AMENDED AND RESTATED STOCK EXCHANGE AGREEMENT
AMENDED
AND RESTATED STOCK EXCHANGE AGREEMENT
Among
BUDASOLAR
TECHNOLOGIES CO. LTD.
KRAFT
ELEKTRONIKAI ZRT
NEW
PALACE INVESTMENTS LTD.
XXXXXX
XXXXXXXX
and
XXXXXX
XXXXXXX
as
of April 2, 2008
LIST
OF EXHIBITS
|
Krafcsik
Employment Agreement
|
A-1 | ||||
|
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|
Xxxxxxx
Employment Agreement
|
A-2 | |||
|
Shareholders
Agreement
|
B | ||||
|
Inter-Company
Agreement
|
C |
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AMENDED AND RESTATED STOCK
EXCHANGE AGREEMENT
THIS AMENDED AND RESTATED STOCK
EXCHANGE AGREEMENT (this “Agreement”) is made
and entered into as of 2nd day of April 2009 (the “Effective Date”), by
and among SOLAR THIN FILMS,
INC., a Delaware corporation (the “Parent”); KRAFT ELEKTRONIKAI ZRT, a
Hungarian corporation (the “Buyer”); BUDASOLAR TECHNOLOGIES CO.
LTD., a Hungarian corporation (the “Company”); NEW PALACE INVESTMENTS LTD., a
Cyprus corporation (“New Palace”); XXXXXX XXXXXXXX, an individual
(“I.
Krafcsik”); and XXXXXX
XXXXXXX, an individual (“X. Xxxxxxx”). NPI, I.
Krafcsik and X. Xxxxxxx are sometimes individually referred to as a “Company Stockholder”
and collectively, as the “Company
Stockholders.” The Parent, the Buyer, the Company, and the
Company Stockholders are hereinafter sometimes individually referred to as a
“Party” and
collectively referred to as the “Parties.” This
Agreement amends and restates in its entirety a stock exchange agreement dated
as of September 29th 2008
among the Parties (the “Prior
Agreement”).
Recitals
A.
The Company Stockholders currently own of record and beneficially 100% of the
outstanding registered capital of the Company (the “Subject Company
Quotas”) as hereinafter defined.
B.
The Parent currently owns of record and beneficially 100% of the outstanding
capital stock or share capital of the Buyer (the “Buyer
Shares”).
C.
Upon the terms and subject to the conditions set forth in this Agreement, the
Buyer desires to acquire from the Company Stockholders the Subject Company
Quotas. Company Stockholders desire to hand over the Subject Company Quotas for
a consideration of receiving 49% of the Buyers Shares on a fully diluted basis
(the “Minority Buyer
Equity”).
D.
Buyer desires to acquire the Subject
Company Quotas, and the Company desires to hand over such Subject Company
Quotas, upon the terms and subject to the conditions set forth
herein.
Agreement
NOW,
THEREFORE, in consideration of the premises and of the mutual covenants
contained herein, the Parties agree as follows:
ARTICLE I. –
TRANSFER OF SUBJECT COMPANY QUOTAS
1.1
Transfer of Subject
Company Quotas.
(a) On
the terms and subject to the conditions of this Agreement, at the Closing
referred to in Section 3.1 hereof, by signing a Quota Purchase Agreement with a
purchase price of HUF 1.000.000 the Company Stockholders shall
convey, assign, transfer and deliver to Buyer, and Buyer
shall acquire and accept delivery of the Subject Company Quotas that
is the number of quotas of registered capital of the Company as shall represent
one hundred percent (100%) of the issued and outstanding registered capital of
the Company, on a fully-diluted basis, after giving effect to the exercise of
all options, warrants or other rights to acquire Company registered capital, and
all securities convertible into Company registered capital that is outstanding
as of the Closing Date. The Subject Company Quotas shall be delivered to Buyer
by the Company Stockholders, free and clear of any and all liens, mortgages,
adverse claims, charges, security interests, encumbrances, other restrictions or
limitations, or rights of any third persons whatsoever (collectively, “Liens”).
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(b) To
effect the transfers contemplated by Section 1.1(a), at the Closing, the Company
Stockholders shall deliver or cause to be delivered to Buyer, against
consideration therefor in accordance with Section 2.2 hereof, evidence in a form
acceptable to Buyer of the transfer from Company Stockholders to Buyer of the
Subject Company Quotas, on the books of the Company.
ARTICLE II.
EXCHANGE SHARES AND CAPITALIZATION OF BUYER
2.1
Exchange
Shares. On the Closing Date, against delivery of evidence in a
form acceptable to Buyer of the transfer from the Company Stockholders to the
Buyer of the Subject Company Quotas on the books of the Company the Parent shall
deliver, transfer and assign to the Company Stockholders (pro-rata as among each
of the Company Stockholders as their respective interests in the Subject Company
Quotas bear to each other, all set forth on Schedule 2.1 annexed hereto and made
a part hereof), that number of fully paid up shares of capital stock or share
capital of the Buyer (the “Minority Buyer
Equity”) as shall represent forty-nine percent (49%) of the issued and
outstanding Buyer’s Shares owned by the Parent, on a fully-diluted basis, after
giving effect to the share capital increase as set forth here below and the
exercise of all options, warrants or other rights to acquire Buyer capital stock
or share capital, and all securities convertible into Buyer capital stock or
share capital that is outstanding as of the Closing Date (the “Minority
Interest).
2.2
Capitalization of
Parent Loans and Company Stockholder Loans; Repayment.
(a) Parent
Loans. On or before the Closing Date, the Buyer shall have a
positive stockholders equity or capital of not less than United States One
Thousand Dollars (USD $1,000.00). In addition, the Parent shall
cancel any outstanding loans and advances made by the Parent to the Buyer prior
to the date of this Agreement (the “Parent
Loans”).
(b) Company Stockholder
Loans. On or before the Closing Date, the Buyer shall takeover
and assume the obligation of the repayment of the loans made by the Company
Stockholders or their Affiliates to the Company prior to the date of this
Agreement disclosed by the Company in the Disclosure Letter (the “Company Stockholder
Loans”), so that as at the Closing Date, the Company shall have either a
positive stockholders equity or capital of not less than United States One
Thousand Dollars (USD $1,000.00). Loans shall be evidenced by a five year note
of the Buyer, fully subordinated to all other debt and creditors of the Buyer
and the Company, and bearing interest at an annual rate equal to LIBOR for
twelve month United States dollars interbank deposits as fixed by BBA plus a
margin of three (3) percent (the “Note”). Loans shall
be repaid by the Buyer as follows: (i) on October 1, 2009, the Company shall
repay $ 250,000 provided that there’s a minimum amount of $ 1,600,000 available
on the accounts of the Company. In case such amount is not available on the
accounts on October 1, 2009 repayment of this tranche is due whenever
the amount is made available on the accounts; (ii) on January 1, 2010, a further
sum of $ 250,000 is repayable from the available Excess Cash; (iii) the
outstanding amount of the Loan is repayable on January 1, 2011. Parties
expressly set forth that the condition of the repayment of the Loan (or any
tranche of the Loan) shall be the availability of Excess Cash. In case such
condition is not met on a due date of repayment as set forth above the
availability of Excess Cash shall be checked quarterly and repayment
shall take place immediately after such condition met.
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2.3 Increase of Share Capital of
Buyer.
(a) In
addition to the transactions contemplated by Section 2.2 above,
for no additional consideration, the Parent shall irrevocably increase the
shareholders’ equity and capital of the Buyer prior to Closing (the "Share Capital
Increase") by investing in the Buyer the sum of United States Seven
Hundred Fifty Thousand (USD $750,000) Dollars equivalent in Hungarian Forints
calculated at the then current exchange rate.
(i) Pursuant
to the terms of a cooperation agreement, dated as of September 29, 2008, among
the Company, the Parent and the Buyer (the “Cooperation Agreement”),
the Parent or the Buyer has caused to be paid to the Company as at the date of
this Agreement, the aggregate sum of Seven Hundred and Fifty Thousand Dollars
(USD $750,000). Such payment shall be deemed to be a loan by the
Buyer to the Company (the “Intercompany Loan”),
and shall be repaid prior to Closing.
(b) On
the Closing Date, the Cooperation Agreement shall, by its terms, terminate and
be of no further force or effect. In addition on the Closing Date,
any debts or other obligations of the Company that are then owed to the Buyer
(other then the above Intercompany Loan) or the Parent shall
terminate.
(c) Notwithstanding
anything to the contrary contained herein, in the event that the Closing shall
not have occurred by the close of business (5:00 p.m. New York, New York USA
time) on Friday, April 30, 2009, then and in such event this Agreement shall
terminate and the Company shall thereafter continue to render services to the
Buyer under the Interim Agreement until such time as the aggregate value of the
services to be rendered by the Company to the Buyer (at the rates set forth in
the Interim Agreement) shall equal (i) the aggregate amount of all payments made
by the Parent or the Buyer to the Company pursuant to this Section 2.3 through
and including the date of termination of this Agreement, less (ii)
the invoiced value of the services provided by the Company to the Buyer prior to
the termination of this Agreement.
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ARTICLE
III. CLOSING
3.1 Closing. The
consummation of the transfer of the Subject Company Quotas, transfer of the
Minority Buyer Equity, consummation of the Investment and the other transactions
contemplated by this Agreement (the “Closing”) will take
place at 10:00 a.m. (local time) on a date to be specified by Buyer, which shall
be no later than the fifth business day after satisfaction or waiver of the
conditions set forth in Article VII of this Agreement (the "Closing Date"), at
the offices of Xxxx Stiefenhofer Xxxx, Budapest, Hungary, counsel to the Buyer,
unless another date, time or place is agreed to in writing by the Parties
hereto. In no event, however, shall the Closing Date occur after
April 30, 2009, unless otherwise mutually agreed upon by the Company
Stockholders and the Buyer or the Parent.
3.2 Deliveries by the Company
Stockholders. At or prior to the Closing, the Company
Stockholders shall deliver to Buyer:
(i) Member’s
list of the Company representing all, and not less than all, of the Subject
Company Quotas, with powers, Member’s meeting decisions and modified
Articles of Association appropriate for the transfer of the Subject Company
Quotas attached;
(ii) the
minute books of the Company;
(iii) a
certificate executed by the Company and the Company Stockholders to the effect
that the conditions set forth in Section 7.1 have been satisfied;
(iv) possession
of all originals and copies of agreements, instruments, documents, deeds, books,
records, files and other data and information within the possession of the
Company and the Company Stockholders or any Affiliate of the Company
Stockholders pertaining to the Company (collectively, the “Records”); provided, however, that the
Company Stockholders may retain (1) copies of any tax returns and copies of
Records relating thereto; (2) copies of any Records that the Company
Stockholders is reasonably likely to need for complying with requirements of
law; and (3) copies of any Records that in the reasonable opinion of the Company
Stockholders will be required in connection with the performance of their
obligations under Article VIII hereof; and
(v) evidence
satisfactory to Buyer that Buyer’s designees and the Company Stockholders shall
be the only authorized signatories with respect to the Company’s various
accounts, credit lines, safe deposit boxes or vaults set forth or required to be
set forth in Schedule
4.17.
3.3 Deliveries by Buyer and
Parent. At or prior to the Closing, the Buyer and/or the
Parent shall deliver to the Company Stockholders:
(i) certificates
evidencing the Minority Buyer Equity representing all of the Minority Interest
in the Buyer pursuant to Section 2.1 hereof,
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(ii) evidence
satisfactory to the Company Stockholders of completion of the transactions
contemplated pursuant to Section 2.2 and 2.3 hereof;
(iii) a
certificate executed by an authorized officer of the Buyer or the Parent, on
behalf of the Buyer and the Parent, to the effect that the conditions set forth
in Section 7.2 have been satisfied; and
(iv) modified
articles of incorporation of the Buyer in form and content acceptable to the
Parties reflecting the regulations of the Shareholders Agreement.
3.4 Termination in Absence of
Closing.
(a) Subject
to the provisions of Section 3.4(b) and (c), if the Closing has not occurred by
the close of business on April 30, 2009, then any Party hereto may thereafter
terminate this Agreement by written notice to such effect, to the other Parties
hereto, without liability of or to any Party to this Agreement or any
shareholder, director, officer, employee or representative of such Party unless
the reason for Closing having not occurred is (i) such Party’s willful breach of
the provisions of this Agreement, or (ii) if all of the conditions to such
Party’s obligations set forth in Article VII have been satisfied or waived in
writing by the date scheduled for the Closing pursuant to Section 3.1., the
failure of such Party to perform its obligations under this Article III on such
date; provided,
however, that
any termination pursuant to this Section 3.4 shall not relieve any Party hereto
who was responsible for Closing having not occurred as described in clauses (i)
or (ii) above of any liability for (x) such Party’s willful breach of the
provisions of this Agreement, or (y) if all of the conditions to such Party’s
obligations set forth in Article VII have been satisfied or waived in writing by
the date scheduled for the Closing pursuant to Section 3.1, the failure of such
Party to perform its obligations under this Article III on such
date.
(b) Notwithstanding
the approval of the Board of Directors of Buyer, this Agreement and the
transactions contemplated herein may be terminated and abandoned at any time on
or prior to the Closing Date by the Buyer, if:
(i) any
representation or warranty made herein for the benefit of Buyer, or any
certificate, schedule or document furnished to Buyer pursuant to this Agreement
is untrue in any material respect; or
(ii) the
Company, the Company Stockholders or any of their Affiliates shall have
defaulted in any material respect in the performance of any material obligation
under this Agreement on their part to be performed.
(c)
This Agreement and the transactions contemplated herein may be terminated and
abandoned at any time on or prior to the Closing Date by the Company
Stockholders, if:
(i) any
representation or warranty made herein for the benefit of the Company
Stockholders, or any certificate, schedule or document furnished to the Company
Stockholders pursuant to this Agreement is untrue in any material respect;
or
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(ii) the
Buyer, the Parent or any of their Affiliates shall have defaulted in any
material respect in the performance of any material obligation under this
Agreement on their part to be performed.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND
THE COMPANY STOCKHOLDERS
Each of
(A) the Company; and (B) the Company Stockholders do hereby jointly and
severally represent and warrant to the Buyer that:
4.1 Corporate Existence and
Qualification. The Company is a corporation duly organized,
validly existing and in good standing under the laws of Hungary. The Company has
the corporate power to own, manage, lease and hold its Properties and to carry
on its business as and where such Properties are presently located and such
business is presently conducted; and the Company is qualified to do business as
a foreign corporation and in good standing in each jurisdiction in which it is
required by law to be so qualified.
4.2 Authority, Approval and
Enforceability. This Agreement has been duly executed and
delivered by the Company and the Company Stockholders, and each of the Company
and the Company Stockholders have all requisite power and legal capacity to
execute and deliver this Agreement and all Exhibits executed and delivered or to
be executed and delivered in connection with the transactions provided for
hereby, to consummate the transactions contemplated hereby and by the Exhibits,
and to perform its obligations hereunder and under the Exhibits. This
Agreement and each Exhibit to which any of the Company and/or the Company
Stockholders is a Party constitutes, or upon execution and delivery will
constitute, the legal, valid and binding obligation of such Party, enforceable
in accordance with its terms, except as such enforcement may be limited by
general equitable principles or by applicable bankruptcy, insolvency,
moratorium, or similar laws and judicial decisions from time to time in effect
which affect creditors’ rights generally.
4.3 The Subject Company Quotas
and Corporate Records.
(a) The
Company’s registered capital is HUF 1.000.000 representing 100% of the Quota
owned by the Company Stockholders in the amounts set forth on Schedule 2.1 annexed
hereto and made a part hereof. The Subject Company Quotas are owned
by the Company Stockholders free and clear of all Liens. Except for
the Subject Company Quotas, there are no quotas or shares of capital stock or
other equity securities of the Company authorized, issued or
outstanding.
(b) All
of the outstanding Subject Company Quotas of the Company are duly authorized,
validly issued, fully paid and non-assessable and were not issued in violation
of any: (i) preemptive or other rights of any Person to acquire securities of
the Company, or (ii) applicable securities laws of Hungary, and the rules and
regulations promulgated thereunder (collectively, the “Hungarian Securities
Laws”). There are no outstanding subscriptions, options,
convertible securities, rights (preemptive or otherwise), warrants, calls or
agreements relating to any of the Subject Company Quotas or other quotas of
capital stock or other securities of the Company. Upon delivery to
Buyer at the Closing of documents set out in Section 3.2. (i)
appropriate to transfer the ownership of the Subject Company Quotas,,
indicating good and valid title to the Subject Company Quotas will pass to
Buyer, free and clear of all Liens of any kind, other than those arising from
acts of Buyer.
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(c)
The copies of the Articles of Incorporation and Bylaws of the Company provided
to Buyer are true, accurate, and complete and reflect all amendments made
through the date of this Agreement. The Company’s minute books and
member’s lists made available to Buyer for review were correct and complete as
of the date of such review, no further entries have been made through the date
of this Agreement, and such minute books contain an accurate record of all
quotaholder and corporate actions of the shareholders and directors (and any
committees thereof) of the Company taken by written consent or at a meeting
since inception. All corporate actions taken by the Company have been
duly authorized or ratified. All accounts, books, ledgers and
official and other records of the Company fairly and accurately reflect all of
the Company’s transactions, properties, assets and liabilities.
(d) The
Company does not own, directly or indirectly, any outstanding voting securities
of or other interests in any other corporation, partnership, joint venture or
other business entity.
4.4 No Defaults or
Consents. Except as otherwise set forth in Schedule 4.4 hereto,
the execution and delivery of this Agreement and the Exhibits by Company
Stockholders and the Company and the performance by Company Stockholders and the
Company of their obligations hereunder and there under will not violate any
provision of law or any judgment, award or decree or any indenture, agreement or
other instrument to which the Company Stockholders and/or the Company is a
Party, or by which the properties or assets of the Company Stockholders or the
Company is bound or affected, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under, any such
indenture, agreement or other instrument, in each case except to the extent that
such violation, default or breach could not reasonably be expected to delay or
otherwise significantly impair the ability of the Parties to consummate the
transactions contemplated hereby.
4.5 No Company Defaults or
Consents. Except as otherwise set forth in Schedule 4.5 attached
hereto, neither the execution and delivery of this Agreement nor the carrying
out of any of the transactions contemplated hereby will:
(i) violate
or conflict with any of the terms, conditions or provisions of the charter or
bylaws of the Company;
(ii) violate
any Legal Requirements applicable to the Company;
(iii) violate,
conflict with, result in a breach of, constitute a default under (whether with
or without notice or the lapse of time or both), or accelerate or permit the
acceleration of the performance required by, or give any other Party the right
to terminate, any Contract or Permit binding upon or applicable to the
Company;
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(iv) result
in the creation of any Lien, charge or other encumbrance on any Properties of
the Company; or
(v) require
either of the Company Stockholders or the Company to obtain or make any waiver,
consent, action, approval or authorization of, or registration, declaration,
notice or filing with, any private non-governmental third Party or any
Governmental Authority.
