly, the right to control or direct the Company’s or its Subsidiaries’ operations prior to the Effective Time, and nothing contained in this Agreement shall give the Company, directly or indirectly, the right to control or direct Parent’s or its Subsidiaries’ operations prior to the Effective Time.  Prior to the Effective Time, each of the Company and Parent shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries’ respective operations.

 

Section 5.4           Acquisition Proposals.

 

(a)           Except as set forth in this Section 5.4, from and after the date of this Agreement, the Company agrees that neither it, nor any of its Subsidiaries shall, and that it shall not authorize or knowingly permit its and their respective officers, directors, employees, agents and representatives, including any investment banker, attorney or accountant (collectively, “Representatives”) retained by the Company or any of its Subsidiaries to, directly or indirectly, (i) initiate, solicit, endorse or knowingly encourage, induce, or facilitate (including by providing information) any inquiries, proposals or offers or afford access to the employees, business, properties, assets, books, or records of the Company or any of its Subsidiaries with respect to, or the making or completion of, an Acquisition Proposal, (ii) engage, continue, or otherwise participate in any negotiations or discussions (other than to state that they are not permitted to have discussions) concerning, or provide or cause to be provided any non-public information or data relating to the Company or any of its Subsidiaries in connection with, an Acquisition Proposal, (iii) approve, endorse or recommend any Acquisition Proposal, (iv) approve, endorse or recommend, or execute or enter into any letter of intent, agreement in principle, merger agreement, acquisition agreement or other similar agreement relating to an Acquisition Proposal or (v) resolve or agree to take any of the actions described in clauses (i), (ii), (iii) or (iv); provided, however, it is understood and agreed that any determination or action by the Company, the Special Committee, or the Company Board permitted under Section 5.4(b) or (c) or Section 7.1(c)(ii) shall not be deemed to be a breach of this Section 5.4(a).  Upon the execution of this Agreement, the Company agrees, and the Special Committee will direct, that the Company and its Subsidiaries and its and their Representatives will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Persons conducted heretofore with respect to any Acquisition Proposal and use reasonable best efforts to request the prompt return or destruction of all copies of confidential information previously furnished to any such Person, subject to the terms of the confidentiality agreements entered into by such Persons, on the one hand, and the Company, on the other hand.

 

(b)           Notwithstanding anything to the contrary in Section 5.4(a), at any time after the date of this Agreement and prior to obtaining the Company Stockholder Approval, the Company may, in response to a bona fide written Acquisition Proposal that did not result from a breach of Section 5.4(a) and that the Special Committee, which shall have full, sole, and exclusive authority to make such decision determines, in its good faith judgment, after consultation with its outside legal counsel and financial advisors, constitutes or may reasonably be expected to lead to a Superior Proposal, (i) furnish information with respect to the Company and its Subsidiaries to the Person making such Acquisition Proposal pursuant to a customary confidentiality agreement on terms, including with respect to the “standstill” provisions thereof, at least as restrictive as those contained in the Confidentiality Agreement (except for such changes necessary in order for the Company to be able to comply with its obligations under this Agreement), and (ii) participate, through the Special Committee, in discussions or negotiations with such Person and its Representatives regarding such Acquisition Proposal; provided, however, that the Company shall promptly (and in any event, within 48 hours) provide or make available to Parent any material non-public information concerning the Company or any of its Subsidiaries that is provided to the Person making such Acquisition Proposal or its Representatives which was not previously or concurrently provided or made available to Parent; provided, further, however, that any definitive merger or similar agreement with respect to any Acquisition Proposal shall be subject to approval by the Company Board.

 

(c)           In all cases, subject to the permitted actions contemplated by Section 7.1(c)(ii) and the next sentence of this Section 5.4(c), neither the Company Board nor any committee thereof shall (i) withdraw or modify in a manner adverse to Parent or Merger Sub, or publicly propose to withdraw or modify in a manner adverse to Parent or Merger Sub, its recommendation of this Agreement or the Merger, (ii) adopt, approve or recommend, or publicly propose to adopt, approve or recommend, any Acquisition Proposal (any of such actions described in clauses (i) or (ii) being referred to as an “Adverse Recommendation Change”) or (iii) adopt, approve or recommend, or allow the Company or any of its Subsidiaries to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement or other similar agreement constituting or related to, or that would reasonably be expected to result in, any Acquisition Proposal (other than a confidentiality agreement in accordance with Section 5.4(b)).  Notwithstanding anything to the contrary in this Section 5.4, if, prior to obtaining the Company Stockholder Approval, the Special Committee, which shall have full, sole, and exclusive authority to make such decision determines in good faith, after consultation with its outside legal counsel and financial advisors, that the failure to do so would be inconsistent with the discharge or exercise of its fiduciary duties under applicable Law, may recommend an Adverse Recommendation Change to the Company Board, which, upon receiving such recommendation from the Special Committee, may effect an Adverse Recommendation Change in accordance with this Section 5.4(c). The Company Board shall not be entitled to effect an Adverse Recommendation Change or terminate this Agreement as permitted under Section 7.1(c)(ii) unless (i) the Company has provided written notice (a "Notice of Recommendation Change") at least three Business Days in advance to Parent and Merger Sub advising Parent that the Company Board has determined in good faith, after consultation with its outside legal counsel and financial advisors, that the failure to make an Adverse Recommendation Change or to terminate this Agreement, as applicable, would be inconsistent with the discharge or exercise of its fiduciary duties under applicable Law.  In the event that the basis of such proposed action by the Company is in connection with a Superior Proposal, the Notice of Recommendation Change shall include the terms and conditions of such Superior Proposal (including the identity of the third party making the Superior Proposal and any financing materials related thereto, if any); (ii) during the three Business Day period following receipt by Parent and Merger Sub of the Notice of Recommendation Change, the Company shall, and shall cause its Representatives to, negotiate with Parent and Merger Sub in good faith (to the extent Parent and Merger Sub desire to negotiate) to make such adjustments in the terms and conditions of this Agreement and the Financing Documents so that such Superior Proposal ceases to constitute a Superior Proposal; and (iii) following the end of the three Business Day period, the Company Board and the Special Committee shall have determined in good faith after consultation with their outside legal counsel, taking into account any changes to this Agreement and the Financing Documents proposed in writing by Parent and Merger Sub in response to the Notice of Recommendation Change or otherwise, that the Superior Proposal giving rise to the Notice of Recommendation Change continues to constitute a Superior Proposal. Any material amendment to the financial terms or any other material amendment of such Superior Proposal shall require a new Notice of Recommendation Change and the Company shall be required to comply again with the requirements of this Section 5.4(c).

 

(d)           The Company promptly (and in any event within 48 hours of knowledge thereof) shall notify Parent in writing of (i) any Acquisition Proposal, (ii) any request for non-public information relating to the Company or its Subsidiaries, other than requests for information not reasonably expected to be related to an Acquisition Proposal, and (iii) any inquiry or request for discussion or negotiation regarding an Acquisition Proposal, including in each case the identity of the Person making any such Acquisition Proposal, inquiry or request and the material terms of any such Acquisition Proposal, inquiry or request; provided, in each case, that such Acquisition Proposal, request or inquiry is received by the Special Committee, its agents or its advisors. The Company shall (x) keep Parent informed in all material respects of the status and details (including material amendments to the terms thereof) of such Acquisition Proposal, inquiry or request and (y) provide to Parent as soon as practicable after receipt thereof copies of all material written correspondence relating to such Acquisition Proposal or request exchanged between the Company or any of its Subsidiaries, on the one hand, and the Person making such Acquisition Proposal or request, on the other hand, concerning the material terms and conditions thereof; provided that this obligation shall be excused if and to the extent that the Special Committee, its agents and its advisors shall be unaware of such information and documents.