4.6 No
Proceedings. No suit, action or other proceeding is pending
or, to the Knowledge of the Company and the Company Stockholders, threatened
before any Governmental Authority seeking to restrain the Company or the Company
Stockholders or prohibit their entry into this Agreement or prohibit the
Closing, or seeking damages against the Company or its Properties as a result of
the consummation of this Agreement.
4.7 Financial Statements;
Liabilities; Accounts Receivable; Inventories.
(a) The
Company has delivered to Buyer true and complete copies of the unaudited balance
sheets of the Company as at December 31, 2007 and as at December 31, 2008, and
the related statements of operations and statements of cash flows with respect
to the Company and its business from the 2007 date of inception of the Company
through December 31, 2007, from January 1, 2008 to December 31, 2008, and the
management prepared balance sheet and statement of operations as at December 31,
2008 and for the fiscal year then ended (collectively, the “Financial
Statements”). The said Financial Statements are attached
hereto as Schedule
4.7(a). All of such Financial Statements present fairly the
financial condition and results of operations of the Company for the dates or
periods indicated thereon. All of such Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated.
(b) Except
for (i) trade payables and accrued expenses incurred since inception in the
ordinary course of business, none of which are material, (ii) executory contract
obligations under (x) Contracts listed on Schedule 4.12, and/or
(y) Contracts not required to be listed on Schedule 4.12, and
(iii) the liabilities set forth in Schedule 4.7(b)
attached hereto, the Company does not have any liabilities or obligations
(whether accrued, absolute, contingent, known, or otherwise, and whether or not
of a nature required to be reflected or reserved against in a balance sheet in
accordance with GAAP).
(c) Except
as otherwise set forth in Schedule 4.7(c), the
accounts receivable reflected on the December 31, 2008 balance sheet included in
the Financial Statements referenced in Section 5.8(a) and
all of the Company’s accounts receivable arising since December 31, 2008 (the
“Balance Sheet
Date”) arose from bona fide transactions in the ordinary course of
business, and the goods and services involved have been sold, delivered and
performed to the account obligors, and no further filings (with governmental
agencies, insurers or others) are required to be made, no further goods are
required to be provided and no further services are required to be rendered in
order to complete the sales and fully render the services and to entitle the
Company to collect the accounts receivable in full. Except as set
forth in Schedule
4.7(c), no such account has been assigned or pledged to any other person,
firm or corporation, and no defense or set-off to any such account has been
asserted by the account obligor or exists.
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(d) Except
as otherwise set forth in Schedule 4.7(d), the
Inventory of the Company as of the Closing Date shall consist of items of a
quality, condition and quantity consistent with normal seasonally-adjusted
Inventory levels of the Company and be usable and saleable in the ordinary and
usual course of business for the purposes for which intended, except to the
extent written down or reserved against on the Closing Date Balance
Sheet. Except as otherwise set forth in Schedule 4.7(d), the
Company’s Inventory is valued on the Company’s books of account in accordance
with GAAP (on an average cost basis) at the lower of cost or market, and the
value of obsolete materials, materials below standard quality and slow-moving
materials have been written down in accordance with GAAP.
(e) Except
as provided under the provisions of the agreements described in Schedule 4.7(e), the
Company has and will have as of the Closing Date legal and beneficial ownership
of its Properties, free and clear of any and all Liens.
(f) By
not later than April 30, 2009 or as soon thereafter as is practicable, the
Company Stockholders shall have caused the Company to obtain, from the
independent certified public accountant currently engaged by the Buyer (i) an
audit of the balance sheets of the Company as at December 31, 2007 and December
31, 2008, and (ii) an audit of the statements of income (loss) and statement of
cash flows of the Company for the following two (2) fiscal periods: (A) the date
of inception through December 31, 2007, and (B) the twelve months ended December
31, 2008 (collectively, the “Audited Financial
Statements”). Such Audited Financial Statements shall (i) have
been prepared in accordance with GAAP, (ii) include all footnotes and schedules
required under GAAP, and (ii) be prepared in the same manner as the financial
statements of the Buyer are prepared so as to comply with Regulation S-X, as
promulgated under the United States Securities Act of 1933, as
amended. Unless otherwise agreed to by the Parties, the auditors
regularly engaged to audit the financial statements of the Buyer shall also
prepare and audit the aforesaid Audited Financial Statements of the
Company.
4.8 Absence of Certain
Changes.
(a) Except
as otherwise set forth in Schedule 4.8(a)
attached hereto, since the Balance Sheet Date, there has not been:
(i) any
event, circumstance or change that had or might have a material adverse effect
on the business, operations, prospects, Properties, financial condition or
working capital of the Company;
(ii) any
damage, destruction or loss (whether or not covered by insurance) that had or
might have a material adverse effect on the business, operations, prospects,
Properties or financial condition of the Company; or
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(iii) any
material adverse change in the Company’s sales patterns, pricing policies,
accounts receivable or accounts payable.
(b) Except
as otherwise set forth in Schedule 4.8(b)
attached hereto, since the Balance Sheet Date, the Company has not done any of
the following:
(i)
merged into or with or consolidated with, any other corporation or acquired the
business or assets of any Person;
(ii)
purchased any securities of any Person;
(iii)
created, incurred, assumed, guaranteed or otherwise become liable or obligated
with respect to any indebtedness, or made any loan or advance to, or any
investment in, any person, except in each case in the ordinary course of
business;
(iv) made
any change in any existing election, or made any new election, with respect to
any tax law in any jurisdiction which election could have an effect on the tax
treatment of the Company or the Company’s business operations;
(v) entered
into, amended or terminated any material agreement;
(vi) sold,
transferred, leased, mortgaged, encumbered or otherwise disposed of, or agreed
to sell, transfer, lease, mortgage, encumber or otherwise dispose of, any
Properties except (i) in the ordinary course of business, or (ii) pursuant to
any agreement specified in Schedule
4.12;
(vii) settled
any claim or litigation, or filed any motions, orders, briefs or settlement
agreements in any proceeding before any Governmental Authority or any
arbitrator;
(viii) incurred
or approved, or entered into any agreement or commitment to make, any
expenditures in excess of USD $25,000 (other than those arising in the ordinary
course of business or those required pursuant to any agreement specified in
Schedule
4.12);
(ix) maintained
its books of account other than in the usual, regular and ordinary manner in
accordance with generally accepted accounting principles and on a basis
consistent with prior periods or made any change in any of its accounting
methods or practices that would be required to be disclosed under generally
accepted accounting principles;
(x) adopted
any Plan or Benefit Program or Agreement, or granted any increase in the
compensation payable or to become payable to directors, officers or employees
(including, without limitation, any such increase pursuant to any bonus,
profit-sharing or other plan or commitment), other than merit increases to
non-officer employees in the ordinary course of business and consistent with
past practice;
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(xi) suffered
any extraordinary losses or waived any rights of material value;
(xii) made
any payment to any Affiliate or forgiven any indebtedness due or owing from any
Affiliate to the Company;
(xiii) (A)
liquidated Inventory or accepted product returns other than in the ordinary
course, (B) accelerated receivables, (C) delayed payables, or (D) changed in any
material respect the Company’s practices in connection with the payment of
payables and/or the collection of receivables;
(xiv) engaged
in any one or more activities or transactions with an Affiliate or outside the
ordinary course of business;
(xv) declared,
set aside or paid any dividends, or made any distributions or other payments in
respect of its equity securities, or repurchased, redeemed or otherwise acquired
any such securities;
(xvi) amended
its charter or bylaws;
(xvii)
issued any capital stock or other securities, or granted, or entered into any
agreement to grant, any options, convertible rights, other rights, warrants,
calls or agreements relating to its capital stock; or
(xviii) committed
to do any of the foregoing.
4.9 Compliance with
Laws. Except as otherwise set forth in Schedule 4.9, to the
best knowledge of the Company the Company is and has been in compliance in all
respects with any and all Legal Requirements applicable to the Company, other
than failures to so comply that would not have an adverse effect on the
business, operations, prospects, Properties or financial condition of the
Company. Except as otherwise set forth in Schedule 4.9, the
Company (x) has not received or entered into any citations, complaints, consent
orders, compliance schedules, or other similar enforcement orders or received
any written notice from any Governmental Authority or any other written notice
that would indicate that there is not currently compliance with all such Legal
Requirements, except for failures to so comply that would not have an adverse
effect on the business, operations, prospects, Properties or financial condition
of the Company, and (y) to the best knowledge of the Company the Company is not
in default under, and no condition exists (whether covered by insurance or not)
that with or without notice or lapse of time or both would constitute a default
under, or breach or violation of, any Legal Requirement or Permit applicable to
the Company. Without limiting the generality of the foregoing, the
Company has not received notice of and) to the best knowledge of the
Company there is no basis for, any claim, action, suit, investigation
or proceeding that might result in a finding that the Company is not or has not
been in compliance with Legal Requirements relating to (a) the development,
testing, manufacture, packaging, distribution and marketing of products, (b)
employment, safety and health, (c) environmental protection, building, zoning
and land use and/or (d) the Foreign Corrupt Practices Act and the rules and
regulations promulgated thereunder.
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4.10 Litigation. Except
as otherwise set forth in Schedule 4.10, there
are no claims, actions, suits, investigations or proceedings against the Company
pending or, to the Knowledge of the Company, threatened in any court or before
or by any Governmental Authority, or before any arbitrator, that might have an
adverse effect (whether covered by insurance or not) on the business,
operations, prospects, Properties or financial condition of the Company and
there is no basis for any such claim, action, suit, investigation or
proceeding. Schedule 4.10 also
includes a true and correct listing of all material actions, suits,
investigations, claims or proceedings that were pending, settled or adjudicated
since inception.
4.11 Real
Property.
(a) Schedule 4.11(a) sets
forth a list of all real property or any interest therein (including without
limitation any option or other right or obligation to purchase any real property
or any interest therein) currently owned, or ever owned, by the Company, in each
case setting forth the street address and legal description of each property
covered thereby (the “Owned
Premises”).
(b) Schedule 4.11(b) sets
forth a list of all leases, licenses or similar agreements relating to the
Company’s use or occupancy of real estate owned by a third Party (“Leases”), true and
correct copies of which have previously been furnished to Buyer, in each case
setting forth (i) the lessor and lessee thereof and the commencement date, term
and renewal rights under each of the Leases, and (ii) the street address and
legal description of each property covered thereby (the “Leased
Premises”). The Leases and all guaranties with respect
thereto, are in full force and effect and have not been amended in writing or
otherwise, and no Party thereto is in default or breach under any such
Lease. No event has occurred which, with the passage of time or the
giving of notice or both, would cause a material breach of or default under any
of such Leases. Neither the Company nor its agents or employees have
received written notice of any claimed abatements, offsets, defenses or other
bases for relief or adjustment.
(c) With
respect to each Owned Premises and Leased Premises, as
applicable: (i) the Company has good, marketable and insurable fee
simple interest in the Owned Premises and a valid leasehold interest in the
Leased Premises, free and clear of any Liens, encumbrances, covenants and
easements or title defects that have had or could have an adverse effect on the
Company’s use and occupancy of the Owned Premises and the Leased Premises; (ii)
the portions of the buildings located on the Owned Premises and the Leased
Premises that are used in the business of the Company are each in good repair
and condition, normal wear and tear excepted, and are in the aggregate
sufficient to satisfy the Company’s current and reasonably anticipated normal
business activities as conducted thereon and, to the Knowledge of the Company,
there is no latent material defect in the improvements on any Owned Premises,
structural elements thereof, the mechanical systems (including, without
limitation, all heating, ventilating, air conditioning, plumbing, electrical,
utility and sprinkler systems) therein, the utility system servicing each Owned
Premises and the roofs which have not been disclosed to Buyer in writing prior
to the date of this Agreement; (iii) each of the Owned Premises and the Leased
Premises (a) has direct access to public roads or access to public roads by
means of a perpetual access easement, such access being sufficient to satisfy
the current transportation requirements of the business presently conducted at
such parcel; and (b) is served by all utilities in such quantity and quality as
are necessary and sufficient to satisfy the current normal business activities
conducted at such parcel; and (iv) the Company has not received notice of (a)
any condemnation, eminent domain or similar proceeding affecting any portion of
the Owned Premises or the Leased Premises or any access thereto, and, to the
Knowledge of the Company, no such proceedings are contemplated, (b) any special
assessment or pending improvement liens to be made by any governmental authority
which may affect any of the Owned Premises or the Leased Premises,
or (c) any violations of building codes and/or zoning ordinances or
other governmental regulations with respect to the Owned Premises or the Leased
Premises.
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4.12
Contracts.
(a) Except
as otherwise set forth in Schedule 4.12, the
Company is not a Party to or bound by any of the following, whether written or
oral:
(i) any
Contract that cannot by its terms be terminated by the Company with 30 days’ or
less notice without penalty or whose term continues beyond one year after the
date of this Agreement;
(ii) Contract
or commitment for capital expenditures by the Company in excess of $25,000 per
calendar quarter in the aggregate;
(iii) lease
or license with respect to any Properties, real or personal, whether as
landlord, tenant, licensor or licensee;
(iv) agreement,
Contract, indenture or other instrument relating to the borrowing of money or
the guarantee of any obligation or the deferred payment of the purchase price of
any Properties;
(v) partnership
or joint venture agreement;
(vi) Contract
or agreement with any Affiliate of the Company (including the Company
Stockholders);
(vii) agreement
for the sale of any assets that in the aggregate have a net book value on the
Company’s books of greater than $25,000;
(viii) agreement
that purports to limit the Company’s freedom to compete freely in any line of
business or in any geographic area;
(ix) preferential
purchase right, right of first refusal, or similar agreement; or
(x) other
Contract that is material to the business of the Company.
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(b)
All of the Contracts listed or required to be listed in Schedule 4.12 are
valid, binding and in full force and effect, and the Company has not been
notified or advised by any Party thereto of such Party’s intention or desire to
terminate or modify any such Contract in any respect, except as disclosed in
Schedule
4.12. Neither the Company nor, to the Knowledge of the
Company, any other Party is in breach of any of the terms or covenants of any
Contract listed or required to be listed in Schedule
4.12. Following the Closing, the Company will continue to be
entitled to all of the benefits currently held by the Company under each
Contract listed or required to be listed in Schedule
4.12.
(c) Except
as otherwise set forth in Schedule 4.12(c), the
Company is not a Party to or bound by any Contract or Contracts the terms of
which were arrived at by or otherwise reflect less-than-arm’s-length
negotiations or bargaining.
4.13 Insurance. Schedule 4.13 hereto
is a complete and correct list of all insurance policies (including, without
limitation, fire, liability, product liability, workers’ compensation and
vehicular) presently in effect that relate to the Company or its Properties,
including the amounts of such insurance and annual premiums with respect
thereto, all of which have been in full force and effect from and after the
date(s) set forth on Schedule 4.13. To the
Knowledge of the Company such policies are sufficient for compliance by the
Company with all applicable Legal Requirements and all material
Contracts. None of the insurance carriers has indicated to the
Company an intention to cancel any such policy or to materially increase any
insurance premiums (including, without limitation, workers’ compensation
premiums), or that any insurance required to be listed on Schedule 4.13 will
not be available in the future on substantially the same terms as currently in
effect. The Company has no claim pending or anticipated against any
of its insurance carriers under any of such policies and, to the Knowledge of
the Company, there has been no actual or alleged occurrence of any kind which
could reasonably be expected to give rise to any such claim. During
the prior three years, all notices required to have been given by the Company or
the Company Stockholders to any insurance company have been timely and duly
given, and no insurance company has asserted that any claim is not covered by
the applicable policy relating to such claim.
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4.14 Intangible
Rights. Set forth on Schedule 4.14 is a
list and description of all material foreign and domestic patents, patent
rights, trademarks, service marks, trade names, brands and copyrights (whether
or not registered and, if applicable, including pending applications for
registration) owned, Used, licensed or controlled by the Company and all
goodwill associated therewith. The Company owns or has the right to
use and shall as of the Closing Date own or have the right to use any and all
information, know-how, trade secrets, patents, copyrights, trademarks, trade
names, software, formulae, methods, processes and other intangible properties
that are necessary or customarily Used by the Company for the ownership,
management or operation of its Properties (“Intangible Rights”)
including, but not limited to, the Intangible Rights listed on Schedule
4.14. Except as set forth on Schedule 4.14, (i)
the Company is the sole and exclusive owner of all right, title and interest in
and to all of the Intangible Rights, and has the exclusive right to use and
license the same, free and clear of any claim or conflict with the Intangible
Rights of others; (ii) no royalties, honorariums or fees are payable by the
Company to any person by reason of the ownership or use of any of the Intangible
Rights; (iii) there have been no claims made against the Company asserting the
invalidity, abuse, misuse, or unenforceability of any of the Intangible Rights
and to the Knowledge of the Company no grounds for any such claims exist; (iv)
the Company has not made any claim of any violation or infringement by others of
any of its Intangible Rights or interests therein and, to the Knowledge of the
Company, no grounds for any such claims exist; (v) the Company has not received
any notice that it is in conflict with or infringing upon the asserted
intellectual property rights of others in connection with the Intangible Rights,
and neither the use of the Intangible Rights nor the operation of the Company’s
businesses is infringing or has infringed upon any intellectual property rights
of others; (vi) the Intangible Rights are sufficient and include all
intellectual property rights necessary for the Company to lawfully conduct its
business as presently being conducted; (vii) no interest in any of the Company’s
Intangible Rights has been assigned, transferred, licensed or sublicensed by the
Company to any person other than the Buyer pursuant to this Agreement; (viii) to
the extent that any item constituting part of the Intangible Rights has been
registered with, filed in or issued by, any Governmental Authority, such
registrations, filings or issuances are listed on Schedule 4.14 and were duly
made and remain in full force and effect; (ix) to the Knowledge of the Company,
there has not been any act or failure to act by the Company or any of its
directors, officers, employees, attorneys or agents during the prosecution or
registration of, or any other proceeding relating to, any of the Intangible
Rights or of any other fact which could render invalid or unenforceable, or
negate the right to issuance of any of the Intangible Rights; (x) to the extent
any of the Intangible Rights constitutes proprietary or confidential
information, the Company has adequately safeguarded such information from
disclosure; and (xi) all of the Company’s current Intangible Rights will remain
in full force and effect following the Closing without alteration or
impairment.
4.15 Equipment and Other Tangible
Property. Except as otherwise set forth on Schedule 4.15, the
Company’s equipment, furniture, machinery, vehicles, structures, fixtures and
other tangible property included in the Properties (the “Tangible Company
Properties”), other than Inventory, is suitable for the purposes for
which intended and in good operating condition and repair consistent with normal
industry standards, except for ordinary wear and tear, and except for such
Tangible Company Properties as shall have been taken out of service on a
temporary basis for repairs or replacement consistent with the Company’s prior
practices and normal industry standards. To the Knowledge of the
Company, the Tangible Company Properties are free of any structural or
engineering defects, and during the past five years there has not been any
significant interruption of the Company’s business due to inadequate maintenance
or obsolescence of the Tangible Company Properties.