 

(e)           Nothing set forth in this Agreement shall prevent the Company Board, after consultation with the Special Committee, or the Special Committee, after providing prior notice to the Company Board, from (i) taking and disclosing to the Company’s stockholders a position contemplated by Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation M-A promulgated under the Exchange Act (or any similar communication to stockholders in connection with the making or amendment of a tender offer or exchange offer), or from (ii) making any required disclosure to the Company’s stockholders if, in the good faith judgment of the Company Board or Special Committee, as applicable, after consultation with their respective outside counsels, failure to disclose such information would reasonably be expected to be inconsistent with the Company Board’s or Special Committee’s, as applicable, fiduciary duties or violate their respective obligations under applicable Law and none of such actions or communications shall constitute an Adverse Recommendation Change.

 

Section 5.5           Preparation of Proxy Statement and Schedule 13E; Stockholders’ Meeting.

 

(a)           As promptly as reasonably practicable following the date of this Agreement, the Company shall, with the assistance of Parent, prepare and file the Proxy Statement with the SEC.  Concurrently with filing the Proxy Statement with the SEC, the Company and Parent shall prepare and file the Schedule 13E with the SEC.  Parent, Merger Sub and the Company will cooperate with each other in the preparation of the Proxy Statement and the Schedule 13E.  Without limiting the generality of the foregoing, each of Parent and Merger Sub will furnish to the Company in writing the information relating to it required by the Exchange Act and the rules and regulations promulgated thereunder to be set forth in each of the Proxy Statement and the Schedule 13E.  Each of Parent, Merger Sub, and the Company shall use all commercially reasonable efforts to resolve all SEC comments with respect to the Proxy Statement and the Schedule 13E as promptly as practicable after receipt thereof.  Each of Parent, Merger Sub and the Company agree to correct any information provided by it for use in either the Proxy Statement or the Schedule 13E which shall have become false or misleading.  Each of Parent, Merger Sub, and the Company shall as soon as reasonably practicable notify the others of the receipt of any comments from the SEC with respect to either the Proxy Statement or the Schedule 13E and any request by the SEC for any amendment to either the Proxy Statement or the Schedule 13E or for additional information with respect to either the Proxy Statement or the Schedule 13E and provide Parent with copies of all correspondence between the Company and the SEC with respect to the Proxy Statement and Schedule 13E.  Prior to filing or mailing (as applicable) the Proxy Statement and Schedule 13E (or any amendment of supplement thereto), or responding to any comments from the SEC with respect thereto, Parent and its counsel shall be given seven Business Days to review and comment on the Proxy Statement, Schedule 13E and any proposed responses to any SEC comments or communications, and the Company shall consider all additions, deletions or changes suggested thereto by Parent and its counsel in good faith.

 

(b)           As promptly as reasonably practicable following the clearance of the Proxy Statement and Schedule 13E by the SEC, the Company, acting through the Company Board, shall (i) take all action necessary to establish a record date, duly call, give notice of, convene and hold a meeting of its stockholders for the purpose of obtaining the Company Stockholder Approval (the “Company Stockholders’ Meeting”), and mail the Proxy Statement to all of the Company’s stockholders as of the record date established for the Company Stockholders’ Meeting, and (ii) except to the extent that an Adverse Recommendation Change shall have been effected in accordance with Section 5.4(c), include in the Proxy Statement the recommendation of the Company Board that the stockholders of the Company vote in favor of the approval of this Agreement and the Merger; provided, however, that the Company shall be permitted to delay, postpone, or cancel the Company Stockholders’ Meeting (but not beyond the Termination Date) if in the good faith judgment of the Company Board, acting upon the recommendation of the Special Committee (after consultation with their respective legal counsels), a failure to effect such delay, postponement, or cancellation would be inconsistent with the discharge or exercise of their respective fiduciary duties under applicable Law.

 

Section 5.6           Access to Information; Confidentiality.

 

(a)           From the date hereof to the Effective Time or the earlier termination of this Agreement, upon reasonable prior written notice, the Company shall, and shall cause its Subsidiaries, officers, directors and Representatives to, afford to Parent reasonable access during normal business hours, consistent with applicable Law, to its officers, key management employees, properties, offices, other facilities and books and records, and shall furnish Parent with all financial, operating and other data and information as Parent shall reasonably request in writing (it being agreed, however, that the foregoing shall not permit Parent or its officers, employees or Representatives to conduct any environmental testing or sampling or other invasive testing) and, during such period, each of Parent and the Company shall, and the Company shall cause its Significant Subsidiaries to, make available to the other party, to the extent not publicly available, a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of applicable United States federal and state securities Laws, and Cayman, PRC, and Hong Kong securities Laws.  Notwithstanding the foregoing, any such investigation or consultation shall be conducted in such a manner as not to interfere unreasonably with the business or operations of the Company or its Subsidiaries or otherwise result in any significant interference with the prompt and timely discharge by the employees of the Company or its Subsidiaries of their normal duties.  Neither the Company nor any of its Subsidiaries shall be required to provide access to or to disclose information where such access or disclosure would (i) breach any agreement with any third party, (ii) constitute a waiver of or jeopardize the attorney-client or other privilege held by the Company, or (iii) otherwise violate any applicable Law.

 

(b)           Each of Parent and Merger Sub will hold and treat and will cause its Representatives to hold and treat in confidence all documents and information concerning the Company and its Subsidiaries furnished to Parent or Merger Sub in connection with the transactions contemplated by this Agreement in accordance with the non-disclosure letter agreement, dated January 9, 2011 as amended February 22, 2011, between Abax Global Capital (Hong Kong) Limited and the Company, (the “Confidentiality Agreement”), which Confidentiality Agreement shall remain in full force and effect in accordance with its terms, and which Parent and Merger Sub agree would be binding upon them, the terms of this Section 5.6(b) notwithstanding.

 

Section 5.7           Further Action; Efforts.

 

(a)           Upon the terms and subject to the conditions of this Agreement, each of the parties shall use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and cooperate with each other in order to do, all things necessary, proper or advisable under applicable Law to consummate the transactions contemplated by this Agreement at the earliest practicable date, including:  (i) causing the preparation and filing of all forms, registrations and notices required to be filed to consummate the Merger and the taking of such actions as are necessary to obtain any requisite consent under any applicable Law; (ii) defending all Actions by or before any Governmental Entity challenging this Agreement or the consummation of the Merger; and (iii) resolving any objection asserted with respect to the transactions contemplated under this Agreement under any applicable Law raised by any Governmental Entity and preventing the entry of any court order, and vacating, lifting, reversing, or overturning any injunction, decree, ruling, order or other action of any Governmental Entity that would prevent, prohibit, restrict or delay the consummation of the transactions contemplated by this Agreement.

 

(b)           If a party receives a request for information or documentary material from any Governmental Entity with respect to this Agreement or any of the transactions contemplated hereby, then such party shall in good faith make, or cause to be made, as soon as reasonably practicable and after consultation with the other party, a response which is, at a minimum, in substantial compliance with such request.

 

(c)           The parties shall keep each other apprised of the status of matters relating to the completion of the transactions contemplated by this Agreement and work cooperatively in connection with obtaining the approvals of or clearances from each applicable Governmental Entity, including:

 

(i)             cooperating with each other in connection with filings required to be made by any party under applicable Law and liaising with each other in relation to each step of the procedure before the relevant Governmental Entities and as to the contents of all communications with such Governmental Entities.  In particular, to the extent permitted by Law or appropriate Governmental Entity, no party will make any notification in relation to the transactions contemplated hereunder without first providing the other party with a copy of such notification in draft form and giving such other party a reasonable opportunity to discuss its content before it is filed with the relevant Governmental Entities, and such first party shall consider and take account of all reasonable comments timely made by the other party in this respect;

 

(ii)            furnishing to the other party all information within its possession that is required for any application or other filing to be made by the other party pursuant to applicable Law in connection with the transactions contemplated by this Agreement;

 

(iii)           promptly notifying each other of any communications (and, unless precluded by Law, providing copies of any such communications that are in writing) from or with any Governmental Entity with respect to the transactions contemplated by this Agreement and ensuring to the extent permitted by Law or Governmental Entity that each of the parties is entitled to attend any meetings with or other appearances before any Governmental Entity with respect to the transactions contemplated by this Agreement; and

 

(iv)           without prejudice to any rights of the parties hereunder, consulting and cooperating in all respects with the other in defending all lawsuits and other proceedings by or before any Governmental Entity challenging this Agreement or the consummation of the transactions contemplated by this Agreement.