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4.16 Permits; Environmental
Matters.
(a)
Except as otherwise set forth in Schedule 4.16(a), the
Company has all Permits necessary for the Company to own, operate, use and/or
maintain its Properties and to conduct its business and operations as presently
conducted and as expected to be conducted in the future. Except as
otherwise set forth in Schedule 4.16(a), all
such Permits are in effect, no proceeding is pending or, to the Knowledge of the
Company, threatened to modify, suspend or revoke, withdraw, terminate, or
otherwise limit any such Permits, and no administrative or governmental actions
have been taken or, to the Knowledge of the Company, threatened in connection
with the expiration or renewal of such Permits which could adversely affect the
ability of the Company to own, operate, use or maintain any of its Properties or
to conduct its business and operations as presently conducted and as expected to
be conducted in the future. Except as otherwise set forth in Schedule 4.16(a),to
the Knowledge of the Company (i) no violations have occurred that remain
uncured, un-waived, or otherwise unresolved, or are occurring in respect of any
such Permits, other than inconsequential violations, and (ii) no circumstances
exist that would prevent or delay the obtaining of any requisite consent,
approval, waiver or other authorization of the transactions contemplated hereby
with respect to such Permits that by their terms or under applicable law may be
obtained only after Closing.
(b)
Except as set forth on Schedule 4.16(b),
there are no claims, liabilities, investigations, litigation, administrative
proceedings, whether pending or, to the Knowledge of the Company, threatened, or
judgments or orders relating to any Hazardous Materials (collectively called
“Environmental
Claims”) asserted or threatened against the Company or relating to any
real property currently or formerly owned, leased or otherwise Used by the
Company. Neither the Company nor, to the Knowledge of the Company,
any prior owner, lessee or operator of said real property, has caused or
permitted any Hazardous Material to be used, generated, reclaimed, transported,
released, treated, stored or disposed of in a manner which could form the basis
for an Environmental Claim against the Company or the Buyer. Except
as set forth on Schedule 4.16(b), the
Company has not assumed any liability of any Person for cleanup, compliance or
required capital expenditures in connection with any Environmental
Claim.
(c)
Except as set forth on Schedule 4.16(c), to
the Knowledge of the Company no Hazardous Materials are or were stored or
otherwise located, and no underground storage tanks or surface impoundments are
or were located, on real property currently or formerly owned, leased or Used by
the Company or, to the Knowledge of the Company, on adjacent parcels of real
property, and no part of such real property or, to the Knowledge of the Company,
any part of such adjacent parcels of real property, including the groundwater
located thereon, is presently contaminated by Hazardous Materials.
(d)
Except as set forth on Schedule 4.16(d), to
the Knowledge of the Company the Company has been and is currently in compliance
with all applicable Environmental Laws, including obtaining and maintaining in
effect all Permits required by applicable Environmental Laws.
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4.17 Banks. Schedule 4.17 sets
forth (i) the name of each bank, trust company or other financial institution
and stock or other broker with which the Company has an account, credit line or
safe deposit box or vault, (ii) the names of all persons authorized to draw
thereon or to have access to any safe deposit box or vault, (iii) the purpose of
each such account, safe deposit box or vault, and (iv) the names of all persons
authorized by proxies, powers of attorney or other like instrument to act on
behalf of the Company in matters concerning any of its business or
affairs. Except as otherwise set forth in Schedule 4.17, no
such proxies, powers of attorney or other like instruments are
irrevocable.
4.18 Suppliers and
Customers. The Company has furnished the Buyer with a list
setting forth (i) the ten principal suppliers of the Company from the date of
its inception through December 31, 2008, together with the dollar amount of
goods purchased by the Company from each such supplier during each such period,
and (ii) the ten principal customers of the Company from the date of its
inception through December 31, 2008, together with the dollar amount of goods
and/or services sold by the Company to each such customer during each such
period. The Company maintains good relations with all suppliers and
customers as well as with governments, partners, financing sources and other
Parties with whom the Company has significant relations, and no such Party has
canceled, terminated or made any threat to the Company to cancel or otherwise
terminate its relationship with the Company or to materially decrease its
services or supplies to the Company or its direct or indirect purchase or usage
of the products or services of the Company.
4.19 Absence of Certain Business
Practices. Neither the Company, the Company Stockholders nor
any other Affiliate or to the Knowledge of the Company any agent of the Company,
or any other person acting on behalf of or associated with the Company, acting
alone or together, has (a) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic
benefits from any customer, supplier, employee or agent of any
customer or supplier which may reasonably effect business decisions; or
(b) given or agreed to give any money, gift or similar
benefit to any customer, supplier, employee or agent of any customer
or supplier, any official or employee of any government (domestic or foreign),
or any political Party or candidate for office (domestic or foreign), or other
person who was, is or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction), in each case which (i) may subject the Company to any damage or
penalty in any civil, criminal or governmental litigation or proceeding or (ii)
if not continued in the future, may reasonably adversely affect the assets,
business, operations or prospects of the Company.
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4.20 Products, Services and
Authorizations.
(a)
Each Product designed, manufactured, repaired or serviced by the Company has
been designed, manufactured, repaired or serviced in accordance with (i) the
specifications under which the Product is normally and has normally been
manufactured, and (ii) to the best Knowledge of the Company the
provisions of all applicable laws, policies, guidelines and any other
governmental requirements.
(b)
Schedule 4.20(b) sets
forth (i) a list of all Products which at any time have been recalled, withdrawn
or suspended by the Company, whether voluntarily or otherwise, including the
date recalled, withdrawn or suspended and a brief description of all completed
or pending proceedings seeking the recall, withdrawal, suspension or seizure of
any Product, (ii) a brief description of all completed or pending proceedings
seeking the recall, withdrawal, suspension or seizure of any Product, and (iii)
a list of all regulatory letters received by the Company or the Company
Stockholders or any of its agents relating to the Company or any of the Products
or the Company’s establishments.
(c)
There exists no set of facts which could reasonably be expected to furnish
a basis for the recall, withdrawal or suspension of any product registration,
product license, repair or overhaul license, manufacturing license, wholesale
dealers license, export license or other license, approval or consent of any
governmental or regulatory authority with respect to the Company or any of the
Products.
(d)
There are no claims existing or to the Knowledge of the Company threatened
under or pursuant to any warranty, whether express or implied, on products or
services sold by the Company. There are no claims existing and to the
Knowledge of the Company there is no basis for any claim against the Company for
injury to persons, animals or property as a result of the sale, distribution or
manufacture of any product or performance of any service by the Company,
including, but not limited to, claims arising out of the defective or unsafe
nature of its products or services. The Company has full and adequate
insurance coverage for products liability claims against it.
4.21 Transactions With
Affiliates. Except as set forth on Schedule 4.21 and except
for normal advances to employees consistent with past practices, payment of
compensation for employment to employees consistent with past practices, and
participation in scheduled Plans or Benefit Programs and Agreements by
employees, the Company has not purchased, acquired or leased any property or
services from, or sold, transferred or leased any property or services to, or
loaned or advanced any money to, or borrowed any money from, or entered into or
been subject to any management, consulting or similar agreement with, or engaged
in any other significant transaction with the Company Stockholders or any other
officer, director or shareholder of the Company or any of their respective
Affiliates. Except as set forth on Schedule 4.21, neither the Company
Stockholders, nor any other Affiliate of the Company is indebted to the Company
for money borrowed or other loans or advances, and the Company is not indebted
to any such Affiliate.
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4.22 Other
Information. The information furnished by the Company
Stockholders and the Company to Buyer pursuant to this Agreement (including,
without limitation, information contained in the exhibits hereto, the Schedules
identified herein, the instruments referred to in such Schedules and the
certificates and other documents to be executed or delivered pursuant hereto by
the Company Stockholders and/or the Company at or prior to the Closing) is not,
nor at the Closing will be, false or misleading in any material respect, or
contains, or at the Closing will contain, any misstatement of material fact, or
omits, or at the Closing will omit, to state any material fact required to be
stated in order to make the statements therein not misleading.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND
THE
BUYER
The
Parent and the Buyer hereby jointly and severally represents and warrants to the
Company and the Company Stockholders that:
5.1 Corporate Existence and
Qualification. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Hungary. The Buyer has
the corporate power to own, manage, lease and hold its Properties and to carry
on its business as and where such Properties are presently located and such
business is presently conducted; and the Buyer is qualified to do business as a
foreign corporation and in good standing in each jurisdiction in which it is
required by law to be so qualified.
5.2 Authority, Approval and
Enforceability. This Agreement has been duly executed and
delivered by the Parent and the Buyer, and each of the Parent and the Buyer have
all requisite power and legal capacity to execute and deliver this Agreement and
all Exhibits executed and delivered or to be executed and delivered in
connection with the transactions provided for hereby, to consummate the
transactions contemplated hereby and by the Exhibits, and to perform its
obligations hereunder and under the Exhibits. This Agreement and each
Exhibit to which any of the Parent and/or the Buyer is a Party
constitutes, or upon execution and delivery will constitute, the legal, valid
and binding obligation of such Party, enforceable in accordance with its terms,
except as such enforcement may be limited by general equitable principles or by
applicable bankruptcy, insolvency, moratorium, or similar laws and judicial
decisions from time to time in effect which affect creditors’ rights
generally.
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5.3 The Buyer Shares and
Corporate Records.
(a)
The authorized, issued and outstanding shares of capital stock of the
Buyer is set forth on Schedule 5.3 annexed
hereto ("the Buyer
Shares"). The Parent is the record and beneficial owner of one hundred
(100%) percent of the issued and outstanding of the Buyer Shares. The
Buyer Shares are owned by the Parent free and clear of all
Liens. Except for the Buyer Shares, there are no shares of capital
stock or other equity securities of the Buyer authorized, issued or
outstanding. No ordinary shares of common stock or other capital
shares are held in the Buyer’s treasury.
(b)
All of the outstanding Buyer Shares are duly authorized, validly issued,
fully paid and non-assessable and were not issued in violation of any: (i)
preemptive or other rights of any Person to acquire securities of the Buyer, or
(ii) applicable Hungarian Securities Laws. There are no outstanding
subscriptions, options, convertible securities, rights (preemptive or
otherwise), warrants, calls or agreements relating to any of the Buyer Shares or
other shares of capital stock or other securities of the Buyer. Upon
delivery to the Company Stockholders at Closing of certificates of Minority
Buyer Equity representing the Minority Interest, accompanied by stock powers
duly endorsed in blank, good and valid title to the Minority Buyer Equity will
pass to the Company Stockholders free and clear of all Liens of any kind, other
than those arising from acts of the Parent or the Buyer.
(c)
The copies of the Articles of Incorporation and Bylaws of the Buyer provided to
the Company Stockholders are true, accurate, and complete and reflect all
amendments made through the date of this Agreement. The Buyer’s stock
and minute books made available to the Company Stockholders for review were
correct and complete as of the date of such review, no further entries have been
made through the date of this Agreement, and such minute books contain an
accurate record of all shareholder and corporate actions of the shareholders and
directors (and any committees thereof) of the Buyer taken by written consent or
at a meeting since inception. All corporate actions taken by the
Buyer have been duly authorized or ratified. All accounts, books,
ledgers and official and other records of the Buyer fairly and accurately
reflect all of the Buyer’s transactions, properties, assets and
liabilities.
(d)
The Buyer does not own, directly or indirectly, any outstanding voting
securities of or other interests in any other corporation, partnership, joint
venture or other business entity.
5.4 No Defaults or
Consents. Except as otherwise set forth in Schedule 5.4 hereto,
the execution and delivery of this Agreement and the Exhibits by the Parent and
the Buyer and the performance by the Parent and the Buyer of their obligations
hereunder and there under will not violate any provision of law or any judgment,
award or decree or any indenture, agreement or other instrument to which the
Parent and/or the Buyer is a Party, or by which the properties or assets of the
Parent or the Buyer is bound or affected, or conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default under, any
such indenture, agreement or other instrument, in each case except to the extent
that such violation, default or breach could not reasonably be expected to delay
or otherwise significantly impair the ability of the Parties to consummate the
transactions contemplated hereby.
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5.5 No Buyer Defaults or
Consents. Except as otherwise set forth in Schedule 5.5 attached
hereto, neither the execution and delivery of this Agreement nor the carrying
out of any of the transactions contemplated hereby will:
(i) violate
or conflict with any of the terms, conditions or provisions of the charter or
bylaws of the Buyer;
(ii) violate
any Legal Requirements applicable to the Buyer;
(iii) violate,
conflict with, result in a breach of, constitute a default under (whether with
or without notice or the lapse of time or both), or accelerate or permit the
acceleration of the performance required by, or give any other Party the right
to terminate, any Contract or Permit binding upon or applicable to the
Buyer;
(iv) result
in the creation of any Lien, charge or other encumbrance on any Properties of
the Buyer; or
(v) require
either of the Parent or the Buyer to obtain or make any waiver, consent, action,
approval or authorization of, or registration, declaration, notice or filing
with, any private non-governmental third Party or any Governmental
Authority.
5.6 No
Proceedings. Except as set forth in the Parent’s Public
Filings, no suit, action or other proceeding is pending or, to the Knowledge of
the Buyer and the Parent, threatened before any Governmental Authority seeking
to restrain the Buyer or the Parent or prohibit their entry into this Agreement
or prohibit the Closing, or seeking damages against the Buyer or its Properties
as a result of the consummation of this Agreement.
5.7 Financial Statements;
Liabilities; Accounts Receivable; Inventories.
(a)
Parent has delivered to Company Stockholders (i) the consolidated audited
accounts of the Parent for the fiscal years ended December 31, 2006 and 2007
true and complete copies of the audited balance sheet, statement of operations
and statement of cash flows and (ii) copies of the unaudited balance sheet,
statement of operations and statement of cash flows of the Parent as at
September 30, 2008 and for the nine months then ended (the “Parent Financial
Statements”).
(b)
Buyer has delivered to Company Stockholders (i) audited accounts of Buyer for
the fiscal years ended December 31, 2006 and 2007 true and complete copies of
the audited balance sheet, statement of operations and statement of cash flows
and (ii) copies of the unaudited balance sheet, statement of operations and
statement of cash flows of Buyer as at December 31, 2008 and for the fiscal year
period then ended (the “Buyer Financial
Statements”) and are attached hereto as Schedule
5.7(a). Buyer’s Financial Statements have been prepared as per
U.S. GAAP (as the Parent) and Hungarian accounting standards and translated to
US GAAP applied on a consistent basis throughout the periods indicated. Such
Buyer Financial Statements present fairly the financial condition and results of
operations of the Buyer for the dates or periods indicated
thereon.
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(c)
Except for (i) security interests and liens on the assets of the Buyer to secure
indebtedness of the Parent and/or the Buyer not to exceed $250,000 in the
aggregate; (ii) trade payables and accrued expenses incurred in the ordinary
course of business, none of which are material, (iii) executory contract
obligations under (x) Contracts listed on Schedule 5.12, and/or
(y) Contracts not required to be listed on Schedule 5.12, (iv)
the liabilities set forth in Schedule 5.7(c) and
the (v) the Parent Loan Balance set forth in Schedule 2.2 attached
hereto, the Buyer does not have any liabilities or obligations (whether accrued,
absolute, contingent, known or otherwise, and whether or not of a nature
required to be reflected or reserved against in a balance sheet in accordance
with GAAP). The Parent shall be solely responsible to retire the
aforesaid indebtedness secured by the liens on the assets of the
Buyer.
(d)
Except as otherwise set forth in Schedule 5.7(d), the
accounts receivable reflected on the December 31, 2008 balance sheet included in
the Buyers Financial Statements referenced in this Section 5.7(a) and
all of the Buyer’s accounts receivable arising since December 31, 2008 (the
“Balance Sheet
Date”) arose from bona fide transactions in the ordinary course of
business, and the goods and services involved have been sold, delivered and
performed to the account obligors, and no further filings (with governmental
agencies, insurers or others) are required to be made, no further goods are
required to be provided and no further services are required to be rendered in
order to complete the sales and fully render the services and to entitle the
Buyer to collect the accounts receivable in full. Except as set forth
in Schedule
5.7(d), no such account has been assigned or pledged to any other person,
firm or corporation, and no defense or set-off to any such account has been
asserted by the account obligor or exists.
(e)
As of the date of Closing the Buyer has either a positive stockholders equity or
capital of not less than United States One Thousand Dollars (USD $1,000.00)
equivalent in Hungarian Forinth calculated at the then current rate of
exchange.
(f)
As of the date of Closing the Parent Loan Balance shall (i)
bear interest calculated at the rate of LIBOR for twelve month United
States dollars interbank deposits as fixed by the BBA plus a margin of 3%, such
interest to be paid annually in arrears (ii) be due and payable as to principal
and any interest accrued on the fifth anniversary of the Closing Date, (iii) not
be convertible into or exchangeable for capital shares of the Buyer, and (iv) be
subject and subordinated to all creditors of the Buyer and its consolidated
Subsidiaries, including the Company.
(g)
Except as otherwise set forth in Schedule 5.7(g), the
Inventory of the Buyer as of the Closing Date shall consist of items of a
quality, condition and quantity consistent with normal seasonally-adjusted
Inventory levels of the Buyer and be usable and saleable in the ordinary and
usual course of business for the purposes for which intended, except to the
extent written down or reserved against on the Closing Date Balance
Sheet. Except as otherwise set forth in Schedule 5.7(g), the
Buyer’s Inventory is valued on the Buyer’s books of account in accordance with
GAAP (on an average cost basis) at the lower of cost or market, and the value of
obsolete materials, materials below standard quality and slow-moving materials
have been written down in accordance with GAAP.
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(h) Except
as provided under the provisions of the agreements described in Schedule 5.7(h), the
Buyer has and will have as of the Closing Date legal and beneficial ownership of
its Properties, free and clear of any and all Liens.
5.8 Absence of Certain
Changes.
(a) Except
as otherwise set forth in Schedule 5.8(a)
attached hereto, since the Balance Sheet Date, there has not been:
(i) any
event, circumstance or change that had or might have a material adverse effect
on the business, operations, prospects, Properties, financial condition or
working capital of the Buyer;
(ii) any
damage, destruction or loss (whether or not covered by insurance) that had or
might have a material adverse effect on the business, operations, prospects,
Properties or financial condition of the Buyer; or
(iii) any
material adverse change in the Buyer’s sales patterns, pricing policies,
accounts receivable or accounts payable.