 

(d)           Notwithstanding the foregoing, commercially and/or competitively sensitive information and materials of a party will be provided to the other party on an outside counsel-only basis while, to the extent feasible, making a version in which the commercial and/or competitively sensitive information has been redacted available to the other party.

 

(e)           If (i) two full Business Days have elapsed since the Effective Time and (ii) Parent has not made the deposits called for by Section 2.3(a),  the parties agree they shall, at the Special Committee's request, take any and all steps as may be necessary or appropriate in order to unwind the effect of the filing of the Articles of Merger in order to place the parties, and their respective shareholders and owners, in the same positions they occupied prior to the filing of the Articles of Merger.

 

Section 5.8           Takeover Laws.  If any of the Nevada Takeover Laws is or becomes applicable to this Agreement, the Merger or any of the other transactions contemplated hereby, each of the Company and Parent and their respective boards of directors shall take such commercially reasonable actions as may be necessary to render such Nevada Takeover Law inapplicable to all of the foregoing or to ensure that the Merger and the other transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to eliminate or minimize the effect of such Nevada Takeover Laws on this Agreement, the Merger and the other transactions contemplated hereby.

 

Section 5.9           Notification of Certain Matters.  The Company and Parent shall promptly notify each other of (a) any notice or other communication received by such party from any Governmental Entity in connection with the Merger or the other transactions contemplated hereby or from any Person alleging that the consent of such Person is or may be required in connection with the Merger or the other transactions contemplated hereby, if the subject matter of such communication could be material to the Company, the Surviving Corporation or Parent, (b) any Action commenced or, to such party’s knowledge, threatened against, relating to or involving or otherwise affecting such party or any of its Subsidiaries which relate to the Merger or the other transactions contemplated hereby, or (c) the discovery of any fact or circumstance that, or the occurrence or non-occurrence of any event the occurrence or non-occurrence of which, would cause or result in any of the conditions to the Merger set forth in Article VI not being satisfied or satisfaction of those conditions being materially delayed in violation of any provision of this Agreement; provided, however, that the delivery of any notice pursuant to this Section 5.9 shall not (i) cure any breach of, or noncompliance with, any other provision of this Agreement, or (ii) limit the remedies available to the party receiving such notice; provided further, that failure to give prompt notice pursuant to clause (c) shall not constitute a failure of a condition to the Merger set forth in Article VI except to the extent that the underlying fact or circumstance not so notified would, standing alone, constitute such a failure.  The parties agree and acknowledge that the Company’s compliance or failure of compliance with this Section 5.9 shall not be taken into account for purposes of determining whether the condition referred to in Section 6.3(b) shall have been satisfied.

 

Section 5.10         Indemnification, Exculpation and Insurance.

 

(a)           Without limiting any additional rights that any employee may have under any agreement or Plan, from the Effective Time through the sixth anniversary of the date on which the Effective Time occurs, Parent shall, or shall cause the Surviving Corporation to, indemnify and hold harmless each present (as of the Effective Time) and former officer or director of the Company and its Subsidiaries (the “Indemnified Parties”), against all claims, losses, liabilities, damages, judgments, inquiries, fines and reasonable fees, costs and expenses, including reasonable attorneys’ fees and disbursements (collectively, “Costs”), incurred in connection with any Action, whether civil, criminal, administrative or investigative, arising out of or pertaining to (i) the fact that the Indemnified Party is or was an officer or director of the Company or any of its Subsidiaries, or (ii) matters existing or occurring at or prior to the Effective Time (including this Agreement and the transactions and actions contemplated hereby), whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted under applicable Law and the Company Charter and Company Bylaws as at the date hereof.  In the event of any such Action, (A) each Indemnified Party shall be entitled to advancement of expenses incurred in the defense of any Action from Parent or the Surviving Corporation to the fullest extent permitted under applicable Law and the Company Charter and Company Bylaws as at the date hereof within 10 Business Days of receipt by Parent or the Surviving Corporation from the Indemnified Party of a request therefor; provided, that any Person to whom expenses are advanced provides an unsecured undertaking, if and only to the extent required by the NRS, the Company Charter, the Company Bylaws, or any indemnification agreement in effect immediately prior to the Effective Time, to repay such advances if it is ultimately determined that such Person is not entitled to indemnification, (B) neither Parent nor the Surviving Corporation shall settle, compromise or consent to the entry of any judgment in any proceeding or threatened action, suit, proceeding, investigation or claim (and in which indemnification could be sought by such Indemnified Party hereunder), unless such settlement, compromise or consent includes an unconditional release of such Indemnified Party from all liability arising out of such action, suit, proceeding, investigation or claim and does not include an admission of fault or wrongdoing by any Indemnified Party or such Indemnified Party otherwise consents, and (C) the Surviving Corporation shall cooperate in the defense of any such matter.  Parent and the Surviving Corporation shall be jointly and severally liable for the obligation to provide indemnification to the Indemnified Parties.

 

(b)           Except as may be required by applicable Law, Parent and the Company agree that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time and rights to advancement of expenses relating thereto now existing in favor of any Indemnified Party as provided in the Company Charter or Company Bylaws (or comparable organizational documents) of the Company and its Subsidiaries or in any indemnification agreement between such Indemnified Party and the Company or any of its Subsidiaries shall survive the Merger and continue in full force and effect, and shall not be amended, repealed or otherwise modified in any manner that would adversely affect any right thereunder of any such Indemnified Party.

 

(c)           Prior to the Closing Date, Parent shall purchase for the benefit of the Company and the current and former officers and directors of the Company a fully prepaid, irrevocable, non-cancellable directors’ and officers’ liability insurance and fiduciary liability insurance “tail policy” with an expiration date not earlier than the date that is six years after the date of the Effective Time of at least the same coverage and amounts and containing terms and conditions that are not less advantageous in the aggregate than the Company’s current policies, with respect to matters arising on or before the Effective Time including the transactions contemplated hereby.  Parent shall not take any steps, nor shall it permit the Company to take any steps, to cause such “tail policy” to lapse or be terminated prior to its expiration date.

 

(d)           Notwithstanding anything herein to the contrary, if any Action (whether arising before, at or after the Effective Time) is instituted against any Indemnified Party on or prior to the sixth anniversary of the Effective Time, the provisions of this Section 5.10 shall continue in effect until the final disposition of such Action.

 

(e)           The indemnification provided for herein shall not be deemed exclusive of any other rights to which an Indemnified Party is entitled, whether pursuant to Law, Contract or otherwise.  The provisions of this Section 5.10 shall survive the consummation of the Merger and, notwithstanding any other provision of this Agreement that may be to the contrary, expressly are intended to benefit, and shall be enforceable by, each of the Indemnified Parties and their respective heirs and legal representatives.

 

(f)            In the event that the Surviving Corporation or Parent or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or a majority of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of the Surviving Corporation or Parent, as the case may be, shall succeed to the obligations set forth in this Section 5.10.

 

Section 5.11         Rule 16b-3.  Prior to the Effective Time, the Company shall be permitted to take such steps as may be reasonably necessary or advisable hereto to cause dispositions of Company equity securities (including derivative securities) pursuant to the transactions contemplated by this Agreement by each individual who is a director or officer of the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.

 

Section 5.12         Public Announcements.  Each of Parent and Merger Sub, on the one hand, and the Company, on the other hand, shall, to the extent reasonably practicable, consult with each other before issuing, and give each other a reasonable opportunity to review and comment upon, any press release or other public statements with respect to this Agreement, the Merger and the other transactions contemplated hereby and shall not issue any such press release or make any public announcement without the prior consent of the other party, which consent shall not be unreasonably withheld, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system.  Parent and the Company agree that the press release announcing the execution and delivery of this Agreement shall be a joint release of Parent and the Company.