(b) Except
as otherwise set forth in Schedule 5.8(b)
attached hereto, since the Balance Sheet Date, the Buyer has not done any of the
following:
(i) merged
into or with or consolidated with, any other corporation or acquired the
business or assets of any Person;
(ii) purchased
any securities of any Person;
(iii) created,
incurred, assumed, guaranteed or otherwise become liable or obligated with
respect to any indebtedness, or made any loan or advance to, or any investment
in, any person, except in each case in the ordinary course of
business;
(iv) made
any change in any existing election, or made any new election, with respect to
any tax law in any jurisdiction which election could have an effect on the tax
treatment of the Buyer or the Buyer’s business operations;
(v) entered
into, amended or terminated any material agreement;
(vi) sold,
transferred, leased, mortgaged, encumbered or otherwise disposed of, or agreed
to sell, transfer, lease, mortgage, encumber or otherwise dispose of, any
Properties except (i) in the ordinary course of business, or (ii) pursuant to
any agreement specified in Schedule
5.8(b)(vi);
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(vii) settled
any claim or litigation, or filed any motions, orders, briefs or settlement
agreements in any proceeding before any court, any Governmental Authority or any
arbitrator;
(viii) incurred
or approved, or entered into any agreement or commitment to make, any
expenditures in excess of $5,000 (other than those arising in the ordinary
course of business or those required pursuant to any agreement specified in
Schedule
5.8(b)(viii);
(ix) maintained
its books of account other than in the usual, regular and ordinary manner in
accordance with generally accepted accounting principles and on a basis
consistent with prior periods or made any change in any of its accounting
methods or practices that would be required to be disclosed under generally
accepted accounting principles;
(x) adopted
any Plan or Benefit Program or Agreement, or granted any increase in the
compensation payable or to become payable to directors, officers or employees
(including, without limitation, any such increase pursuant to any bonus,
profit-sharing or other plan or commitment), other than merit increases to
non-officer employees in the ordinary course of business and consistent with
past practice;
(xi) suffered
any extraordinary losses or waived any rights of material value;
(xii) made
any payment to any Affiliate or forgiven any indebtedness due or owing from any
Affiliate to the Buyer;
(xiii) (A)
liquidated Inventory or accepted product returns other than in the ordinary
course, (B) accelerated receivables, (C) delayed payables, or (D) changed in any
material respect the Buyer’s practices in connection with the payment of
payables and/or the collection of receivables;
(xiv) engaged
in any one or more activities or transactions with an Affiliate or outside the
ordinary course of business;
(xv) declared,
set aside or paid any dividends, or made any distributions or other payments in
respect of its equity securities, or repurchased, redeemed or otherwise acquired
any such securities;
(xvi) amended
its charter or bylaws;
(xvii) issued
any capital stock or other securities, or granted, or entered into any agreement
to grant, any options, convertible rights, other rights, warrants, calls or
agreements relating to its capital stock; or
(xviii) committed
to do any of the foregoing.
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5.9 Compliance with
Laws. Except as otherwise set forth in Schedule 5.9, the
Parent and the Buyer is and has been in compliance in all respects with any and
all Legal Requirements applicable to the Buyer, other than failures to so comply
that would not have an adverse effect on the business, operations, prospects,
Properties or financial condition of the Buyer. Except as otherwise
set forth in Schedule
5.9, the Buyer (x) has not received or entered into any citations,
complaints, consent orders, compliance schedules, or other similar enforcement
orders or received any written notice from any Governmental Authority or any
other written notice that would indicate that there is not currently compliance
with all such Legal Requirements, except for failures to so comply that would
not have an adverse effect on the business, operations, prospects, Properties or
financial condition of the Buyer, and (y) is not in default under, and no
condition exists (whether covered by insurance or not) that with or without
notice or lapse of time or both would constitute a default under, or breach or
violation of, any Legal Requirement or Permit applicable to the
Buyer. Without limiting the generality of the foregoing, the Buyer
has not received notice of and there is no basis for, any claim, action, suit,
investigation or proceeding that might result in a finding that the Buyer is not
or has not been in compliance with Legal Requirements relating to (a) the
development, testing, manufacture, packaging, distribution and marketing of
products, (b) employment, safety and health, (c) environmental protection,
building, zoning and land use and/or (d) the Foreign Corrupt Practices Act and
the rules and regulations promulgated there under.
5.10 Litigation. Except
as otherwise set forth in Schedule 5.10, there
are no claims, actions, suits, investigations or proceedings against the Buyer
pending or, to the Knowledge of the Parent and the Buyer, threatened in any
court or before or by any Governmental Authority, or before any arbitrator, that
might have an adverse effect (whether covered by insurance or not) on the
business, operations, prospects, Properties or financial condition of the Parent
and / or the Buyer and there is no basis for any such claim, action, suit,
investigation or proceeding. Schedule 5.10 also
includes a true and correct listing of all material actions, suits,
investigations, claims or proceedings that were pending, settled or adjudicated
during the past three financial years and up to the date of
Closing.
5.11 Real
Property.
(a) Schedule 5.11(a) sets
forth a list of all real property or any interest therein (including without
limitation any option or other right or obligation to purchase any real property
or any interest therein) currently owned, or ever owned, by the Buyer, in each
case setting forth the street address and legal description of each property
covered thereby (the “Owned
Premises”).
(b) Schedule 5.11(b) sets
forth a list of all leases, licenses or similar agreements relating to the
Buyer’s use or occupancy of real estate owned by a third Party (“Leases”), true and
correct copies of which have previously been furnished to Buyer, in each case
setting forth (i) the lessor and lessee thereof and the commencement date, term
and renewal rights under each of the Leases, and (ii) the street address and
legal description of each property covered thereby (the “Leased
Premises”). The Leases and all guaranties with respect
thereto, are in full force and effect and have not been amended in writing or
otherwise, and no Party thereto is in default or breach under any such
Lease. No event has occurred which, with the passage of time or the
giving of notice or both, would cause a material breach of or default under any
of such Leases. Neither the Buyer nor its agents or employees have
received written notice of any claimed abatements, offsets, defenses or other
bases for relief or adjustment.
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(c) With
respect to each Owned Premises and Leased Premises, as
applicable: (i) the Buyer has good, marketable and insurable free
simple interest in the Owned Premises and a valid leasehold interest in the
Leased Premises, free and clear of any Liens, encumbrances, covenants and
easements or title defects that have had or could have an adverse effect on the
Buyer’s use and occupancy of the Owned Premises and the Leased Premises; (ii)
the portions of the buildings located on the Owned Premises and the Leased
Premises that are used in the business of the Buyer are each in good repair and
condition, normal wear and tear excepted, and are in the aggregate sufficient to
satisfy the Buyer’s current and reasonably anticipated normal business
activities as conducted thereon and, to the Knowledge of the Buyer, there is no
latent material defect in the improvements on any Owned Premises, structural
elements thereof, the mechanical systems (including, without limitation, all
heating, ventilating, air conditioning, plumbing, electrical, utility and
sprinkler systems) therein, the utility system servicing each Owned Premises and
the roofs which have not been disclosed to Buyer in writing prior to the date of
this Agreement; (iii) each of the Owned Premises and the Leased Premises (a) has
direct access to public roads or access to public roads by means of a perpetual
access easement, such access being sufficient to satisfy the current
transportation requirements of the business presently conducted at such parcel;
and (b) is served by all utilities in such quantity and quality as are necessary
and sufficient to satisfy the current normal business activities conducted at
such parcel; and (iv) the Buyer has not received notice of (a) any condemnation,
eminent domain or similar proceeding affecting any portion of the Owned Premises
or the Leased Premises or any access thereto, and, to the Knowledge of the
Buyer, no such proceedings are contemplated, (b) any special assessment or
pending improvement liens to be made by any governmental authority which may
affect any of the Owned Premises or the Leased Premises, or (c) any
violations of building codes and/or zoning ordinances or other governmental
regulations with respect to the Owned Premises or the Leased
Premises.
5.12 Contracts.
(a) Except
as otherwise set forth in Schedule 5.12, the
Buyer is not a Party to or bound by any of the following, whether written or
oral:
(i) any
Contract that cannot by its terms be terminated by the Buyer with 30 days’ or
less notice without penalty or whose term continues beyond one year after the
date of this Agreement;
(ii) Contract
or commitment for capital expenditures by the Buyer in excess of $25,000 per
calendar quarter in the aggregate;
(iii) lease
or license with respect to any Properties, real or personal, whether as
landlord, tenant, licensor or licensee;
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(iv) agreement,
contract, indenture or other instrument relating to the borrowing of money or
the guarantee of any obligation or the deferred payment of the purchase price of
any Properties;
(v) partnership
agreement;
(vi) contract
with any Affiliate of the Buyer (including the Parent);
(vii) agreement
for the sale of any assets that in the aggregate have a net book value on the
Buyer’s books of greater than $25,000;
(viii) agreement
that purports to limit the Buyer’s freedom to compete freely in any line of
business or in any geographic area;
(ix) preferential
purchase right, right of first refusal, or similar agreement; or
(x)
other Contract that is material to the business of the Buyer.
(b) All
of the Contracts listed or required to be listed in Schedule 5.12 are
valid, binding and in full force and effect, and the Buyer has not been notified
or advised by any Party thereto of such Party’s intention or desire to terminate
or modify any such Contract in any respect, except as disclosed in Schedule
5.12. Neither the Buyer nor, to the Knowledge of the Buyer,
any other Party is in breach of any of the terms or covenants of any Contract
listed or required to be listed in Schedule
5.12. Following the Closing, the Buyer will continue to be
entitled to all of the benefits currently held by the Buyer under each Contract
listed or required to be listed in Schedule
5.12.
(c) Except
as otherwise set forth in Schedule 5.12(c), the
Buyer is not a Party to or bound by any Contract or Contracts the terms of which
were arrived at by or otherwise reflect less-than-arm’s-length negotiations or
bargaining.
5.13 Insurance. Schedule 5.13 hereto
is a complete and correct list of all insurance policies (including, without
limitation, fire, liability, product liability, workers’ compensation and
vehicular) presently in effect that relate to the Buyer or its Properties,
including the amounts of such insurance and annual premiums with respect
thereto, all of which have been in full force and effect from and after the
date(s) set forth on Schedule
5.13. Such policies are sufficient for compliance by the Buyer
with all applicable Legal Requirements and all material
Contracts. None of the insurance carriers has indicated to the Buyer
an intention to cancel any such policy or to materially increase any insurance
premiums (including, without limitation, workers’ compensation premiums), or
that any insurance required to be listed on Schedule 5.13 will
not be available in the future on substantially the same terms as currently in
effect. The Buyer has no claim pending or anticipated against any of
its insurance carriers under any of such policies and, to the Knowledge of the
Buyer, there has been no actual or alleged occurrence of any kind which could
reasonably be expected to give rise to any such claim. During the
prior three years, all notices required to have been given by the Buyer or the
Parent to any insurance Buyer have been timely and duly given, and no insurance
Buyer has asserted that any claim is not covered by the applicable policy
relating to such claim.
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5.14 Intangible
Rights. Set forth on Schedule 5.14 is a
list and description of all material foreign and domestic patents, patent
rights, trademarks, service marks, trade names, brands and copyrights (whether
or not registered and, if applicable, including pending applications for
registration) owned, Used, licensed or controlled by the Buyer and all goodwill
associated therewith. The Buyer owns or has the right to use and
shall as of the Closing Date own or have the right to use any and all
information, know-how, trade secrets, patents, copyrights, trademarks, trade
names, software, formulae, methods, processes and other intangible properties
that are necessary or customarily Used by the Buyer for the ownership,
management or operation of its Properties (“Intangible Rights”)
including, but not limited to, the Intangible Rights listed on Schedule
5.14. Except as set forth on Schedule 5.14(i) the
Buyer is the sole and exclusive owner of all right, title and interest in and to
all of the Intangible Rights, and has the exclusive right to use and license the
same, free and clear of any claim or conflict with the Intangible Rights of
others; (ii) no royalties, honorariums or fees are payable by the Buyer to any
person by reason of the ownership or use of any of the Intangible Rights; (iii)
there have been no claims made against the Buyer asserting the invalidity,
abuse, misuse, or unenforceability of any of the Intangible Rights and no
grounds for any such claims exist; (iv) the Buyer has not made any claim of any
violation or infringement by others of any of its Intangible Rights or interests
therein and, to the Knowledge of the Buyer, no grounds for any such claims
exist; (v) the Buyer has not received any notice that it is in conflict with or
infringing upon the asserted intellectual property rights of others in
connection with the Intangible Rights, and neither the use of the Intangible
Rights nor the operation of the Buyer’s businesses is infringing or has
infringed upon any intellectual property rights of others; (vi) the Intangible
Rights are sufficient and include all intellectual property rights necessary for
the Buyer to lawfully conduct its business as presently being conducted; (vii)
no interest in any of the Buyer’s Intangible Rights has been assigned,
transferred, licensed or sublicensed by the Buyer to any person other than the
Buyer pursuant to this Agreement; (viii) to the extent that any item
constituting part of the Intangible Rights has been registered with, filed in or
issued by, any Governmental Authority, such registrations, filings or issuances
are listed on Schedule 5.14 and were duly made and remain in full force and
effect; (ix) to the Knowledge of the Buyer, there has not been any act or
failure to act by the Buyer or any of its directors, officers, employees,
attorneys or agents during the prosecution or registration of, or any other
proceeding relating to, any of the Intangible Rights or of any other fact which
could render invalid or unenforceable, or negate the right to issuance of any of
the Intangible Rights; (x) to the extent any of the Intangible Rights
constitutes proprietary or confidential information, the Buyer has adequately
safeguarded such information from disclosure; and (xi) all of the Buyer’s
current Intangible Rights will remain in full force and effect following the
Closing without alteration or impairment.
5.15 Equipment and Other Tangible
Property. Except as otherwise set forth on Schedule 5.15, the
Buyer’s equipment, furniture, machinery, vehicles, structures, fixtures and
other tangible property included in the Properties (the “Tangible Buyer
Properties”), other than Inventory, is suitable for the purposes for
which intended and in good operating condition and repair consistent with normal
industry standards, except for ordinary wear and tear, and except for such
Tangible Buyer Properties as shall have been taken out of service on a temporary
basis for repairs or replacement consistent with the Buyer’s prior practices and
normal industry standards. To the Knowledge of the Buyer, the
Tangible Buyer Properties are free of any structural or engineering defects, and
during the past five years there has not been any significant interruption of
the Buyer’s business due to inadequate maintenance or obsolescence of the
Tangible Buyer Properties.
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5.16 Permits; Environmental
Matters.
(a) Except
as otherwise set forth in Schedule 5.16(a), the
Buyer has all Permits necessary for the Buyer to own, operate, use and/or
maintain its Properties and to conduct its business and operations as presently
conducted and as expected to be conducted in the future. Except as
otherwise set forth in Schedule 5.16(a) ,
all such Permits are in effect, no proceeding is pending or, to the Knowledge of
the Buyer, threatened to modify, suspend or revoke, withdraw, terminate, or
otherwise limit any such Permits, and no administrative or governmental actions
have been taken or, to the Knowledge of the Buyer, threatened in connection with
the expiration or renewal of such Permits which could adversely affect the
ability of the Buyer to own, operate, use or maintain any of its Properties or
to conduct its business and operations as presently conducted and as expected to
be conducted in the future. Except as otherwise set forth in Schedule 5.16(a)(i)
no violations have occurred that remain uncured, un-waived, or otherwise
unresolved, or are occurring in respect of any such Permits, other than
inconsequential violations, and (ii) no circumstances exist that would prevent
or delay the obtaining of any requisite consent, approval, waiver or other
authorization of the transactions contemplated hereby with respect to such
Permits that by their terms or under applicable law may be obtained only after
Closing.
(b) Except
as set forth on Schedule 5.16(b),
there are no claims, liabilities, investigations, litigation, administrative
proceedings, whether pending or, to the Knowledge of the Buyer, threatened, or
judgments or orders relating to any Hazardous Materials (collectively called
“Environmental
Claims”) asserted or threatened against the Buyer or relating to any real
property currently or formerly owned, leased or otherwise Used by the
Buyer. Neither the Buyer nor, to the Knowledge of the Buyer, any
prior owner, lessee or operator of said real property, has caused or permitted
any Hazardous Material to be used, generated, reclaimed, transported, released,
treated, stored or disposed of in a manner which could form the basis for an
Environmental Claim against the Buyer or the Buyer. Except as set
forth on Schedule
5.16(b), the Buyer has not assumed any liability of any Person for
cleanup, compliance or required capital expenditures in connection with any
Environmental Claim.
(c) Except
as set forth on Schedule 5.16(c), no
Hazardous Materials are or were stored or otherwise located, and no underground
storage tanks or surface impoundments are or were located, on real property
currently or formerly owned, leased or used by the Buyer or, to the Knowledge of
the Buyer, on adjacent parcels of real property, and no part of such real
property or, to the Knowledge of the Buyer, any part of such adjacent parcels of
real property, including the groundwater located thereon, is presently
contaminated by Hazardous Materials.
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(d) Except
as set forth on Schedule 5.16(d), the
Buyer has been and is currently in compliance with all applicable Environmental
Laws, including obtaining and maintaining in effect all Permits required by
applicable Environmental Laws.
5.17 Banks. Schedule 5.17 sets
forth (i) the name of each bank, trust Buyer or other financial institution and
stock or other broker with which the Buyer has an account, credit line or safe
deposit box or vault, (ii) the names of all persons authorized to draw thereon
or to have access to any safe deposit box or vault, (iii) the purpose of each
such account, safe deposit box or vault, and (iv) the names of all persons
authorized by proxies, powers of attorney or other like instrument to act on
behalf of the Buyer in matters concerning any of its business or
affairs. Except as otherwise set forth in Schedule 5.17, no
such proxies, powers of attorney or other like instruments are
irrevocable.
5.18 Suppliers and
Customers. Schedule 5.18 sets
forth (i) the ten principal suppliers of the Buyer from in the year 2007 and
2008 through December 31, 2008, together with the dollar amount of goods
purchased by the Buyer from each such supplier during each such period, and (ii)
the ten principal customers of the Buyer in the year 2007 and 2008 through
December 31, 2008, together with the dollar amount of goods and/or services sold
by the Buyer to each such customer during each such period. Except as
otherwise set forth in Schedule 5.18, the
Buyer maintains good relations with all suppliers and customers listed or
required to be listed in Schedule 5.18 as well
as with governments, partners, financing sources and other Parties with whom the
Buyer has significant relations, and no such Party has canceled, terminated or
made any threat to the Buyer to cancel or otherwise terminate its relationship
with the Buyer or to materially decrease its services or supplies to the Buyer
or its direct or indirect purchase or usage of the products or services of the
Buyer.
5.19 Absence of Certain Business
Practices. Neither the Buyer, the Parent nor any other
Affiliate or agent of the Buyer, or any other person acting on behalf of or
associated with the Buyer, acting alone or together, has (a) received, directly
or indirectly, any rebates, payments, commissions, promotional allowances or any
other economic benefits, regardless of their nature or type, from any customer,
supplier, employee or agent of any customer or supplier; or (b) directly or
indirectly given or agreed to give any money, gift or similar benefit to any
customer, supplier, employee or agent of any customer or supplier, any official
or employee of any government (domestic or foreign), or any political Party or
candidate for office (domestic or foreign), or other person who was, is or may
be in a position to help or hinder the business of the Buyer (or assist the
Buyer in connection with any actual or proposed transaction), in each case which
(i) may expose the Buyer to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii) if not given in the past, may have
had an adverse effect on the assets, business, operations or prospects of the
Buyer, or (iii) if not continued in the future, may adversely affect the assets,
business, operations or prospects of the Buyer.