 

Section 5.13         Obligations of Merger Sub.  Parent shall take all commercially reasonable actions necessary to cause Merger Sub and the Surviving Corporation to perform their respective obligations under this Agreement.

 

Section 5.14         Financing; Equity Rollover.

 

(a)           Prior to the Closing, the Company shall, and shall cause its Subsidiaries to, use reasonable best efforts to cause its and their respective Representatives to, at Parent’s sole expense, provide to Holdco, Parent and Merger Sub such cooperation reasonably requested by Parent that is necessary in connection with the Debt Financing (provided that such requested cooperation is consistent with applicable Law and does not unreasonably interfere with the operations of the Company and its Subsidiaries), including (i) participation in a reasonable number of meetings, presentations, and due diligence sessions; (ii) as promptly as reasonably practical, furnishing Holdco, Parent and, as applicable, the Bank Lender and lenders party to the Subordinated Financing Agreement with financial and other information regarding the Company and its Subsidiaries as may be reasonably requested by Parent; and (iii) using reasonable best efforts to obtain, at the expense of Parent, customary legal opinions and other documentation and items relating to the Debt Financing as reasonably requested by Parent and, if requested by Holdco, Parent or Merger Sub, to cooperate with and assist Holdco, Parent or Merger Sub, at the expense of Parent, in obtaining such documentation and items.  Neither the Company nor any of its Subsidiaries shall be required, under the provisions of this Section 5.14 or otherwise in connection with any Debt Financing (x) to pay any commitment or other similar fee prior to the Effective Time, (y) to incur any expense unless such expense is reimbursed by Parent promptly after incurrence thereof, or (z) to commit to take any action that is not contingent upon the Closing (including the entry into any agreement) or that would be effective prior to the Effective Time or that would otherwise subject it to actual or potential liability in connection with any Debt Financing.  Parent shall indemnify, defend, and hold harmless the Company, its Subsidiaries and their respective Representatives from and against any and all losses suffered or incurred by them in connection with (1) any action taken by them at the request of Holdco, Parent or Merger Sub pursuant to this Section 5.14 or in connection with the arrangement of any Debt Financing or (2) any information utilized in connection therewith (other than information provided by the Company or its Subsidiaries).  Nothing contained in this Section 5.14 or otherwise shall require the Company to be an issuer or other obligor with respect to any Debt Financing prior to the Effective Time.  All material, non-public information regarding the Company and its Subsidiaries provided to Holdco, Parent, Merger Sub or their respective Representatives pursuant to this Section 5.14 shall be kept confidential by them in accordance with the Confidentiality Agreement.

 

(b)           Holdco and Parent shall each use their respective reasonable best efforts to complete the Debt Financing and the Abax Equity Financing at Closing on the terms and conditions described in the Financing Documents and shall not agree to any amendment or modification to be made to, or any waiver of any provision or remedy under, the Financing Documents without the prior written consent of both the Special Committee and the Company Board if such amendments, modifications or waivers would or would reasonably be expected to (i) reduce the aggregate amount of the Debt Financing and the Abax Equity Financing below the amount required to consummate the Merger, (ii) impose new or additional conditions to the receipt of the Debt Financing or the Abax Equity Financing, (iii) prevent or materially delay the consummation of the transactions contemplated by this Agreement or (iv) adversely impact the ability of Holdco, Parent or Merger Sub to enforce their respective rights against the other parties to the Financing Documents; provided that, the foregoing notwithstanding, Holdco may amend the Subordinated Financing Agreement to add lenders or similar entities who had not executed the Subordinated Financing Agreement as of the date of this Agreement (each on a non-exclusive basis until the Closing Date and so long as any such amendment does not result in a release, or reduction, of any of the funding commitments of the lenders party to the Subordinated Financing Agreement as in effect on the date hereof).  In connection with the foregoing, Parent hereby represents and warrants that all material documentation required to be delivered to the Bank Lender, Abax Emerald Ltd. or the Abax Funds in order to satisfy the conditions to funding set forth in the Financing Documents to which each is party have been agreed as to form with the Bank Lender, Abax Emerald Ltd. or the Abax Funds, as the case may be.  In addition, Holdco and Parent shall each use their respective reasonable best efforts to (A) negotiate definitive agreements with respect to the Abax Equity Financing on the terms and conditions contained in the Abax Commitment Letter, or on other terms reasonably acceptable to Parent and Holdco and not in violation of this Section 5.14, and (B) satisfy on a timely basis all conditions applicable to the Debt Financing (x) in the case of the CDB Debt Financing, set forth in the Senior Financing Agreement, and (y) in the case of the Abax Debt Financing, set forth in the Subordinated Financing Agreement.  In the event that all conditions to funding under the Financing Documents (other than, with respect to the Debt Financing, the availability of equity financing) have been satisfied, Holdco and Parent shall each use their respective reasonable best efforts to cause the lenders and other Persons to fund the Debt Financing and Abax Equity Financing required to consummate the Merger and related transactions on the Closing Date (including taking enforcement actions to cause such lenders and other Persons to provide such financing).  In the event any portion of the Debt Financing or the Abax Equity Financing becomes unavailable on the terms and conditions contemplated in the Financing Documents, (1) Parent shall promptly notify the Company, and (2) Holdco and Parent shall each use their respective reasonable best efforts to arrange to obtain alternative financing from alternative sources on terms not materially less beneficial to Holdco, Parent and Merger Sub (as determined in the reasonable judgment of Holdco and/or Parent, as applicable), in an amount sufficient to consummate the Merger as promptly as possible, but in any event no later than the earlier of (1) 30 days after the originally contemplated Closing Date, or (2) the Termination Date.  Except as provided elsewhere in this Section 5.14, nothing contained in this Agreement shall prohibit Holdco, Parent or Merger Sub from entering into agreements relating to the Debt Financing, the Abax Equity Financing or the operation of Holdco, Parent, Merger Sub or, as of the Effective Time, the Surviving Corporation, including adding other equity providers or operating partners (so long as any such agreements or entering into such agreements would not reasonably be expected to materially impair or delay the Closing).

 

(c)           Holdco and Parent shall each use their respective reasonable best efforts to consummate the transactions contemplated by the Contribution Agreement immediately prior to the Closing on the terms and conditions described in the Contribution Agreement and shall not agree to any amendment or modification to be made to, or any waiver of any provision or remedy under, the Contribution Agreement that would reasonably be expected to (in the Special Committee’s good faith judgment) prevent, materially delay or materially impede the consummation of the transactions contemplated hereby.

 

Section 5.15         Delisting.  Parent shall cause the Company’s securities to be de-listed from NASDAQ and deregistered under the Exchange Act at or as soon as practicable following the Effective Time.

 

Section 5.16         Knowledge of Inaccuracies.  It is agreed that Parent shall not have any right to (a) terminate this Agreement under Section 7.1(d)(i) or (b) claim any damage or seek any other remedy at Law or in equity for any breach of or inaccuracy in any representation or warranty made by the Company in Article III to the extent both (i) Mr. Tianfu Yang and (ii) Abax Global Capital (Hong Kong) Limited or any of its Affiliates had actual knowledge of such breach of or inaccuracy in such representation or warranty as of the date hereof.

 

 

Section 6.1           Conditions to Each Party’s Obligation to Effect the Merger.  The obligation of each party to effect the Merger is subject to the satisfaction at or prior to the Effective Time of the following conditions:

 

(a)           Stockholder Approval.  The Company Stockholder Approval shall have been obtained.

 

(b)           No Injunctions or Legal Restraints; Illegality.  No temporary restraining order, preliminary or permanent injunction or other judgment, order or decree issued by any court of competent jurisdiction or other legal restraint or prohibition shall be in effect, and no Law shall have been enacted, entered, promulgated, enforced or deemed applicable by any Governmental Entity that, in any case, prohibits or makes illegal the consummation of the Merger.

 

Section 6.2           Conditions to the Obligations of the Company.  The obligation of the Company to effect the Merger is also subject to the satisfaction, or waiver by the Company, at or prior to the Effective Time, of the following conditions:

 

(a)           Representations and Warranties.  The representations and warranties of Parent and Merger Sub set forth in this Agreement shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date as though made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except for inaccuracies of representations or warranties the circumstances giving rise to which would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect (it being understood that, for purposes of determining whether such Parent Material Adverse Effect threshold has been met, all materiality, “Parent Material Adverse Effect” and similar qualifiers set forth in such representations and warranties shall be disregarded in determining the accuracy of such representations and warranties).

 

(b)           Performance of Obligations of Parent and Merger Sub.  Parent and Merger Sub shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Effective Time.

 

(c)           Officer’s Certificate.  The Company shall have received a certificate signed by an executive officer of Parent certifying as to the matters set forth in Sections 6.2(a) and 6.2(b).

 

Section 6.3           Conditions to the Obligations of Parent and Merger Sub.  The obligation of Parent and Merger Sub to effect the Merger is also subject to the satisfaction, or waiver by Parent, at or prior to the Effective Time of the following conditions:

 

(a)           Representations and Warranties.  The representations and warranties of the Company (i) set forth in Sections 3.1, 3.2, 3.3, 3.6, and 3.8 shall be true and correct in all respects, and (ii) set forth in each other Section or subsection of this Agreement shall be true and correct, except for inaccuracies of representations or warranties the circumstances giving rise to which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (it being understood that, for purposes of determining whether such Material Adverse Effect threshold has been met, all materiality, “Material Adverse Effect” and similar qualifiers set forth in such representations and warranties shall be disregarded in determining the accuracy of such representations and warranties), in the case of each of clauses (i) and (ii), as of the date of this Agreement and as of the Closing Date as though made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date).

 

(b)           Performance of Obligations of the Company.  The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time.

 

(c)           No Material Adverse Effect.  Since the date of this Agreement, there shall not have been any Material Adverse Effect.

 

(d)           Officer’s Certificate.  Parent shall have received a certificate signed by an executive officer of the Company certifying as to the matters set forth in Sections 6.3(a), 6.3(b), and 6.3(c).

 

Section 6.4           Frustration of Closing Conditions.  None of Parent, Merger Sub or the Company may rely on the failure of any condition set forth in Article VI to be satisfied if such failure was caused by such party’s breach of this Agreement.

 

Section 6.5           No Financing Condition.  For the avoidance of doubt, the obtaining of financing is not a condition to the obligations of Parent and Merger Sub to effect the Merger.

 

 

Section 7.1           Termination.  This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the Company Stockholder Approval has been obtained (with any termination by Parent also being an effective termination by Merger Sub):

 

(a)           by mutual written consent of Parent and the Company;

 

(b)           by either Parent or the Company:

 

(i)             if the Merger shall not have been consummated on or before March 8, 2012 (the “Termination Date”); provided, that neither party shall have the right to terminate this Agreement pursuant to this Section 7.1(b)(i) if any action of such party or failure of such party to perform or comply with the covenants and agreements of such party set forth in this Agreement shall have been the primary cause of, or resulted primarily in, the failure of the Merger to be consummated by the Termination Date and such action or failure to perform constitutes a breach of this Agreement.

 

(ii)             if any court of competent jurisdiction or other Governmental Entity shall have issued a judgment, order, injunction, rule or decree, or taken any other action restraining, enjoining or otherwise prohibiting any of the transactions contemplated by this Agreement and such judgment, order, injunction, rule, decree or other action shall have become final and nonappealable; provided, that the party seeking to terminate this Agreement pursuant to this Section 7.1(b)(ii) shall have used its reasonable best efforts to contest, appeal and remove such judgment, order, injunction, rule, or decree, ruling or other action in accordance with Section 5.7; or

 

(iii)            if the Company Stockholder Approval shall not have been obtained at the Company Stockholders’ Meeting duly convened therefor or at any adjournment or postponement thereof at which a vote on the adoption of this Agreement was taken;

 

(c)           by the Company:

 

(i)              if (A) Parent or Merger Sub shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement, which breach of failure to perform (1) would result in the failure of a condition set forth in Section 6.1 or 6.2, and (2) cannot be cured by the Termination Date; provided, that the Company shall have given Parent written notice, delivered at least 30 days prior to such termination (or if such breach or failure to perform occurs within 30 days of the Termination Date, delivered within 7 days of such breach or of the date such performance was due), stating the Company’s intention to terminate this Agreement pursuant to Section 7.1(c)(i)(A) and the basis for such termination, or (B) at any time, the guarantees described in Section 4.14, or the Financing Documents, are not in full force and effect in all material respects (with respect to the commitment to pay or fund thereunder) and such condition continues until the earlier of (1) the Termination Date or (2) five Business Days following written notice to Parent; provided, however, that the Company shall not have the right to terminate this Agreement pursuant to this Section 7.1(c)(i) if it is then in material breach of any of its covenants or agreements set forth in this Agreement;

 

(ii)             in order to enter into a definitive written agreement with respect to a Superior Proposal, if prior to the receipt of the Company Stockholder Approval, (A) the Special Committee has received a Superior Proposal not in violation or contravention of any of the provisions of Section 5.4(a) or Section 5.4(b), (B) the Company has complied with the provisions of Section 5.4(c), and (C) prior to or concurrently with such termination, the Company pays the fee due under Section 7.3; or

 

(iii)            if all the closing conditions contained in Section 6.1 and 6.3 have been satisfied (or are capable of being satisfied) and Parent fails to fund the Payment Fund within one Business Day following the date the Closing should have occurred;

 

(d)           by Parent:

 

(i)              if (subject to Section 5.16) the Company shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement, which breach or failure to perform (A) would result in the failure of a condition set forth in Section 6.1 or 6.3, and (B) cannot be cured by the Termination Date; provided, that Parent shall have given the Company written notice, delivered at least 30 days prior to such termination (or if such breach or failure to perform occurs within 30 days of the Termination Date, delivered within 7 days of such breach or of the date such performance was due), stating Parent’s intention to terminate this Agreement pursuant to this Section 7.1(d)(i) and the basis for such termination; provided further, that Parent shall not have the right to terminate this Agreement pursuant to this Section 7.1(d)(i) if Parent or Merger Sub is then in material breach of any of its covenants or agreements set forth in this Agreement; or

 

(ii)             if an Adverse Recommendation Change shall have been effected.

 

The party desiring to terminate this Agreement pursuant to this Section 7.1 (other than pursuant to Section 7.1(a)) shall give notice of such termination to the other party, specifying the basis for such termination.

 

Section 7.2           Effect of Termination.  In the event of termination of the Agreement, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of Parent, Merger Sub or the Company, except that the Confidentiality Agreement and the provisions of Section 3.23 and 4.11 (Brokers), Section 5.12 (Public Announcements), Section 7.2 (Effect of Termination), Section 7.3 (Fees and Expenses), Section 8.2 (Notices), Section 8.5 (Entire Agreement), Section 8.6 (Parties in Interest), Section 8.7 (Governing Law), Section 8.8 (Submission to Jurisdiction), Section  8.9 (Assignment; Successors), Section 8.10 (Enforcement), Section 8.12 (Severability), Section 8.13 (Waiver of Jury Trial) and Section 8.16 (No Presumption Against Drafting Party) of this Agreement shall survive the termination hereof.  Notwithstanding anything to the contrary in this Agreement, if Parent and Merger Sub fail to effect the Merger or otherwise are in breach of this Agreement, then the aggregate liability of Parent, Merger Sub and any of their respective former, current and future direct or indirect equity holders, controlling persons, stockholders, directors, officers, employees, agents, Affiliates, members, managers, general or limited partners or assignees shall be limited to the amount of the Parent Termination Fee and, in the case of the foregoing persons party to the Guarantee, the costs of enforcement thereon and no Person shall have any rights under the Abax Commitment Letter, whether at law or equity, in contract, in tort or otherwise.  None of Parent, Merger Sub or any of their respective former, current and future direct or indirect equity holders, controlling persons, stockholders, directors, officers, employees, agents, Affiliates, members, managers, general or limited partners or assignees shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated by this Agreement except as expressly provided herein (including Section 8.10).