5.20 Products, Services and
Authorizations.
(a)
Each Product designed, manufactured, repaired or
serviced by the Buyer has been designed, manufactured, repaired or serviced in
accordance with (i) the specifications under which the Product is normally and
has normally been manufactured, and (ii) the provisions of all applicable laws,
policies, guidelines and any other governmental requirements.
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(b) Schedule 5.20(b) sets
forth (i) a list of all Products which at any time have been recalled, withdrawn
or suspended by the Buyer, whether voluntarily or otherwise, including the date
recalled, withdrawn or suspended and a brief description of all completed or
pending proceedings seeking the recall, withdrawal, suspension or seizure of any
Product, (ii) a brief description of all completed or pending proceedings
seeking the recall, withdrawal, suspension or seizure of any Product, and (iii)
a list of all regulatory letters received by the Buyer or the Parent or any of
its agents relating to the Buyer or any of the Products or the Buyer’s
establishments.
(c) There
exists no set of facts which could reasonably be expected to furnish a basis for
the recall, withdrawal or suspension of any product registration, product
license, repair or overhaul license, manufacturing license, wholesale dealers
license, export license or other license, approval or consent of any
governmental or regulatory authority with respect to the Buyer or any of the
Products.
(d) There
are no claims existing or threatened under or pursuant to any warranty, whether
express or implied, on products or services sold by the Buyer. There
are no claims existing and there is no basis for any claim against the Buyer for
injury to persons, animals or property as a result of the sale, distribution or
manufacture of any product or performance of any service by the Buyer,
including, but not limited to, claims arising out of the defective or unsafe
nature of its products or services. The Buyer has full and adequate
insurance coverage for products liability claims against it.
5.21
Transactions
With Affiliates. Except as set forth on Schedule 5.21 and
except for normal advances to employees consistent with past practices, payment
of compensation for employment to employees consistent with past practices, and
participation in scheduled Plans or Benefit Programs and Agreements by
employees, the Buyer has not purchased, acquired or leased any property or
services from, or sold, transferred or leased any property or services to, or
loaned or advanced any money to, or borrowed any money from, or entered into or
been party to any management, consulting or similar agreement with, or engaged
in any other significant transaction with the Parent or any other officer,
director of the Buyer or any of their respective Affiliates. Except
as set forth on Schedule 5.21, neither the Parent, nor any other Affiliate of
the Buyer is indebted to the Buyer for money borrowed or other loans or
advances, and the Buyer is not indebted to any such Affiliate.
5.22 Other
Information. The information furnished by the Parent and the
Buyer to the Company and the Company Stockholders pursuant to this Agreement
(including, without limitation, information contained in the exhibits hereto,
the Schedules identified herein, the instruments referred to in such Schedules
and the certificates and other documents to be executed or delivered pursuant
hereto by the Parent and/or the Buyer at or prior to the Closing) is not, nor at
the Closing will be, false or misleading in any material respect, or contains,
or at the Closing will contain, any misstatement of material fact, or omits, or
at the Closing will omit, to state any material fact required to be stated in
order to make the statements therein not misleading.
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Notwithstanding
anything to the contrary contained in this Article V, the Parent and the Buyer
shall be deemed to have made adequate disclosure to the Company and the Company
Stockholders with respect to any item required to be listed on a Schedule set
forth in this Article V, if such information is contained in the Parent Public
Filings which have been furnished to the Company Stockholders and their legal
representatives.
ARTICLE VI.
COVENANTS AND AGREEMENTS OF THE PARTIES
A.)
With regard to the Company and the Company Stockholders the Company and
the Company Stockholders hereto do hereby covenant and agree, as
follows:
6.1 Buyer’s Access to
Information and Properties. The Company Stockholders and the
Company shall permit Buyer and its authorized employees, agents, accountants,
legal counsel and other representatives to have access to the books, records,
employees, counsel, accountants, engineers and other representatives of the
Company at all times reasonably requested by Buyer for the purpose of conducting
an investigation of the Company’s financial condition, corporate status,
operations, prospects, business and Properties. The Company shall
make available to Buyer for examination and reproduction all documents and data
of every kind and character relating to the Company in possession or control of,
or subject to reasonable access by, the Company and/or the Company Stockholders,
including, without limitation, all files, records, data and information relating
to the Properties (whether stored in paper, magnetic or other storage media) and
all agreements, instruments, contracts, assignments, certificates, orders, and
amendments thereto. Also, the Company shall allow Buyer access to,
and the right to inspect, the Properties, except to the extent that such
Properties are operated by a third-Party operator, in which case the Company
shall use its best efforts to cause the operator of such Properties to allow
Buyer access to, and the right to inspect, such Properties.
6.2 Company’s Conduct of
Business and Operations. The Company Stockholders shall keep
Buyer advised as to all material operations and proposed material operations
relating to the Company. The Company shall (a) conduct its business
in the ordinary course, (b) keep available the services of present employees,
(c) maintain and operate its Properties in a good and workmanlike manner, (d)
pay or cause to be paid all costs and expenses (including but not limited to
insurance premiums) incurred in connection therewith in a timely manner, (e) use
reasonable efforts to keep all Contracts listed or required to be listed on
Schedule 4.13
in full force and effect, (f) comply with all of the covenants contained in all
such material Contracts, (g) maintain in force until the Closing Date insurance
policies equivalent to those in effect on the date hereof, and (h) comply in all
material respects with all applicable Legal Requirements. Except as
otherwise contemplated in this Agreement, the Company will use its best efforts
to preserve the present relationships of the Company with persons having
significant business relations therewith.
6.3 General
Restrictions. Except as otherwise expressly permitted in this
Agreement, between the date of this Agreement and the Closing Date, without the
prior written consent of Buyer, which consent shall not be unreasonably
withheld, the Company shall not do any of the following, and the Company
Stockholders shall not permit the Company to do any of the
following:
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(i) declare,
set aside or pay any dividends, or make any distributions or other payments in
respect of its equity securities, or repurchase, redeem or otherwise acquire any
such securities;
(ii) merge
into or with or consolidate with, any other corporation or acquire the business
or assets of any person;
(iii)
purchase any securities of any person;
(iv)
amend its charter or bylaws (unless otherwise required by the
present agreement);
(v) issue
any capital stock or other securities, or grant, or enter into any agreement to
grant, any options, convertibility rights, other rights, warrants, calls or
agreements relating to its securities;
(vi) create,
incur, assume, guarantee or otherwise become liable or obligated with respect to
any indebtedness, or make any loan or advance to, or any investment in, any
person, except in each case in the ordinary course of business;
(vii) make
any change in any existing election, or make any new election, with respect to
any tax law in any jurisdiction which election could have an effect on the tax
treatment of the Company or the Company’s business operations;
(viii) enter
into, amend or terminate any material agreement except in the ordinary course of
business consistent with past business practices;
(ix) sell,
transfer, lease, mortgage, encumber or otherwise dispose of, or agree to sell,
transfer, lease, mortgage, encumber or otherwise dispose of, any Properties
except (i) in the ordinary course of business, or (ii) pursuant to any agreement
specified in Schedule 4.13;
(x) settle
any material claim or litigation, or file any material motions, orders, briefs
or settlement agreements in any proceeding before any Governmental Authority or
any arbitrator;
(xi) other
than in the ordinary course of business consistent with past practices, incur or
approve, or enter into any agreement or commitment to make, any expenditures in
excess of $50,000 (other than those required pursuant to any agreement specified
in Schedule 4.13);
(xii) maintain
its books of account other than in the usual, regular and ordinary manner in
accordance with generally accepted accounting principles and on a basis
consistent with prior periods or make any change in any of its accounting
methods or practices;
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(xiii) make
any change, whether written or oral, to any agreement or understanding with any
of the suppliers or customers listed except in the ordinary course of business
consistent with past business practices; or required to be listed on Schedule
4.19;
(xiv) accelerate
or delay collection of any notes or accounts receivable in advance of or beyond
their regular due dates or the dates when they would have been collected in the
ordinary course of business consistent with past practices;
(xv) delay
or accelerate payment of any accrued expense, trade payable or other liability
beyond or in advance of its due date or the date when such liability would have
been paid in the ordinary course of business consistent with past
practices;
(xvi) allow
its levels of inventory to vary in any material respect from the levels
customarily maintained;
(xvii) adopt
any Plan or Benefit Program or Agreement or increase the compensation payable to
any employee (including, without limitation, any increase pursuant to any bonus,
profit-sharing or other incentive plan or commitment);
(xviii) become
a Party to or bound by any of the arrangements described in Section 4.13(a),
whether written or oral;
(xix) engage
in any one or more activities or transactions outside the ordinary course of
business;
(xx) enter
into any transaction or make any commitment which could result in any of the
representations, warranties or covenants of the Company and/or Company
Stockholders contained in this Agreement not being true and correct after the
occurrence of such transaction or event; or
(xxi)
commit to do any of the foregoing.
6.4 Notice Regarding
Changes. The Company Stockholders shall promptly inform Buyer
in writing of any change in facts and circumstances that could render any of the
representations and warranties made herein by the Company and/or the Company
Stockholders inaccurate or misleading if such representations and warranties had
been made upon the occurrence of the fact or circumstance in
question. The Buyer shall promptly inform the Company Stockholders in
writing of any change in facts and circumstances that could render any of the
representations and warranties made herein by it inaccurate or misleading if
such representations and warranties had been made upon the occurrence of the
fact or circumstance in question.
6.5 Maintenance of Insurance
Policies. The Company shall take all actions necessary or
appropriate to cause any and all insurance coverage currently carried by or for
the benefit of the Company to remain in full force and effect.
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6.6 Casualty
Loss. If, between the date of this Agreement and the Closing,
any of the Properties of the Company shall be destroyed or damaged in whole or
in part by fire, earthquake, flood, other casualty or any other cause, then the
Company shall, at Buyer’s election, (i) cause such Properties to be repaired or
replaced prior to the Closing with Properties of substantially the same
condition and function, , or (ii) enter into contractual arrangements
satisfactory to Buyer so that the Company will have at the Closing the same
economic value as if such casualty had not occurred.
6.7 Employee
Matters.
(a) The
Company shall permit Buyer to contact and make arrangements with the Company’s
employees for the purpose of assuring their continued employment by the Company
after the Closing and for the purpose of ensuring the continuity of the
Company’s business, and the Company agrees not to discourage any such employees
from consulting with Buyer.
(b) The
Company shall use its best efforts to keep available the services of its present
employees through the Closing Date.
(c) On
or before the Closing Date, the Company Stockholders, the Buyer and the Company
shall have established an employee bonus and/or equity incentive program for key
employees of the Company (other than the Company Stockholders) that shall be
acceptable to the Parties hereto.
6.8 No
Shop. From the date of this Agreement until the earlier of (i)
the Closing Date, or (ii) the termination of this Agreement, the Company shall
not, and the Company Stockholders shall not cause the Company’s officers,
directors, employees and other agents to, directly or indirectly, take any
action to solicit, initiate or encourage any offer or proposal or indication of
interest in a merger, consolidation or other business combination involving any
equity interest in, or a substantial portion of the assets of the Company, other
than in connection with the transactions contemplated by this
Agreement. The Company shall immediately advise the Buyer of the
terms of any offer, proposal or indication of interest that it receives or
otherwise becomes aware of.
6.9 Employment
Agreements. On the Closing Date (a) the Buyer shall enter into an
employment agreement with I. Krafcsik, substantially in the form of Exhibit
A-1 annexed hereto and made a part hereof, and (b) the Buyer shall enter
into an employment agreement with X. Xxxxxxx, substantially in the form of Exhibit
A-2 annexed hereto and made a part hereof (the “Employment
Agreements”).
6.10 Legal
Opinions. On the Closing Date, the Company shall furnish to
the Buyer, in form and content satisfactory to Buyer and its counsel, the
favorable legal opinion of Dr. David Xxxx, Xxxxxxxxx Xxxxx, Esqs., legal counsel
to the Company and the Company Stockholders, with respect to the matters set
forth in Section 4.1 through Section 4.4 of this Agreement. In
rendering such opinions, such counsel may rely as to factual matters on
certificates of officers and directors of the Company and on certificates of
governmental officials.
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6.11 Audited Financial Statements
and Company Backlog Requirement.
(a) On
or before April 30, 2009 or as soon thereafter as is practicable, the Company
shall deliver to the Buyer and the Parent the Audited Financial Statements of
the Company contemplated by Section 4.7(f) of
this Agreement.
(b) On
the Closing Date, the Company shall have a backlog of firm equipment orders
reasonably acceptable to the Buyer of a minimum of 6 Megawatts, the delivery and
installation of which will generate a turnover of US$ 12,000,000 and an
anticipated profit contribution of USD $3,000,000 during the twelve month period
following the Closing Date.
B.) With
regard to the Parent and the Buyer the Parent and the Buyer do hereto do hereby
covenant and agree, as follows:
6.12 Company Stockholders' Access
to Information and Properties. The Parent and the Buyer shall
permit the Company Stockholders and its authorized employees, agents,
accountants, legal counsel and other representatives to have access to the
books, records, employees, counsel, accountants, engineers and other
representatives of the Buyer at all times reasonably requested by the Company
Stockholders for the purpose of conducting an investigation of the Buyers'
financial condition, corporate status, operations, prospects, business and
Properties. The Buyer shall make available to the Company
Stockholders for examination and reproduction all documents and data of every
kind and character relating to the Buyer in possession or control of, or subject
to reasonable access by, the Parent and/or the Buyer, including, without
limitation, all files, records, data and information relating to the Properties
(whether stored in paper, magnetic or other storage media) and all agreements,
instruments, contracts, assignments, certificates, orders, and amendments
thereto. Also, the Buyer shall allow the Company Stockholders access
to, and the right to inspect, the Properties, except to the extent that such
Properties are operated by a third-Party operator, in which case the Buyer shall
use its best efforts to cause the operator of such Properties to allow the
Company Stockholders access to, and the right to inspect, such
Properties.
6.13 Buyers’s Conduct of Business
and Operations. The Parent and the Buyer shall keep the
Company Stockholders advised as to all material operations and proposed material
operations relating to the Buyer and shall conduct its business in the ordinary
course consistent with past business practices
6.14 General
Restrictions. Except as otherwise expressly permitted in this
Agreement, between the date of this Agreement and the Closing Date, without the
prior written consent of Buyer, which consent shall not be unreasonably
withheld, the Buyer shall not do any of the following, and the Parent shall not
permit the Buyer to do any of the following:
(i)
declare, set aside or pay any dividends, or make any distributions or other
payments in respect of its equity securities, or repurchase, redeem or otherwise
acquire any such securities;
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(ii) merge
into or with or consolidate with, any other corporation or acquire the business
or assets of any person;
(iii) purchase
any securities of any person;
(iv)
amend its charter or bylaws;
(v) issue
any capital stock or other securities, or grant, or enter into any agreement to
grant, any options, convertibility rights, other rights, warrants, calls or
agreements relating to its securities;
(vi)
create, incur, assume, guarantee or otherwise become liable or obligated with
respect to any indebtedness, or make any loan or advance to, or any investment
in, any person, except in each case in the ordinary course of
business;
(vii) enter
into, amend or terminate any material agreement except in the ordinary course of
business;
(viii) sell,
transfer, lease, mortgage, encumber or otherwise dispose of, or agree to sell,
transfer, lease, mortgage, encumber or otherwise dispose of, any Properties
except (i) in the ordinary course of business, or (ii) pursuant to any agreement
specified in Schedule 5.13(viii);
(ix) settle
any material claim or litigation, or file any material motions, orders, briefs
or settlement agreements in any proceeding before any Governmental Authority or
any arbitrator;
(x) other
than in the ordinary course of business consistent with past practices, incur or
approve, or enter into any agreement or commitment to make, any expenditures in
excess of $50,000 (other than those required pursuant to any agreement specified
in Schedule 5.13(x);
(xi) maintain
its books of account other than in the usual, regular and ordinary manner in
accordance with generally accepted accounting principles and on a basis
consistent with prior periods or make any change in any of its accounting
methods or practices;
(xii) make
any change, whether written or oral, to any agreement or understanding with any
of the suppliers or customers listed or required to be listed on Schedule
5.19;
(xiii) accelerate
or delay collection of any notes or accounts receivable in advance of or beyond
their regular due dates or the dates when they would have been collected in the
ordinary course of business consistent with past practices;
(xiv) delay
or accelerate payment of any accrued expense, trade payable or other liability
beyond or in advance of its due date or the date when such liability would have
been paid in the ordinary course of business consistent with past
practices;
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(xv) allow
its levels of inventory to vary in any material respect from the levels
customarily maintained;
(xvi) adopt
any Plan or Benefit Program or Agreement or increase the compensation payable to
any employee (including, without limitation, any increase pursuant to any bonus,
profit-sharing or other incentive plan or commitment);
(xvii) become
a Party to or bound by any of the arrangements described in Section 5.13(a) ,
whether written or oral;
(xviii) engage
in any one or more activities or transactions outside the ordinary course of
business;
(xix) enter
into any transaction or make any commitment which could result in any of the
representations, warranties or covenants of the Company and/or Company
Stockholders contained in this Agreement not being true and correct after the
occurrence of such transaction or event; or
(xx) commit
to do any of the foregoing.
6.15 Notice Regarding
Changes. The Buyer shall promptly inform the Company
Stockholders in writing of any change in facts and circumstances that could
render any of the representations and warranties made herein by the Parent
and/or the Buyer inaccurate or misleading if such representations and warranties
had been made upon the occurrence of the fact or circumstance in
question. The Buyer shall promptly inform the Company Stockholders in
writing of any change in facts and circumstances that could render any of the
representations and warranties made herein by it inaccurate or misleading if
such representations and warranties had been made upon the occurrence of the
fact or circumstance in question.
6.16 Maintenance of Insurance
Policies. The Buyer shall take all actions necessary or
appropriate to cause any and all insurance coverage currently carried by or for
the benefit of the Buyer to remain in full force and effect.
6.17 Casualty
Loss. If, between the date of this Agreement and the Closing,
any of the Properties of the Buyer shall be destroyed or damaged in whole or in
part by fire, earthquake, flood, other casualty or any other cause, then the
Buyer shall, at Company Stockholders’ election, (i) cause such Properties to be
repaired or replaced prior to the Closing with Properties of substantially the
same condition and function, (ii) deposit in a separate account an amount
sufficient to cause such Properties to be so repaired or replaced, or (iii)
enter into contractual arrangements satisfactory to Company Stockholders so that
the Buyer will have at the Closing the same economic value as if such casualty
had not occurred.
6.18 No
Shop. From the date of this Agreement until the earlier of (i)
the Closing Date, or (ii) the termination of this Agreement, the Parent shall
not, and the Parent shall not cause the Buyer and the Buyer shall not and its
officers, directors, employees and other agents to, directly or indirectly,
shall not take any action to solicit, initiate or encourage any offer or
proposal or indication of interest in a merger, consolidation or other business
combination involving any equity interest in, or a substantial portion of the
assets of the Buyer, other than in connection with the transactions contemplated
by this Agreement. The Parent and the Buyer shall immediately advise
the Company Stockholders of the terms of any offer, proposal or indication of
interest that it receives or otherwise becomes aware of.
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6.19 Legal
Opinions. On the Closing Date, the Buyer shall
furnish to the Company Stockholders, in form and content satisfactory to the
Company Stockholders and its counsel, the favorable legal opinion of Xxxxxxx
Xxxx LLP and Xxxx Stiefenhofer Xxxx, legal counsel to the Parent and the Parent
and the Buyer, respectively, with respect to the matters contemplated by Section 7.1(g) of
this Agreement.
C.) All
the Parties hereto do hereby covenant and agree, as follows:
6.20 Settlement of EPV Solar
Agreements. Unless this condition shall be waived
by mutual agreement of all Parties, on or before the Closing Date, the Parent or
the Buyer shall have terminated the provisions of Article 6 of agreements
between the Buyer and Energy Photovoltaics, Inc. (“EPV Solar”) dated
September 23, 2002 and December 29, 2005 (collectively the “EPV Solar
Agreements”) or shall have entered into such settlement agreement or
other business arrangement with EPV Solar as shall be reasonably acceptable to
the Parties hereto.
6.21 Ensure Conditions
Met. Subject to the terms and conditions of this Agreement,
each of the Parties hereto shall use all reasonable commercial efforts to take
or cause to be taken all actions and do or cause to be done all things required
under applicable Legal Requirements in order to consummate the transactions
contemplated hereby, including, without limitation, (i) obtaining all Permits,
authorizations, consents and approvals of any Governmental Authority or other
person which are required for or in connection with the consummation of the
transactions contemplated hereby and by the Exhibits, (ii) taking any and all
reasonable actions necessary to satisfy all of the conditions to each Party’s
obligations hereunder as set forth in Article VI, and (iii) executing and
delivering all agreements and documents required by the terms hereof to be
executed and delivered by such Party on or prior to the Closing.
6.22 Payment of Transaction
Expenses and Bonuses. The Company Stockholders and
the Company, the Parent and the Buyer hereby agree that: (a) all
legal, accounting and other transaction expenses incurred by the Buyer, the
Parent, the Company Stockholders and/or the Company in connection with the
transactions contemplated by this Agreement, including the audit of the Audited
Financial Statements of the Company (collectively, “Transaction
Expenses”) shall be borne by the Buyer and (b) all Taxes to be
incurred by the Company or the Company Stockholders in connection with the
transactions contemplated by this Agreement, and all bonuses, incentive payments
and other remuneration (in excess of current salaries) payable to the principal
executive and any other member of the management of the Company (the “Bonus Compensation”),
paid or payable by the Company shall be borne solely by the Company
Stockholders. In such connection, the Parties acknowledge that
through February 28, 2009 a total of (U.S.) $167,696.71 in accrued and unpaid
legal fees are invoiced to the Buyer by Xxxxxxx Xxxx LLP.. The
accepted legal fees shall be paid by the Buyer as follows: (a) $75,000 on April
15, 2009, and (b) the balance in three equal monthly installments commencing May
15, 2009.
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6.23 Corporate Services
Agreement. The Parties hereto do hereby
acknowledge that on the Closing Date, the Buyer and the Company will enter into
a corporate services agreement with the Parent, in the form of Exhibit
2 to the Shareholders Agreement made a part hereof (the “Corporate Services
Agreement”), pursuant to which the Parent shall be paid the sum of
$450,000 per year to cover certain corporate overhead, executive management and
professional advisory services provided by the Parent to the Buyer and the
Company.
6.24 Inter-Company Services
Agreement. The Parties hereto do hereby
acknowledge that on the Closing Date, the Buyer and the Company will enter into
an inter-company services agreement with Solar Thin Power, Inc., a majority
owned subsidiary of the Parent (“Solar Thin Power”),
in the form of Exhibit
C annexed hereto and made a part hereof (the “Inter-Company Services
Agreement”).
ARTICLE VII.
CONDITIONS TO PARTIES’ OBLIGATIONS
7.1 Conditions to Obligations of
the Company and the Company Stockholders. The obligations of
the Company Stockholders and the Company to carry out the transactions
contemplated by this Agreement are subject, at the option of the Company
Stockholders and the Company, to the satisfaction or waiver of the following
conditions:
(a) Buyer
shall have furnished Company Stockholders with a certified copy of all necessary
board of directors and corporate action on its behalf approving its execution,
delivery and performance of this Agreement.
(b) All
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects at and as of the Closing, and Parent
and Buyer shall have performed and satisfied in all material respects all
covenants and agreements required by this Agreement to be performed and
satisfied by Buyer at or prior to the Closing.
(c) Except
for matters disclosed in Schedule 5.9(a) or
Schedule 5.9(b)
attached hereto, since the December 31, 2008 Balance Sheet Date and up to and
including the Closing, there shall not have been any event, circumstance, change
or effect that, individually or in the aggregate, had or might have a material
adverse effect on the Buyer’s business, operations, prospects, Properties or
financial condition.
(d) The
Company Stockholders shall have completed its due diligence investigation, and
the results thereof shall not have revealed that any of the representations of
the Buyer or the Parent set forth herein are untrue or incorrect in any respect
or otherwise be unsatisfactory to the Company Stockholders
(e) All
proceedings to be taken by the Buyer in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Company Stockholders and its counsel, and the Company
Stockholders and said counsel shall have received all such counterpart originals
or certified or other copies of such documents as it or they may reasonably
request.
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(f)
As of the Closing Date, no suit, action or other proceeding (excluding any
such matter initiated by or on behalf of the Company, or Company Stockholders)
shall be pending or threatened before any Governmental Authority seeking to
restrain the Company or prohibit the Closing or seeking Damages against the
Company as a result of the consummation of this Agreement.
(g) The
Company Stockholders and the Company shall have received the opinion(s) of Xxxx
Xxxxxxxxxxxx Xxxx and Xxxxxxx Xxxx, LLP, counsel to Buyer, dated as of the
Closing Date, in form and substance reasonably satisfactory to the Company, with
respect to the matters set forth in Sections 5.1, 5.2 and 5.3(i). In
rendering such opinion, such legal counsel may rely as to factual matters on
certificates of officers and directors of Buyer and on certificates of
governmental officials, and (i) as to matters of Hungarian law, on the legal
opinion of Xxxx Stiefenhofer Xxxx, and (ii) as to matters of United States law,
on the legal opinion of Xxxxxxx Xxxx LLP.
(h) The
Buyer shall have made the deliveries set forth in Section 3.3
above.
(i)
A condition precedent to Closing will be:
(A) The
transactions contemplated by Section 2.2 and by
Section 2.3. of this Agreement shall have been completed; and
(B) Buyer
shall have executed and delivered the Employment Agreements of Xxxxxx Xxxxxxxx
and Xxxxxx Xxxxxxx in the form attached hereto as Exhibit A-1 and Exhibit A-2,
respectively.
(j)
The Parent, the Buyer shall have executed and delivered to the
Company Stockholders a shareholders agreement between the Parent, the Buyer and
the Company Stockholders, to be executed and delivered on the Closing Date. and
in substantially the form annexed hereto as Exhibit
B and made a part hereof (the “Shareholders
Agreement”).
(k) The
Parent and the Buyer shall have made the deliveries contemplated by Section 3.3
of this Agreement.
7.2 Conditions to Obligations of
the Parent and the Buyer. The obligations of the Parent and
the Buyer to carry out the transactions contemplated by this Agreement are
subject, at the option of the Parent and the Buyer, to the satisfaction, or
waiver by the Parent and the Buyer, of the following conditions:
(a) All
representations and warranties of the Company and the Company Stockholders
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing, and the Company and the Company Stockholders shall
have performed and satisfied in all material respects all agreements and
covenants required by this Agreement to be performed and satisfied by them at or
prior to the Closing.
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(b) As
of the Closing Date, no suit, action or other proceeding (excluding any such
matter initiated by or on behalf of the Parent or the Buyer) shall be pending or
threatened before any court or governmental agency seeking to restrain the
Parent or the Buyer or prohibit the Closing or seeking Damages against the
Parent or the Buyer or the Company or its Properties as a result of the
consummation of this Agreement.
(c) Except
for matters disclosed in Schedule 4.9(a) or
Schedule 4.9(b)
attached hereto, since the Balance Sheet Date and up to and including the
Closing, there shall not have been any event, circumstance, change or effect
that, individually or in the aggregate, had or might have a material adverse
effect on the Company’s business, operations, prospects, Properties or financial
condition.
(d) The
Buyer shall have received the opinion of legal counsel to the Company and the
Company Stockholders referred to in Section 6.11 above, dated as of the Closing
Date, addressed to the Buyer and the Parent and in form and substance reasonably
satisfactory to the Buyer and the Parent.
(e) Each
of the Company Stockholders and the Company shall have furnished Buyer with a
certified copy of all necessary corporate or other action on its behalf
approving the Company’s execution, delivery and performance of this
Agreement.
(f) All
agreements, commitments and understandings between the Company and any Affiliate
thereof shall have been terminated in all respects on terms satisfactory to
Buyer, and all obligations, claims or entitlements thereunder shall be
unconditionally waived and released by such Affiliates and written evidence
thereof satisfactory in form and substance to Buyer shall have been delivered to
Buyer.
(g) The
Buyer shall have completed its due diligence investigation, and the results
thereof shall not have revealed that any of the representations of the Company
or the Company Stockholders set forth herein are untrue or incorrect in any
respect or otherwise be unsatisfactory to Buyer.
(h) All
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to Buyer and its counsel, and Buyer and said counsel shall
have received all such counterpart originals or certified or other copies of
such documents as it or they may reasonably request.
(i) No
proceeding in which the Buyer, the Company Stockholders or the Company shall be
a debtor, defendant or Party seeking an order for its own relief or
reorganization shall have been brought or be pending by or against such person
under any United States or state bankruptcy or insolvency law.
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(j) The
Company shall be free and clear of all debt and liabilities (other than such
debts and liabilities and Funded Indebtedness incurred in the ordinary course of
its business as are acceptable to Buyer based on its due diligence) and that no
dividends or other distributions to NPI or other Company Stockholders will have
been made prior to the Closing Date.
(l) On
the Closing Date, I. Krafcsik and X. Xxxxxxx shall have each executed and
delivered the Employment Agreements.
(m) On
the Closing Date, the Company Stockholders (including I. Krafcsik and X.
Xxxxxxx) shall have executed and delivered to the Parent and the Buyer the
Shareholders Agreement .
(n) The
Company Stockholders shall have made the deliveries contemplated by Section 3.2 of this
Agreement.
(o) The
Company shall have delivered to the Buyer and the Parent the Audited Financial
Statements as contemplated by Section 4.7(f) and
Section 6.11(a)
of this Agreement.
ARTICLE VIII.
POST-CLOSING AGREEMENTS AND OBLIGATIONS
8.1 Further
Assurances. Following the Closing, the Company, the Company
Stockholders, the Buyer and the Parent shall execute and deliver such documents,
and take such other action, as shall be reasonably requested by any other Party
hereto to carry out the transactions contemplated by this
Agreement.
8.2 Publicity. None
of the Parties hereto shall issue or make, or cause to have issued or made, any
public release or announcement concerning this Agreement or the transactions
contemplated hereby, without the advance approval in writing of the form and
substance thereof by each of the other Parties, except as and to the extent
required by law (in which case, so far as possible, there shall be consultation
among the Parties prior to such announcement), and the Parties shall endeavor
jointly to agree on the text of any announcement or circular so approved or
required.
8.3 Post-Closing
Indemnity
8.3.1 From
and after the Closing, the Company Stockholders shall indemnify and hold
harmless the Company, the Parent, the Buyer and their Affiliates, directors,
officers and employees from and against any and all Damages in accordance with
and subject to the limitations set forth in Section 10.1 of this
Agreement.
8.3.2
From and after the Closing, the Parent shall indemnify and hold harmless the
Company Stockholders, Buyer, the Company and their Affiliates, directors,
officers and employees from and against any and all Damages in accordance with
and subject to the limitations set forth in Section 10.2 of this
Agreement.
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8.4 Non-Competition,
Non-Solicitation and Non-Disclosure.
(a) General. In
order to induce the Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, the Company Stockholders do each hereby
covenant and agree as follows:
(i) Without
the prior written consent of the Buyer, none of the Company Stockholders or any
of their Affiliates shall, for a period of five (5) years from and after the
Closing Date:
(A) directly or indirectly acquire
or own in any manner any interest in any person, firm, partnership, corporation,
association or other entity which engages or plans to engage in any facet of the
business of the Company or which competes or plans to compete in any way with
the “Business” (as hereinafter defined) of the Buyer, the Company, the Parent or
any of the direct or indirect subsidiaries or joint venture partners of the
Buyer, the Company or the Parent (collectively, the “STF Companies”),
anywhere in the world (the “Territory”);
(B) be employed by or serve as an
employee, agent, officer, director of, or as a consultant to, any person, firm,
partnership, corporation, association or other entity which engages or plans to
engage in any facet of the Business of the STF Companies or which competes or
plans to compete in any way with Business of the STF Companies within the
Territory, or
(C) utilize his special knowledge of
the business of the Company and his or its relationships with customers,
suppliers and others to compete with STF Companies in the Business;
provided, however, that nothing
herein shall be deemed to prevent the Company Stockholders from acquiring
through market purchases and owning, solely as an investment, less than three
percent (3%) in the aggregate of the equity securities of any class of any
issuer whose shares are registered under §12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended, and are listed or admitted for trading on any
United States national securities exchange or are quoted on the National
Association of Securities Dealers Automated Quotation System, or any similar
system of automated dissemination of quotations of securities prices in common
use, so long as Company Stockholders is not a member of any “control group”
(within the meaning of the rules and regulations of the United States Securities
and Exchange Commission) of any such issuer.
As used
herein the term “Business” shall mean
the manufacture, assembly, sale or distribution, individually and/or with third
Persons, of equipment to manufacture solar panels or modules of all kinds, (b)
the manufacture, assembly sale or distribution, individually and/or with third
Persons, of solar panels or modules, and (c) the manufacture, assembly,
installation and/or operation, individually and/or with third Persons, of
turn-key solar panel manufacturing facilities.
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The
Company Stockholders acknowledge and agree that the covenants provided for in
this Section
8.4(a) are reasonable and necessary in terms of time, area and line of
business to protect the Company’s Trade Secrets. The Company
Stockholders further acknowledge and agree that such covenants are reasonable
and necessary in terms of time, area and line of business to protect the
Company’s legitimate business interests, which include its interests in
protecting the Company’s (i) valuable confidential business information, (ii)
substantial relationships with customers throughout the United States, Europe,
Asia and the world, and (iii) customer goodwill associated with the ongoing
business of the Company. Company Stockholders expressly authorizes
the enforcement of the covenants provided for in this Section 8.4(a) by (A)
the Company and its subsidiaries, (B) the Company’s permitted assigns, and (C)
any successors to the Company’s business. To the extent that the
covenants provided for in this Section 8.4(a) may
later be deemed by a court to be too broad to be enforced with respect to its
duration or with respect to any particular activity or geographic area, the
court making such determination shall have the power to reduce the duration or
scope of the provision, and to add or delete specific words or phrases to or
from the provision. The provision as modified shall then be
enforced.
(ii)
Without the prior consent of Buyer, for a period of five (5) years from the
Closing Date, the Company Stockholders shall not directly or indirectly, for
himself or for any other person, firm, corporation, partnership, association or
other entity: (i) attempt to employ or enter into any contractual arrangement
with any employee or former employee of any of the STF Companies, unless such
employee or former employee has not been employed by one or more of the STF
Companies for a period in excess of nine months, and/or (ii) call on or solicit
any of the actual or targeted prospective customers or clients of any of the STF
Companies, nor shall the Company Stockholders make known the names and addresses
of such customers or any information relating in any manner to the STF Companies
business relationships with such customers.
(iii) The
Company Stockholders shall not at any time divulge, communicate, use to the
detriment of the Company or for the benefit of any other person or persons, or
misuse in any way, any Confidential Information pertaining to the STF
Companies. Any confidential information or data now known or
hereafter acquired by any of the Company Stockholders with respect to any of the
STF Companies shall be deemed a valuable, special and unique asset of such STF
Companies that is received by the Company Stockholders in confidence and as a
fiduciary, and the Company Stockholders shall remain a fiduciary to each of the
STF Companies with respect to all of such information.
(b) Injunction. It
is recognized and hereby acknowledged by the Parties hereto that a breach or
violation by either the Company Stockholders of any or all of the covenants and
agreements contained in this Section 8.4 may cause
irreparable harm and damage to Buyer in a monetary amount which may be virtually
impossible to ascertain. As a result, each of the Company
Stockholders recognizes and hereby acknowledges that Buyer or any one or more of
the other STF Companies shall be entitled to an injunction from any court of
competent jurisdiction enjoining and restraining any breach or violation of any
or all of the covenants and agreements contained in this Section 8.4 by either
the Company Stockholders, and/or its or his associates, Affiliates, partners or
agents, either directly or indirectly, and that such right to injunction shall
be cumulative and in addition to whatever other rights or remedies the Buyer or
such STF Companies may possess hereunder, at law or in
equity. Nothing contained in this Section 8.4 shall be
construed to prevent Buyer of any of the STF Companies from seeking and
recovering from the Company Stockholders damages sustained by it as a result of
any breach or violation by the Company Stockholders of any of the covenants or
agreements contained herein.
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(c) Termination of
Covenants. Notwithstanding
the provisions of this Section 8.4, the
covenants and obligations of the Company Stockholders set forth in this Section 8.4 shall
terminate in the event, and only in the event, that a court of competent
jurisdiction from which no appeal can or shall be taken shall determine that the
Parent or the Buyer has committed (and shall have failed to cure within 30 days
of written notice of such breach) a breach or violation of one or more of the
employer’s covenants and agreements set forth in the five (5) year Employment
Agreements, that involves (i) a material change without just cause in the nature
of such Company Stockholder’s duties under his Employment Agreement, (ii) the
failure by the Company to timely pay the compensation to which the Company
Stockholders is entitled to receive under his Employment Agreement, or (iii)
another act or omission by the Company that is sufficiently material to have
justified the Company Stockholders to unilaterally terminate such Employment
Agreement.
ARTICLE
IX. TAX
MATTERS
9.1 Company Representations and
Obligations Regarding Taxes. The Company represents and
warrants to and agree with the Buyer as follows:
(a) The
Company has filed all Tax Returns that it was required to file. All
such Tax Returns were, to the Knowledge of the Company Stockholders, correct and
complete in all respects. All Taxes owed by the Company (whether or
not shown on any Tax Return and whether or not any Tax Return was required) have
been paid. The Company is not currently the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by a
taxing authority in a jurisdiction where the Company does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There
are no liens on any of the assets of the Company that arose in connection with
any failure (or alleged failure) to pay any Tax, except for liens for Taxes not
yet due.