 

Section 7.3           Fees and Expenses.

 

(a)           Except as otherwise provided in this Section 7.3, all fees and expenses incurred in connection with this Agreement, the Merger and the other transactions contemplated hereby shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated, except that the expenses incurred in connection with the filing, printing and mailing of the Proxy Statement and filing of the Schedule 13E (including, in each case, applicable SEC filing fees) and the solicitation of the Company Stockholder Approval shall be shared equally by Parent and the Company.

 

(b)           If:

 

(i)           this Agreement is terminated by either Parent or the Company pursuant to Section 7.1(b)(i) (but only if the Company Stockholders’ Meeting has not been held by the Termination Date) or Section 7.1(b)(iii) and, in either case, (A) at any time after the date of this Agreement and prior to the termination under Section 7.1(b)(i) or the taking of a vote to approve this Agreement at the Company Stockholders’ Meeting or any adjournment or postponement thereof (in the case of a termination pursuant to Section 7.1(b)(iii)), an Acquisition Proposal shall have been publicly announced by the Company and not withdrawn prior to such termination under Section 7.1(b)(i) or such vote to adopt this Agreement, as applicable, and (B) within 12 months after such termination, the Company shall have entered into a definitive agreement with respect to, or shall have consummated, such Acquisition Proposal (provided, that for purposes this Section 7.3(b)(i), the references to “20% or more” in the definition of Acquisition Proposal shall be deemed to be references to “more than 50%”);

 

(ii)            this Agreement is terminated by the Company pursuant to Section 7.1(c)(ii); or

 

(iii)           this Agreement is terminated by Parent pursuant to Section 7.1(d)(ii)

 

then, in any such case, the Company shall pay Parent a termination fee of $22,500,000 (the “Company Termination Fee”), it being understood that in no event shall the Company be required to pay the Company Termination Fee on more than one occasion.

 

(c)           If the Company terminates this Agreement pursuant to Section ‎7.1(c)(i), and at the time of such termination, there is no state of facts or circumstances (other than such state of facts or circumstances as gave rise to the Company’s right to terminate this Agreement pursuant to Section 7.1(c)(i)) that would cause the conditions in Sections 6.1, 6.2, and 6.3 not to be satisfied on or prior to the Termination Date, or pursuant to Section 7.1(c)(iii), then Parent shall pay a termination fee to the Company in an amount equal to $30,000,000 (the “Parent Termination Fee” ), it being understood that in no event shall Parent be required to pay the Parent Termination Fee on more than one occasion.  The parties agree that the payment of the Parent Termination Fee shall constitute liquidated damages and not a penalty and shall be the sole and exclusive remedy available to the Company with respect to this Agreement and the transactions contemplated hereby in the event any such payment becomes due and payable and, upon payment of the Parent Termination Fee, that Parent (and its Subsidiaries, including Merger Sub, and their Representatives) shall have no further liability to the Company (or its Subsidiaries or Representatives) hereunder.

 

(d)           Payment of the Company Termination Fee or Parent Termination Fee, if applicable, shall be made by wire transfer of same day funds to the account or accounts designated by Parent or the Company, as applicable by (A) the Company (i) on the earlier of the execution of a definitive agreement with respect to or consummation of, any transaction contemplated by an Acquisition Proposal, as applicable, in the case of a Company Termination Fee payable pursuant to Section 7.3(b)(i), or (ii) as promptly as reasonably practicable (and in any event within five Business Days) after termination, in the case of termination by the Company pursuant to Section 7.1(c)(ii) or by Parent pursuant to Section 7.1(d)(ii), or (B) Parent, as promptly as practicable (and in any event within five Business Days) after termination, in the case of termination by the Company pursuant to Section 7.1(c)(i) or Section 7.1(c)(iii).

 

(e)           Each of the Company and Parent acknowledges that the agreements contained in this Section 7.3 are an integral part of the transactions contemplated by this Agreement, the damages resulting from termination of this Agreement under circumstances where a Company Termination Fee or Parent Termination Fee is payable are uncertain and incapable of accurate calculation and, therefore, the amounts payable pursuant to Sections 7.3(b) and 7.3(c) are not a penalty but rather constitute liquidated damages in a reasonable amount that will compensate Parent or the Company, as applicable, for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the transactions contemplated hereby and that, without these agreements, the Company, Parent and Merger Sub would not enter into this Agreement; accordingly, if the Company or Parent, as applicable, fails promptly to pay any amounts due pursuant to this Section 7.3, and, in order to obtain such payment, Parent or the Company commences a suit that results in a judgment against the Company or Parent, as the case may be, for the amounts set forth in this Section 7.3, the Company or Parent, as applicable, shall pay to the other party its costs and expenses (including reasonable attorneys’ fees and expenses) in connection with such suit, together with interest on the amounts due pursuant to this Section 7.3 from the date such payment was required to be made until the date of payment at the prime lending rate as published in The Wall Street Journal in effect on the date such payment was required to be made.

 

Section 7.4           Amendment or Supplement.  This Agreement may be amended, modified or supplemented by the parties by action taken or authorized by their respective boards of directors at any time prior to the Effective Time, whether before or after the Company Stockholder Approval has been obtained; provided, however, that after the Company Stockholder Approval has been obtained, no amendment may be made that pursuant to applicable Law requires further approval or adoption by the stockholders of the Company without such further approval or adoption.  This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each of the parties in interest at the time of the amendment.

 

Section 7.5           Extension of Time; Waiver.  At any time prior to the Effective Time, the parties may, by action taken or authorized by their respective boards of directors, to the extent permitted by applicable Law, (a) extend the time for the performance of any of the obligations or acts of the other party, (b) waive any inaccuracies in the representations and warranties of the other parties set forth in this Agreement or any document delivered pursuant hereto, or (c) subject to applicable Law, waive compliance with any of the agreements or conditions of the other parties contained herein; provided, however, that after the Company Stockholder Approval has been obtained, no waiver may be made that pursuant to applicable Law requires further approval or adoption by the stockholders of the Company without such further approval or adoption.  Any agreement on the part of a party to any such waiver shall be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such party.  No failure or delay of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power.

 

 

Section 8.1           Nonsurvival of Representations and Warranties.  None of the representations, warranties, covenants or agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, other than those covenants or agreements of the parties which by their terms apply, or are to be performed in whole or in part, after the Effective Time.

 

Section 8.2           Notices.  All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by facsimile or e-mail, upon written confirmation of receipt by facsimile or e-mail, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier, or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid.  All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

 

(i)           if to Parent, Merger Sub or the Surviving Corporation, to:

 

c/o Harbin Electric, Inc.

No. 9 Ha Ping Xi Lu, Ha Ping Lu Ji Zhong Qu,

Harbin Kai Fa Qu, Harbin, PRC 150060

Attention:  Mr. Tianfu Yang

Facsimile:  +86 (451) 8611 6769

E-mail:   ***@***

 

with a copy (which shall not constitute notice) to:

 

Skadden, Arps, Slate, Meagher & Flom LLC

30th Floor, China World Office 2

1 Jianguomenwai Avenue

Beijing 100004, PRC

Attention:  Michael V. Gisser

                   Peter X. Huang

Facsimile:  +86 10 6535 5577

E-mail:   ***@***

               ***@***

 

(ii)           if to Company, to:

 

Harbin Electric, Inc.