(b) To
the Knowledge of the Company Stockholders, the Company has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third Party.
(c) Schedule 9.1(c) sets
forth the following information with respect to the Company as of the most
recent practicable date (as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the transactions contemplated
hereby): (i) the basis of the Company in its assets; and (ii) the
amount of any net operating loss, net operating loss carryover, net capital
loss, net capital loss carryover, Tax credit, Tax credit carryover or excess
charitable contribution of the Company.
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(d) The
Company shall grant to Buyer or its designees access at all reasonable times to
all of the Company’s books and records (including tax work papers and returns
and correspondence with tax authorities), including the right to take extracts
therefrom and make copies thereof, to the extent such books and records relate
to taxable periods ending on or prior to or that include the Closing
Date. Buyer shall (i) grant to Company Stockholders access at all
reasonable times to all of the Company’s books and records (including tax work
papers and returns and correspondence with tax authorities), including the right
to take extracts therefrom and make copies thereof, to the extent that such
books and records relate to the operations of the Company during taxable periods
ending on or prior to or that include the Closing Date, and (ii) otherwise
cooperate with Company Stockholders in connection with any audit of Taxes that
relate to the business of the Company prior to Closing.
(e) The
transfer of the Subject Shares to Buyer pursuant to the terms of this Agreement
will not result in any Tax liability to the Company or result in a reduction of
the amount of any net operating loss, net operating loss carryover, net capital
loss, net capital loss carryover, Tax credit, Tax credit carryover, excess
charitable contribution or basis of property that otherwise would be available
to the Company by reason or as a result of deferred intercompany transactions,
excess loss accounts, or otherwise.
(f) Buyer
shall be responsible for preparing and filing, or causing the Company to prepare
and file, all Tax Returns of the Company required to be filed after the Closing
Date. Company Stockholders shall pay to Buyer within five (5) days
after the date on which Taxes are paid with respect to periods beginning before
the Closing Date and ending on or after the Closing Date an amount equal to the
portion of those Taxes that relates to the portion of the taxable period ending
on the Closing Date. For purposes of this Agreement, in the case of
any period that begins before the Closing Date and ends after the Closing Date,
any tax based directly or indirectly on gross or net income or receipts or
imposed in respect of specific transactions, and any credits available with
respect to any Tax, shall be allocated by assuming that the taxable period ended
on the Closing Date, and any other tax shall be allocated based on the number of
days in the taxable period ending on the Closing Date divided by the total
number of days in the taxable period.
9.2 Company Stockholders
Indemnification for Taxes.
(a) The
Company Stockholders hereby agrees to indemnify, jointly and severally, Buyer
and each of its Subsidiaries, including, after the Closing, the Company (each
herein sometimes referred to as an “Indemnified
Taxpayer”) against, and agrees to protect, save and hold harmless each
Indemnified Taxpayer from, any and all claims, damages, deficiencies and losses
and all expenses, including, without limitation, attorneys’, accountants’ and
experts’ fees and disbursements (all herein referred to as “Losses”) resulting
from:
(i) A
claim by any taxing authority for (A) any Taxes of the Company allocable to any
period ending on or prior to the Closing Date or allocable to any period that
begins before and ends after the Closing Date, and (B) any Taxes of the Company
or any corporation that is or was a member of an Affiliated Group of which the
Company was or is a member;
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(ii) Any
misrepresentation or breach of any representation, warranty or obligation set
forth in this Article IX.
(b) Subject
to the resolution of any Tax contest pursuant to Section 9.2(c), upon notice
from Buyer to the Company Stockholders that an Indemnified Taxpayer is entitled
to an indemnification payment for a Loss pursuant to Section 9.2(a), the Company
Stockholders shall thereupon pay to the Indemnified Taxpayer an amount that, net
of any Taxes imposed on the Indemnified Taxpayer with respect to such payment,
will indemnify and hold the Indemnified Taxpayer harmless from such
Loss.
(c)
(i) If a claim shall be made by
any taxing authority that, if successful, would result in the indemnification of
an Indemnified Taxpayer, the Indemnified Taxpayer shall promptly notify the
Company Stockholders in writing of such fact; provided, however, that any
failure to give such notice will not waive any rights of the Indemnified
Taxpayer except to the extent the rights of the indemnifying Party are actually
materially prejudiced.
(ii) The
Company Stockholders shall have the right to defend the Indemnified Taxpayer
against such claim with counsel of its choice satisfactory to the Indemnified
Taxpayer so long as (A) the Company Stockholders notifies the Indemnified
Taxpayer in writing within 15 days after the Indemnified Taxpayer has given
notice of such claim that the Company Stockholders will indemnify the
Indemnified Taxpayer from and against the entirety of any Losses the Indemnified
Taxpayer may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the claim, (B) the Company Stockholders provides the
Indemnified Taxpayer with evidence acceptable to the Indemnified Taxpayer that
the Company Stockholders will have the financial resources to defend against the
claim and fulfill his indemnification obligations hereunder, (C) if requested by
the Indemnified Taxpayer, the Company Stockholders provides to the Indemnified
Taxpayer an opinion, in form and substance reasonably satisfactory to
the Indemnified Taxpayer, of counsel satisfactory to the Indemnified Taxpayer,
that there exists a reasonable basis for the Company to prevail in that contest,
(D) if the Indemnified Taxpayer is requested to pay the Tax claimed
and xxx for a refund, the Company Stockholders shall have advanced to the
Indemnified Taxpayer, on an interest free basis, the full amount the Indemnified
Taxpayer is required to pay, and (E) the Company Stockholders conducts the
defense of the claim actively and diligently.
(iii) Subject
to the provisions of paragraph (ii) above, Company Stockholders shall be
entitled to prosecute such contest to a determination in a court of initial
jurisdiction, and if Company Stockholders shall reasonably request, to a
determination in an appellate court provided that, if requested by the
Indemnified Taxpayer, Company Stockholders shall provide to the Indemnified
Taxpayer an opinion, in form and substance satisfactory to the Indemnified
Taxpayer, of counsel satisfactory to the Indemnified Taxpayer, that there exists
a reasonable basis for the Company to prevail on that appeal.
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(iv) The
Company Stockholders shall not be entitled to settle or to contest any claim
relating to Taxes if the settlement of, or an adverse judgment with respect to,
the claim would be likely, in the good faith judgment of the Indemnified
Taxpayer, to cause the liability for any Tax of the Indemnified Taxpayer or of
any Affiliate of the Indemnified Taxpayer for any taxable period ending after
the Closing Date to increase (including, without limitation, by making any
election or taking any action having the effect of making any election, by
deferring the inclusion of any amount in income or by accelerating the deduction
of any amount or the claiming of any credit) or to take a position that, if
applied to any taxable period ending after the Closing Date, would be adverse to
the interest of the Indemnified Taxpayer or any Affiliate of the Indemnified
Taxpayer.
(v) If,
after actual receipt by the Indemnified Taxpayer of an amount advanced by
Company Stockholders pursuant to paragraph (ii)(D) above, the extent of the
liability of the Indemnified Taxpayer with respect to the indemnified matter
shall be established by the judgment or decree of a court that has become final
or a binding settlement with an administrative agency having jurisdiction
thereof that has become final, the Indemnified Taxpayer shall promptly pay to
Company Stockholders any refund received by or credited to the Indemnified
Taxpayer with respect to the indemnified matter (together with any interest paid
or credited thereon by the taxing authority and any recovery of legal fees from
such taxing authority); provided, however, that the
Indemnified Taxpayer shall have been indemnified and held harmless from all
Losses by reason of any indemnification payments retained by the Indemnified
Taxpayer net of any Taxes imposed on the Indemnified Taxpayers with respect to
indemnification payments received by the Indemnified Taxpayer or with respect to
the receipt of any payment from the taxing authority. Notwithstanding
the foregoing, the Indemnified Taxpayer shall not be required to make any
payment hereunder before such time as Company Stockholders shall have made all
payments or indemnities then due with respect to Indemnified Taxpayer pursuant
to this Article IX.
(vi) If
any of the conditions in Section 9.2(c)(ii) above are or become unsatisfied, (A)
the Indemnified Taxpayer may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the claim in any manner
it may deem appropriate (and the Indemnified Taxpayer need not consult with, or
obtain any consent from, Company Stockholders in connection therewith), (B)
Company Stockholders will reimburse the Indemnified Taxpayer promptly and
periodically for the costs of defending against the claim (including, without
limitation, attorneys’, accountants’ and experts’ fees and disbursements) and
(C) Company Stockholders will remain responsible for any Losses the Indemnified
Taxpayer may suffer to the fullest extent provided in this Section
9.2.
(d) Anything
to the contrary in this Agreement notwithstanding, the indemnification
obligations of the Company Stockholders under this Article IX shall survive the
Closing until the end of the applicable statutes of limitations. With
respect to any indemnification obligation for any Tax for which a taxing
authority asserts a claim within 90 days before the end of the applicable
statute of limitations, an Indemnified Taxpayer shall be treated as having
provided timely notice to Company Stockholders by providing written notice to
Company Stockholders on or before the 90th day after the Indemnified Taxpayer’s
receipt of a written assertion of the claim by the taxing
authority.
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9.3 Buyer Representations and
Obligations Regarding Taxes. The Parent and the Buyer
represent and warrant to and agree with the Company Stockholders as
follows:
(a) The
Buyer has filed all Tax Returns that it was required to file. All
such Tax Returns were correct and complete in all respects. All Taxes
owed by the Buyer (whether or not shown on any Tax Return and whether or not any
Tax Return was required) have been paid. The Buyer is not currently the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by a taxing authority in a
jurisdiction where the Buyer does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no liens on any
of the assets of the Buyer that arose in connection with any failure (or alleged
failure) to pay any Tax, except for liens for Taxes not yet due.
(b) The
Buyer has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third Party.
(c) Schedule 9.3(c) sets
forth the following information with respect to the Buyer as of the most recent
practicable date (as well as on an estimated pro forma basis as of the Closing
giving effect to the consummation of the transactions contemplated
hereby): (i) the basis of the Buyer in its assets; and (ii) the
amount of any net operating loss, net operating loss carryover, net capital
loss, net capital loss carryover, Tax credit, Tax credit carryover or excess
charitable contribution of the Buyer.
(d) The
Buyer shall grant to the Company Stockholders or its designees access at all
reasonable times to all of the Buyer’s books and records (including tax work
papers and returns and correspondence with tax authorities), including the right
to take extracts there from and make copies thereof, to the extent such books
and records relate to taxable periods ending on or prior to or that include the
Closing Date. Buyer shall (i) grant to Company Stockholders access at
all reasonable times to all of the Buyer’s books and records (including tax work
papers and returns and correspondence with tax authorities), including the right
to take extracts there from and make copies thereof, to the extent that such
books and records relate to the operations of the Buyer during taxable periods
ending on or prior to or that include the Closing Date. The transfer of the
Minority Buyer Equity to the Company Stockholders pursuant to the terms of this
Agreement will not result in any Tax liability to the Buyer or result in a
reduction of the amount of any net operating loss, net operating loss carryover,
net capital loss, net capital loss carryover, Tax credit, Tax credit carryover,
excess charitable contribution or basis of property that otherwise would be
available to the Buyer by reason or as a result of deferred inter-company
transactions, excess loss accounts, or otherwise.
(e) Parent
shall be responsible for preparing and filing, or causing the Buyer to prepare
and file, all Tax Returns of the Buyer required to be filed after the Closing
Date. The Parent shall pay to Buyer within five (5) days after the
date on which Taxes are paid with respect to periods beginning before the
Closing Date and ending on or after the Closing Date an amount equal to the
portion of those Taxes that relates to the portion of the taxable period ending
on the Closing Date. For purposes of this Agreement, in the case of
any period that begins before the Closing Date and ends after the Closing Date,
any tax based directly or indirectly on gross or net income or receipts or
imposed in respect of specific transactions, and any credits available with
respect to any Tax, shall be allocated by assuming that the taxable period ended
on the Closing Date, and any other tax shall be allocated based on the number of
days in the taxable period ending on the Closing Date divided by the total
number of days in the taxable period.
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9.4 Parent Indemnification for
Taxes.
(a) The
Parent hereby agree to indemnify the Company Stockholders and the Buyer (herein
collectively or individually referred to as an “Indemnified
Taxpayer”) against, and agrees to protect, save and hold harmless each
Indemnified Taxpayer from, any and all claims, damages, deficiencies and losses
and all expenses, including, without limitation, attorneys’, accountants’ and
experts’ fees and disbursements (all herein referred to as “Losses”) resulting
from:
(i) A
claim by any taxing authority for (A) any Taxes of the Buyer allocable to any
period ending on or prior to the Closing Date or allocable to any period that
begins before and ends after the Closing Date, and (B) any Taxes of the Buyer or
any corporation that is or was a member of an Affiliated Group of which the
Buyer was or is a member;
(ii) Any
misrepresentation or breach of any representation, warranty or obligation set
forth in this Article IX.
(b) Subject
to the resolution of any Tax contest pursuant to Section 9.4(c), upon notice
from Buyer to the Company Stockholders that an Indemnified Taxpayer is entitled
to an indemnification payment for a Loss pursuant to Section 9.4(a), the
Parent shall thereupon pay to the Indemnified Taxpayer an amount
that, net of any Taxes imposed on the Indemnified Taxpayer with respect to such
payment, will indemnify and hold the Indemnified Taxpayer harmless from such
Loss.
(c) (i) If
a claim shall be made by any taxing authority that, if successful, would result
in the indemnification of an Indemnified Taxpayer, the Indemnified Taxpayer
shall promptly notify the Buyer and the Parent in writing of such fact;
provided, however, that any failure to give such notice will not waive any
rights of the Indemnified Taxpayer except to the extent the rights of the
indemnifying Party are actually materially prejudiced.
(ii) The
Buyer – upon the decision of the Parent - shall have the right to defend the
Indemnified Taxpayer against such claim with counsel of its choice satisfactory
to the Indemnified Taxpayer so long as (A) the Buyer notifies the Indemnified
Taxpayer in writing within 15 days after the Indemnified Taxpayer has given
notice of such claim that the Parent will indemnify the Indemnified Taxpayer
from and against the entirety of any Losses the Indemnified Taxpayer may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
claim, (B) the Parent provides the Indemnified Taxpayer with evidence acceptable
to the Indemnified Taxpayer that the Buyer – on the cost of the Parent - will
have the financial resources to defend against the claim and fulfill his
indemnification obligations hereunder, (C) if requested by the Indemnified
Taxpayer, the Parent provides to the Indemnified Taxpayer an opinion, in form
and substance satisfactory to the Indemnified Taxpayer, of counsel satisfactory
to the Indemnified Taxpayer, that there exists a reasonable basis for the Buyer
to prevail in that contest, (D) if the Indemnified Taxpayer is
requested to pay the Tax claimed and xxx for a refund, the Buyer shall have
advanced to the Indemnified Taxpayer, on an interest free basis, the full amount
the Indemnified Taxpayer is required to pay, and (E) the Buyer and the Parent
conducts the defense of the claim actively and diligently.
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(iii) Subject
to the provisions of paragraph (ii) above, the Buyer shall be entitled to
prosecute such contest to a determination in a court of initial jurisdiction,
and if Buyer shall reasonably request, to a determination in an appellate court
provided that, if requested by the Indemnified Taxpayer, Parent shall provide to
the Indemnified Taxpayer an opinion, in form and substance satisfactory to the
Indemnified Taxpayer, of counsel satisfactory to the Indemnified Taxpayer, that
there exists a reasonable basis for the Buyer to prevail on that
appeal.
(iv) Buyer
shall not be entitled to settle or to contest any claim relating to Taxes if the
settlement of, or an adverse judgment with respect to, the claim would be
likely, in the good faith judgment of the Indemnified Taxpayer, to cause the
liability for any Tax of the Indemnified Taxpayer or of any Affiliate of the
Indemnified Taxpayer for any taxable period ending after the Closing Date to
increase (including, without limitation, by making any election or taking any
action having the effect of making any election, by deferring the inclusion of
any amount in income or by accelerating the deduction of any amount or the
claiming of any credit) or to take a position that, if applied to any taxable
period ending after the Closing Date, would be adverse to the interest of the
Indemnified Taxpayer or any Affiliate of the Indemnified Taxpayer.
(v) If,
after actual receipt by the Indemnified Taxpayer of an amount advanced by Parent
pursuant to paragraph (ii)(D) above, the extent of the liability of the
Indemnified Taxpayer with respect to the indemnified matter shall be established
by the judgment or decree of a court that has become final or a binding
settlement with an administrative agency having jurisdiction thereof that has
become final, the Indemnified Taxpayer shall promptly pay to Parent any refund
received by or credited to the Indemnified Taxpayer with respect to the
indemnified matter (together with any interest paid or credited thereon by the
taxing authority and any recovery of legal fees from such taxing authority);
provided, however, that the
Indemnified Taxpayer shall have been indemnified and held harmless from all
Losses by reason of any indemnification payments retained by the Indemnified
Taxpayer net of any Taxes imposed on the Indemnified Taxpayers with respect to
indemnification payments received by the Indemnified Taxpayer or with respect to
the receipt of any payment from the taxing authority. Notwithstanding
the foregoing, the Indemnified Taxpayer shall not be required to make any
payment hereunder before such time as Buyer shall have made all payments or
indemnities then due with respect to Indemnified Taxpayer pursuant to this
Article IX.
(vi) If
any of the conditions in Section 9.4(c)(ii) above are or become unsatisfied, (A)
the Indemnified Taxpayer may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the claim in any manner
it may deem appropriate (and the Indemnified Taxpayer need not consult with, or
obtain any consent from, Buyer in connection therewith), (B) Parent will
reimburse the Indemnified Taxpayer promptly and periodically for the costs of
defending against the claim (including, without limitation, attorneys’,
accountants’ and experts’ fees and disbursements) and (C) Parent will remain
responsible for any Losses the Indemnified Taxpayer may suffer to the fullest
extent provided in this Section 9.4.
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(d) Anything
to the contrary in this Agreement notwithstanding, the indemnification
obligations of the Buyer and the Parent under this Article IX shall survive the
Closing until the end of the applicable statutes of limitations. With
respect to any indemnification obligation for any Tax for which a taxing
authority asserts a claim within 90 days before the end of the applicable
statute of limitations, an Indemnified Taxpayer shall be treated as having
provided timely notice to Buyer by providing written notice to Buyer on or
before the 90th day after the Indemnified Taxpayer’s receipt of a written
assertion of the claim by the taxing authority.
(e) All
transfer, documentary, sales, use, stamp, registration and other such Taxes and
fees (including any penalties and interest) incurred in connection with this
Agreement shall be paid by the Party the Tax was imposed on by the relevant laws
and Authorities, and such Party shall, at its own expense, file all necessary
Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, any other Party will, and will cause its Affiliates
to, join in the execution of any such Tax Returns and other
documentation.
ARTICLE X.