No. 9, Ha Ping Xi Lu, Ha Ping Lu Ji Zhong Qu

Harbin Kai Fa Qu, Harbin, China 150060

Attention:  Mr. Tianfu Yang and Ms. Christy Shue

Facsimile:  +86 ###-###-#### 6769

E-mail:   ***@***

              ***@***

 

with copies (which shall not constitute notice) to:

 

Gibson, Dunn & Crutcher LLP

2029 Century Park East

Los Angeles, California 90067

Attention:  Jonathan K. Layne

Facsimile:  ###-###-####

E-mail:   ***@***

 

and

 

Loeb & Loeb LLP

345 Park Avenue

New York, NY 10154

Attention:  Angela M. Dowd and Mitchell S. Nussbaum

Facsimile:   (212) 407-4990

E-mail:   ***@*** and ***@***

 

Section 8.3           Certain Definitions.  For purposes of this Agreement:

 

(a)            “2005 Stock Option Plan” means the Harbin Electric Inc. 2005 Stock Option Plan;

 

(b)           “2006 Warrant Agreement” means the warrant agreement between the Company and The Bank of New York, as collateral agent, dated August 30, 2006;

 

(c)            “Acquisition Proposal” means any inquiry, proposal, indication of interest, or offer from any Person or group of Persons other than Parent or one of its Subsidiaries for (i) a merger, reorganization, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction (whether in a single transaction or a series of transactions) involving an acquisition of the Company (or assets of the Company which, or any Subsidiary or Subsidiaries of the Company whose business, constitutes 20% or more of the net revenues, net income or assets of the Company and its Subsidiaries, taken as a whole), or (ii) the acquisition in any manner, directly or indirectly, of beneficial ownership of 20% or more of the equity securities or consolidated total assets of the Company and its Subsidiaries, in each case other than the Merger;

 

(d)           “Affiliate” of any Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person; provided, that for the avoidance of doubt, for all purposes under this Agreement, Mr. Tianfu Yang shall be deemed to be an Affiliate of Parent; provided, further, that with respect to the definition of the Majority of the Minority Approval, the following shall be deemed to be Affiliates of Parent:  (i) each party to the Contribution Agreement, (ii) each officer, director, or employee of the Company or its Subsidiaries who has entered into an agreement (whether written or oral) to contribute any Shares to Parent in lieu of receiving the Merger Consideration for such Shares, (iii) all other Persons who have entered into an agreement, arrangement, or understanding (whether written or oral) with Parent or any Affiliate of Parent to contribute Shares to Parent in lieu of receiving Merger Consideration for such Shares, and (iv) all Persons who the Company Board, upon the recommendation of the Special Committee and upon due inquiry, reasonably believes have reached an agreement or understanding (whether written or oral) with Parent or any Affiliate of Parent to receive, in connection with the consummation of the Merger, some benefit or value other than and in addition to the Merger Consideration to be received in respect of their Shares; provided that in no event shall the continued employment of any employee of the Company or any of its Subsidiaries with the Surviving Corporation or any of its Subsidiaries after the Effective Time, and the continued payment of compensation to such employee by the Surviving Corporation or any of its Subsidiaries after the Effective Time on terms substantially comparable to the compensation paid to such employee by the Company or any of its Subsidiaries as of the date of this Agreement, alone, in and of itself, be deemed to be a benefit or value other than and in addition to the Merger Consideration to be received in respect of Shares;

 

(e)            “Business Day” means any day other than a Saturday, a Sunday or a day on which banks in New York, New York are authorized or required by applicable Law to be closed;

 

(f)            “control” (including the terms “controlled,” “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise;

 

(g)           “Environmental Laws” means all foreign, federal, state, or local statutes, regulations, ordinances, codes, or decrees protecting the quality of the ambient air, soil, surface water or groundwater, in effect as of the date of this Agreement;

 

(h)           “Environmental Permits” means all permits, licenses, registrations, and other authorizations required under applicable Environmental Laws;

 

(i)             “knowledge” of the Company means the actual knowledge of the individuals listed on Section 8.3(j) of the Company Disclosure Letter;

 

(j)             “Material Adverse Effect” means any circumstance, event, change, occurrence, effect or development that, individually or in the aggregate has or is reasonably expected to have a material adverse effect on the business, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, other than any change, effect, event, occurrence, or development resulting from (i) changes in general economic, financial market, business or geopolitical conditions, (ii) general changes or developments in any of the industries or markets in which the Company or its Subsidiaries operate, (iii) changes in exchange rates or interest rates or policy announcements or regulatory changes related to exchange rates or interest rates, (iv) any actions required under this Agreement to obtain any approval or authorization under applicable antitrust or competition Laws for the consummation of the Merger, (v) changes in any applicable Laws or applicable accounting regulations or principles or interpretations thereof, (vi) any change in the price or trading volume of the Company’s stock, in and of itself (provided, that the facts or occurrences giving rise to or contributing to such change that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining whether there has been a Material Adverse Effect), (vii) any failure by the Company to meet any published analyst estimates or expectations of the Company’s revenue, earnings or other financial performance or results of operations for any period, in and of itself, or any failure by the Company to meet its internal or published projections, budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations, in and of itself (provided, that the facts or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining whether there has been a Material Adverse Effect), (viii) any outbreak or escalation of hostilities or war or any act of terrorism, (ix) the announcement of this Agreement and the transactions contemplated hereby, including the initiation of litigation by any Person with respect to this Agreement, and including any termination of, reduction in or similar negative impact on relationships, contractual or otherwise (including loan agreements with the Bank Lender or any other financing sources), with any customers, suppliers, lenders, distributors, partners or employees of the Company and its Subsidiaries due to the announcement and performance of this Agreement or the identity of the parties to this Agreement, or the performance of this Agreement and the transactions contemplated hereby, including compliance with the covenants set forth herein, (x) any action taken or not taken by the Company, or which the Company causes to be taken or not taken by any of its Subsidiaries, in each case which is required by, resulting from or arising in connection with this Agreement, or (xi) any actions taken (or omitted to be taken) at the request of Parent; provided that, in the case of the foregoing clauses (i), (ii), and (v), the impact of such circumstance, event, change, occurrence, effect, or development is not disproportionately adverse to the Company and its Subsidiaries taken as a whole, as compared to other companies in the industries in which the Company and its Subsidiaries operate; provided, further that only the disproportionate portion of the impact referenced in the preceding proviso shall be considered in determining whether there has been a Material Adverse Effect;

 

(k)            “Materials of Environmental Concern” means any hazardous, acutely hazardous, or toxic substance or waste defined and regulated as such under applicable Environmental Laws, including the federal Comprehensive Environmental Response, Compensation and Liability Act or the federal Resource Conservation and Recovery Act;

 

(l)             “Parent Material Adverse Effect” means any event, change, occurrence or effect that would prevent, materially delay or materially impede the performance by Parent or Merger Sub of its obligations under this Agreement or the consummation of the transactions contemplated hereby (including the ability of Parent to obtain financing);

 

(m)           “Person” means an individual, corporation, partnership, limited liability company, association, trust, estate or other entity or organization, including any Governmental Entity;

 

(n)           “Plan”  means any bonus, deferred compensation, pension, profit-sharing, retirement, insurance, stock-purchase, stock option, or other fringe benefit plan, arrangement, or practice;

 

(o)           “Significant Subsidiary” means any “significant subsidiary” (other than any such subsidiary which is not more than 50% owned by the Company) of the Company within the meaning of Rule 1-02(w) of Regulation S-X of the SEC;

 

(p)           “Subsidiary” means, with respect to any Person, any other Person of which stock or other equity interests having ordinary voting power to elect more than 50% of the board of directors or other governing body are owned, directly or indirectly, by such first Person;

 

(q)           “Superior Proposal” means any Acquisition Proposal (A) on terms which the Special Committee, which shall have full, sole, and exclusive authority to make such decision determines, in its good faith judgment and in the good faith performance, discharge and exercise of its fiduciary duties, after consultation with its outside legal counsel and financial advisors, to be more favorable from a financial point of view to the Company and the holders of Shares than the Merger, taking into account all the terms and conditions of such proposal, and this Agreement (including any adjustment to this Agreement proposed by Parent in response to such Acquisition Proposal), and (B) that the Special Committee believes is reasonably capable of being completed, taking into account all financial (including economic and financing terms), regulatory, legal and other aspects of such proposal as the Special Committee, in the good faith performance, discharge and exercise of its fiduciary duties, deems relevant; provided, that for purposes of the definition of “Superior Proposal,” the references to “20%” in the definition of Acquisition Proposal shall be deemed to be references to “50%;”

 

(r)            “Tax Returns” means all domestic or foreign (whether national, federal, state, provincial, local or otherwise) returns, declarations, statements, reports, schedules, forms and information returns required to be filed with any Governmental Entity relating to Taxes, including any amendments thereto; and

 

(s)            “Taxes” means federal, state, provincial, local or foreign taxes of whatever kind imposed by a Governmental Entity, including all interest, penalties and additions imposed with respect to such amounts.

 

Section 8.4           Interpretation.  When a reference is made in this Agreement to a Section, Article or Exhibit such reference shall be to a Section, Article or Exhibit of this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement or in any Exhibit are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  All words used in this Agreement will be construed to be of such gender or number as the circumstances require.  Any capitalized terms used in any Exhibit but not otherwise defined therein shall have the meaning set forth in this Agreement.  All Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein.  The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified.

 

Section 8.5           Entire Agreement.  This Agreement (including the Exhibits and Schedules hereto), the Company Disclosure Letter, the Confidentiality Agreement, and the Voting Support Agreement constitute the entire agreement of the parties, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings among the parties with respect to the subject matter hereof and thereof.

 

Section 8.6           Parties in Interest.  This Agreement is not intended to, and shall not, confer upon any Person other than the parties and their respective successors and permitted assigns any rights or remedies hereunder, except (a) with respect to Section 5.10 which shall inure to the benefit of the Persons benefiting therefrom who are intended to be third party beneficiaries thereof, (b) from and after the Effective Time, the rights of holders of Shares to receive the Merger Consideration set forth in Article II, and (c) from and after the Effective Time, the rights of holders of Company Stock Options or Company Warrants to receive the payments contemplated by the applicable provisions of Section 2.2 in accordance with the terms and conditions of this Agreement.  The rights granted to Company stockholders pursuant to this Section 8.6 shall be enforceable on behalf of Company stockholders only by the Special Committee in its sole and absolute discretion, as agent for the Company stockholders, it being understood and agreed that any and all interests in such claims shall attach to the Shares and subsequently transfer therewith and, consequently, any damages, settlements or other amounts recovered or received by the Company with respect to such claims (net of expenses incurred by the Company in connection therewith) may, in the Company’s sole and absolute discretion, be (i) distributed, in whole or in part, by the Company to the record holders of Shares as of any date determined by the Company, or (ii) retained by the Company for the use and benefit of the Company on behalf of its stockholders in any manner the Company deems fit.  The representations and warranties in this Agreement are the product of negotiations among the parties hereto.  In some instances, the representations and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters regardless of the knowledge of any of the parties.  Consequently, Persons other than the parties may not rely upon the representations and warranties in this Agreement or the characterization of actual facts or circumstances as of the date of this Agreement or as of any other date.

 

Section 8.7           Governing Law.  This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal Laws of the State of Nevada, without regard to the Laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Nevada.

 

Section 8.8           Submission to Jurisdiction.  Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any party or its Affiliates against any other party or its Affiliates shall be brought and determined in the courts of the State of Nevada located in Clark County, Nevada or the federal courts of the United States of America located in Clark County, Nevada.  Each of the parties hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby.  Each of the parties agrees not to commence or maintain any action, suit or proceeding relating thereto except in the courts described above, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Nevada as described herein.  Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient.  Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the exclusive jurisdiction of the courts in Nevada as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper, or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

 

Section 8.9           Assignment; Successors.  Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of Law or otherwise, by any party without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.

 

Section 8.10         Enforcement.  The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by the Company in accordance with their specific terms or were otherwise breached.  Accordingly, each of Parent and Merger Sub shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the State of Nevada located in Clark County, Nevada or any federal court located in Clark County, Nevada, this being in addition to any other remedy to which such party is entitled at Law or in equity.  The Company further waives (i) any defense in any action for specific performance that a remedy at Law would be adequate, and (ii) any requirement under any Law to post security as a prerequisite to obtaining equitable relief. The parties acknowledge that the Company shall not be entitled to an injunction or injunctions to prevent breaches of this Agreement by Parent or Merger Sub or any remedy to enforce specifically the terms and provisions of this Agreement (other than the remedies for failure to fund the Merger Consideration set forth in Section 5.7(e)) and that the Company’s sole and exclusive remedies with respect to any such breach shall be the remedies set forth in Sections 7.1, 7.2 and 7.3 (which shall be in addition to the remedies set forth in Section 5.7(e), if applicable).

 

Section 8.11         Currency.  All references to “dollars” or “$” or “US$” in this Agreement refer to United States dollars, which is the currency used for all purposes in this Agreement, unless otherwise stated.

 

Section 8.12         Severability.  Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

 

Section 8.13         Waiver of Jury Trial.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY DOCUMENTS OR INSTRUMENTS REFERRED TO HEREIN, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF THE PARTIES HERETO AND THEIR AFFILIATES IN NEGOTIATION, ADMINISTRATION, PERFORMANCE, AND ENFORCEMENT OF THIS AGREEMENT.

 

Section 8.14         Counterparts.  This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.

 

Section 8.15         Facsimile or Electronic Signature.  This Agreement may be executed by facsimile or electronic signature and a facsimile or electronic signature shall constitute an original for all purposes.

 

Section 8.16         No Presumption Against Drafting Party.  Each of Parent, Merger Sub and the Company acknowledges that each party to this Agreement has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement.  Accordingly, any rule of Law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.

 

Section 8.17         Parent Guarantee.  Parent agrees to take all commercially reasonable actions necessary to cause Merger Sub or the Surviving Corporation, as applicable, to perform all of its respective agreements, covenants and obligations under this Agreement, including those to be performed from and after the Effective Time.  Parent unconditionally guarantees to the Company the full and complete performance by Merger Sub or the Surviving Corporation, as applicable, of its respective obligations under this Agreement and shall be liable for any breach of any representation, warranty, covenant or obligation of Merger Sub or the Surviving Corporation, as applicable, under this Agreement.  This is a guarantee of payment and performance and not of collectability.  Parent hereby waives diligence, presentment, demand of performance, filing of any claim, any right to require any proceeding first against Merger Sub or the Surviving Corporation, as applicable, protest, notice and all demands whatsoever in connection with the performance of its obligations set forth in this Section 8.17.

 

Section 8.18         Payment of Sales, Use, or Similar Taxes.  Except as provided in Section 2.3(c), all sales, use, transfer, intangible, recordation, documentary stamp, or similar Taxes or charges, of any nature whatsoever, applicable to, or resulting from, the transactions contemplated by this Agreement shall be borne by Parent.

 

Section 8.19         Personal Liability.  This Agreement shall not create or be deemed to create or permit any personal liability or obligation on the part of any direct or indirect stockholder of the Company, Parent, Merger Sub (other than Parent), or any officer, director, employee, agent, representative or investor of or in any party hereto.

 

[The remainder of this page is intentionally left blank.]

 

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

TECH FULL ELECTRIC COMPANY LIMITED
By:	/s/ Tianfu Yang
	Name: Tianfu Yang
	Title: Director
TECH FULL ELECTRIC ACQUISITION, INC.
By:	/s/ Tianfu Yang
	Name: Tianfu Yang
	Title: Director
HARBIN ELECTRIC, INC.
By:	/s/ Boyd R. Plowman
	Name: Boyd R. Plowman
	Title: Chairman, Special Committee of the Board of Directors

[Signature Page to Agreement and Plan of Merger]