MISCELLANEOUS
10.1 Indemnification of Parent
and/or Buyer .
(a) Survival The
representations, warranties, agreements, and indemnities of the Company and the
Company Stockholders set forth in this Agreement or in connection with the
transactions contemplated hereby shall survive the Closing except as expressly
provided in Section 10.1(b). The Post-Closing Agreements and
Covenants of the Parties set forth in Article VIII, including those set forth in
Sections 8.4 of this Agreement, shall survive the Closing Date and the Closing
indefinitely.
(b) Indemnification and Business
Indemnity Period. In addition to
the Tax indemnification provisions set forth in Article IX of this Agreement but
subject at all times to the limitations set forth in this Section 10.1, the
Company Stockholders shall jointly and severally indemnify, defend and hold
harmless the Company, the Buyer and the Parent from any and all Damages incurred
by the Company, the Buyer or the Parent that arise from
(i) the
breach of any of the representations and warranties of the Company Stockholders
set forth in this Agreement,
(ii) the
failure by the Company Stockholders to perform or satisfy in any material
respect their covenants and agreements set forth in this Agreement or in any
Exhibit hereto or document or certificate delivered by the Company Stockholders
or the Company on the Closing Date, or
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(iii) any
claims asserted against any of the Parties to this Agreement by Energo Equipment
Manufacturing Kft, or any of its Affiliates, including Perola Ltd.
Notwithstanding
the foregoing, the Company Stockholders shall have any liability under this
Agreement to indemnify under either (A) clause (iii) of Section 8.3.1, or (B)
clause (i) of Section
8.3.1 against breaches of the provisions of Sections 4.5 (clauses
(ii), (iii), (iv) and (v)), Section 4.6, and
Section 4.7
through Section
4.23 (collectively the “Business
Indemnities”), in each case unless the indemnifying Party receives notice
in writing from Buyer of Buyer’s claim under said indemnity on or before that
date which shall be eighteen (18) months following the Closing Date (the “Business Indemnity
Period”). Said limitations shall not apply to any breaches of
or obligations to comply with any of the other provisions of this Agreement,
regardless of whether such breach or obligation also constitutes a breach or
obligation under any of the provisions specifically listed in this Section
10.1(b).
(c) Limitations on
Liability. The Company
Stockholders shall be obligated to indemnify as and to the extent set forth in
this Section
10.1 only if the aggregate of all of their liability under such indemnity
obligations exceeds $50,000, it being understood that such $50,000 figure is to
serve as a “trigger” for the indemnification and not as a “deductible” (for
example, if the indemnity claims for which the Company Stockholders would, but
for the provisions of this paragraph (c), be liable aggregate $51,000, the
Company Stockholders would then be liable for the full $51,000, and not just
$1,000). The maximum amount for which the Company Stockholders shall
be liable to indemnify the Buyer and the Parent pursuant to this Section 10.1
shall be the product of multiplying the Minority Buyer Equity and Minority
Interest in the Buyer by 50% of the Call Option Price set forth in Section 8.6(b)
above.
(d) Payment of
Damages. In the event that the
Company Stockholders shall become liable under this Agreement to indemnify the
Buyer or the Parent for any Damages, the Company Stockholders shall pay such
Damages to the Parent or the Buyer, at the option of the Company Stockholders,
either (i) in cash, or (ii) by returning to the Buyer an applicable portion of
the Minority Buyer Equity and the Minority Interest in the Buyer, valued at the
Call Option Price set forth in Section 8.6(b)
above.
10.2 Indemnification of Company
Stockholders .
(a) Survival The
representations, warranties, agreements, and indemnities of the Parent and the
Buyer set forth in this Agreement or in connection with the transactions
contemplated hereby shall survive the Closing except as expressly provided in
Section
10.2(b). The Post-Closing Agreements and Covenants of the Parties set
forth in Article VIII, of this Agreement, shall survive the Closing Date and the
Closing indefinitely.
(b) Indemnification and Business
Indemnity Period. In addition to
the Tax indemnification provisions set forth in Article IX of this Agreement but
subject at all times to the limitations set forth in this Section 10.2, the
Parent shall indemnify, defend and hold harmless the Company Stockholders, the
Buyer and the Company from any and all Damages incurred by the Company
Stockholders, the Buyer or the Company that arise from
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(i) the
breach of any of the representations and warranties of the Parent or the Buyer
forth in this Agreement, or
(ii) the
failure by the Parent or the Buyer to perform or satisfy in any material respect
their covenants and agreements set forth in this Agreement or in any Exhibit
hereto or document or certificate delivered by the Parent or the Buyer on the
Closing Date.
Notwithstanding the foregoing, neither
the Parent nor the Buyer shall have any liability under this Agreement to
indemnify under either (A) clause (iii) of Section 8.3.2, or (B)
clause (i) of Section
8.3.2 against breaches of the provisions of Section 5.5 (clauses
(ii), (iii), (iv) and (v)), of Section 5.6, and
Section 5.7
through Section
5.23 (collectively the “Business
Indemnities”), in each case unless the indemnifying Party receives notice
in writing from Company Stockholders of Company Stockholders' claim under said
indemnity on or before that date which shall be eighteen (18) months following
the Closing Date (the “Business Indemnity
Period”). Said limitations shall not apply to any breaches of
or obligations to comply with any of the other provisions of this Agreement,
regardless of whether such breach or obligation also constitutes a breach or
obligation under any of the provisions specifically listed in this Section
10.2(b).
(c) Limitations on
Liability. The Parent and the Buyer shall be obligated to
indemnify as and to the extent set forth in Section 10.3 of this Agreement only
if the aggregate of all of their liability under such indemnity obligations
exceeds $50,000, it being understood that such $50,000 figure is to serve as a
“trigger” for the indemnification and not as a “deductible” (for example, if the
indemnity claims for which the Parent and the Buyer would, but for the
provisions of this paragraph (c), be liable aggregate $51,000, the Parent and
the Buyer would then be liable for the full $51,000, and not just
$1,000).
(d) Payment of
Damages. In the event that the Parent and/or the Buyer shall
become liable under this Agreement to indemnify the Company Stockholders or the
Buyer, as applicable, for Damages, the Parent shall pay such Damages to the
Company Stockholders or the Buyer, as applicable, in cash.
10.3 Indemnified Party and
Indemnifying Party. For purposes of this Section 10.3, a Party
making a claim for indemnity under Section 10.1 or Section 10.2 is
hereinafter referred to as an “Indemnified Party”
and the Party against whom such claim is asserted is hereinafter referred to as
the “Indemnifying
Party.” All claims by any Indemnified Party shall be asserted
and resolved in accordance with the following provisions. If any
claim or demand for which an Indemnifying Party would be liable to an
Indemnified Party is asserted against or sought to be collected from such
Indemnified Party by such third Party, said Indemnified Party shall with
reasonable promptness notify in writing the Indemnifying Party of such claim or
demand stating with reasonable specificity the circumstances of the Indemnified
Party’s claim for indemnification; provided, however, that any failure to give
such notice will not waive any rights of the Indemnified Party except to the
extent the rights of the Indemnifying Party are actually prejudiced or to the
extent that any applicable period set forth in Section 10.1 and
Section 10.2(b)
has expired without such notice being given. After receipt by the
Indemnifying Party of such notice, then upon reasonable notice from the
Indemnifying Party to the Indemnified Party, or upon the request of the
Indemnified Party, the Indemnifying Party shall defend, manage and conduct any
proceedings, negotiations or communications involving any claimant whose claim
is the subject of the Indemnified Party’s notice to the Indemnifying Party as
set forth above, and shall take all actions necessary, including but not limited
to the posting of such bond or other security as may be required by any
Governmental Authority, so as to enable the claim to be defended against or
resolved without expense or other action by the Indemnified
Party. Upon request of the Indemnifying Party, the Indemnified Party
shall, to the extent it may legally do so and to the extent that it is
compensated in advance by the Indemnifying Party for any costs and expenses
thereby incurred,
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(i) take
such action as the Indemnifying Party may reasonably request in connection with
such action,
(ii) allow
the Indemnifying Party to dispute such action in the name of the Indemnified
Party and to conduct a defense to such action on behalf of the Indemnified
Party, and
(iii) render
to the Indemnifying Party all such assistance as the Indemnifying Party may
reasonably request in connection with such dispute and defense.
10.4 Resolution of
Disputes.
(a) All
disputes, claims or controversies arising out of or relating to this Agreement,
or any agreement executed and delivered pursuant hereto, or the negotiation,
breach, validity or performance hereof, or the transactions contemplated hereby
which cannot be resolved by good faith negotiations, shall be exclusively
submitted to final and binding arbitration in London England before a panel of
three arbitrators appointed by the International Chamber of Commerce; provided, that if any Party
has no adequate remedy at law he or it may seek emergency injunctive relief or
specific performance before any court of competent jurisdiction in Hungary or
the United States. The decision and award of the arbitrators shall be
enforceable in any court of competent jurisdiction in the United States and
Hungary.
(b) Subject
to the availability of the arbitration panel, the arbitration shall commence
within ninety (90) days of the date on which a written demand for arbitration is
filed by any Party hereto. In connection with the arbitration
proceeding, the arbitrators shall have the power to order the production of
documents by each Party and any third-Party witnesses. In connection
with any arbitration, each Party shall provide to the other, no later than seven
(7) business days before the date of the arbitration, the identity of all
persons that may testify at the arbitration and a copy of all documents that may
be introduced at the arbitration or considered or used by a Party’s witness or
expert. The arbitrators’ decision and award shall be made and
delivered within ninety (90) days of the commencement of the
arbitration. The arbitrators’ decision shall set forth a reasoned
basis for any award of damages or finding of liability. The
arbitrators shall not have power to award damages in excess of actual
compensatory damages and shall not multiply actual damages or award punitive
damages or any other damages that are specifically excluded under this
Agreement, and each Party hereby irrevocably waives any claim to such
damages.
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(c) The
Parties covenant and agree that they will participate in the arbitration in good
faith and that they will, except as provided below, (A) bear their own
attorneys’ fees, costs and expenses in connection with the arbitration, and
(B) share equally in the fees and expenses of the arbitration, including
forum fees, the fees of the arbitrators and the cost of the official transcript
of the proceedings. The arbitrators may in their discretion assess
costs and expenses (including the reasonable legal fees and expenses of the
prevailing Party) against any Party to the proceeding. Any Party
unsuccessfully refusing to comply with an order of the arbitrators shall be
liable for costs and expenses, including attorneys’ fees, incurred by the other
Party in enforcing the award. This Section 10.4 applies equally to
requests for temporary, preliminary or permanent injunctive relief, except that
in the case of temporary or preliminary injunctive relief any Party may proceed
in court without prior arbitration for the purpose of avoiding immediate and
irreparable harm or to enforce its rights under any non-competition
covenants.
10.5. Confidentiality.
(a)
Prior to the Closing, Buyer shall, and shall cause its Affiliates and its and
their employees, agents, accountants, legal counsel and other representatives
and advisers to, hold in strict confidence all, and not divulge or disclose any,
information of any kind concerning the Company and its business; provided,
however, that the foregoing obligation of confidence shall not apply to (i)
information that is or becomes generally available to the public other than as a
result of a disclosure by Buyer or its Affiliates or any of its or their
employees, agents, accountants, legal counsel or other representatives or
advisers, (ii) information that is or becomes available to Buyer or its
Affiliates or any of its or their employees, agents, accountants, legal counsel
or other representatives or advisers on a non-confidential basis prior to its
disclosure by Buyer or its Affiliates or any of its or their employees, agents,
accountants, legal counsel or other representatives or advisers and (iii)
information that is required to be disclosed by Buyer or its Affiliates or any
of its or their employees, agents, accountants, legal counsel or other
representatives or advisers as a result of any applicable law, rule or
regulation of any Governmental Authority; and provided further that Buyer
promptly shall notify the Company of any disclosure pursuant to clause (iii) of
this Section 10.5.(a); and, provided, further, that the foregoing obligation of
confidence shall not apply to the furnishing of information by Buyer in bona
fide discussions or negotiations with prospective lenders.
(b) The
Company and the Company Stockholders shall, and shall cause its or his
Affiliates and their respective employees, agents, accountants, legal counsel
and other representatives and advisers to, hold in strict confidence all, and
not divulge or disclose any, information of any kind concerning the transactions
contemplated by this Agreement, the Company, the Company Stockholders or their
respective businesses; provided, however, that the foregoing obligation of
confidence shall not apply to (i) information that is or becomes generally
available to the public other than as a result of a disclosure by the Company,
the Company Stockholders or its or his Affiliates or any of their respective
employees, agents, accountants, legal counsel or other representatives or
advisers, (ii) information that is or becomes available to the Company, the
Company Stockholders or its or his Affiliates or any of their respective
employees, agents, accountants, legal counsel or other representatives or
advisers after the Closing on a non-confidential basis prior to its disclosure
by the Company, the Company Stockholders or its or his Affiliates or any of
their respective employees, agents, accountants, legal counsel or other
representatives or advisers and (iii) information that is required to be
disclosed by the Company, the Company Stockholders or its or his Affiliates or
any of their respective employees, agents, accountants, legal counsel or other
representatives or advisers as a result of any applicable law, rule or
regulation of any Governmental Authority; and provided further that the Company
shall promptly shall notify Buyer of any disclosure pursuant to clause (iii) of
this Section 10.3(b).
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10.6. Brokers. Regardless
of whether the Closing shall occur, (i) the Company Stockholders and the Company
shall indemnify and hold harmless Buyer from and against any and all liability
for any brokers or finders’ fees arising with respect to brokers or finders
retained or engaged by the Company or the Company Stockholders in respect of the
transactions contemplated by this Agreement, and (ii) Buyer shall indemnify and
hold harmless the Company Stockholders from and against any and all liability
for any brokers’ or finders’ fees arising with respect to brokers or finders
retained or engaged by Buyer in respect of the transactions contemplated by this
Agreement.
10.7 Costs and
Expenses. Each of the Parties to this Agreement shall bear his
or its own expenses incurred in connection with the negotiation, preparation,
execution and closing of this Agreement, however, Buyer shall be responsible for
and shall discharge all Transaction Expenses by and on behalf of the Company
Stockholders and or/the Company pursuant to Section 6.20.
10.8 Notices. Any
notice, request, instruction, correspondence or other document to be given
hereunder by any Party hereto to another (herein collectively called “Notice”) shall be in
writing and delivered personally or mailed by registered or certified mail,
postage prepaid and return receipt requested, or by facsimile, as
follows:
IF TO
BUYER: Solar Thin Films, Inc.
00 Xxxxxxxx Xxxxxxxxx, Xxx Xxxxx,
Xxx Xxxx 00000
Attn: Xxx Xxxxx, Chairman
of the Board
email:
xxx.xxxxx@xxxxxxxxxxxxxx.xxx
|
With copies to:
|
|
|
Xxxxxxx
Xxxx, LLP
|
Xxxx
Xxxxxxxxxxxx Xxxx
|
|
0000
Xxxxxxxx, 00xx
Xxxxx
|
Fő u
00-00
|
|
Xxx
Xxxx, Xxx Xxxx 00000
|
X-0000
Xxxxxxxx, Xxxxxxx
|
|
Attention: Xxxxxxx
X. Xxxxx, Esq.
|
Attention: Xx.
Xxxx Xxxxxx
|
|
Fax
No. 000-000-0000
|
Fax
No. xx00-0-000-0000
|
|
email: xxxxxx@xxxxxxxxxxx.xxx
|
email:
xxxxx.xxxxxx@xxxxx.xxx
|
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IF
TO THE COMPANY, AND/OR
THE COMPANY
STOCKHOLDERS:
Xxxxxx
Xxxxxxxx
H-1021
Budapest, Kuruclesiu 40. Hungary
Fax
No. x000 000 0000
With a copy
to:
Xxxxxxxxx
Xxxxx
H-1061
Budapest,
Andrassy ut.43
Hungary
Attn: Dr.
David Xxxx
Fax No.
x00 0-000-0000
email:
xxxxx@xxxxxxxxx.xxx
Each of
the above addresses for notice purposes may be changed by providing appropriate
notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by
telecopier shall be effective upon actual receipt if received during the
recipient’s normal business hours, or at the beginning of the recipient’s next
normal business day after receipt if not received during the recipient’s normal
business hours. All Notices by telecopier shall be confirmed by the
sender thereof promptly after transmission in writing by registered mail or
personal delivery. Anything to the contrary contained herein
notwithstanding, notices to any Party hereto shall not be deemed effective with
respect to such Party until such Notice would, but for this sentence, be
effective both as to such Party and as to all other persons to whom copies are
provided above to be given.
10.9 Governing
Law. The provisions of this agreement and the documents
delivered pursuant hereto shall be governed by and construed in accordance with
the laws of the State of New York (excluding any conflict of law rule or
principle that would refer to the laws of another
jurisdiction). Notwithstanding the foregoing, the laws of Hungary
shall govern the Share Capital Increase and the Employment
Agreements.
10.10. Entire Agreement; Amendments
and Waivers. This Agreement, together with all exhibits and
schedules attached hereto, constitutes the entire agreement between and among
the Parties hereto pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties, including, without limitation, the Prior Agreement, and
there are no warranties, representations or other agreements between the Parties
in connection with the subject matter hereof except as set forth specifically
herein or contemplated hereby. No supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by the Party to be
bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(regardless of whether similar), nor shall any such waiver constitute a
continuing waiver unless otherwise expressly provided.
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10.11. Binding Effect and
Assignment. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective permitted successors and
assigns; but neither this Agreement nor any of the rights, benefits or
obligations hereunder shall be assigned, by operation of law or otherwise, by
any Party hereto without the prior written consent of the other Party; provided,
however, that the Buyer may assign its rights hereunder to any lender to the
Buyer or the Parent. Nothing in this Agreement, express or implied,
is intended to confer upon any person or entity other than the Parties hereto
and their respective permitted successors and assigns, any rights, benefits or
obligations hereunder.
10.12 Remedies. The
rights and remedies provided by this Agreement are cumulative, and the use of
any one right or remedy by any Party hereto shall not preclude or constitute a
waiver of its right to use any or all other remedies. Such rights and
remedies are given in addition to any other rights and remedies a Party may have
by law, statute or otherwise.
10.13 Exhibits and
Schedules. The exhibits and Schedules referred to herein are
attached hereto and incorporated herein by this reference. Disclosure
of a specific item in any one Schedule shall be deemed restricted only to the
Section to which such disclosure specifically relates except where (i) there is
an explicit cross-reference to another Schedule, and (ii) Buyer could reasonably
be expected to ascertain the scope of the modification to a representation
intended by such cross-reference.
10.14 Multiple
Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.15 References and
Construction.
(a) Whenever
required by the context, and is used in this Agreement, the singular number
shall include the plural and pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the
identification the person may require. References to monetary
amounts, specific named statutes and generally accepted accounting principles
are intended to be and shall be construed as references to United States
dollars, statutes of the United States of the stated name and United States
generally accepted accounting principles, respectively, unless the context
otherwise requires.
(b) The
provisions of this Agreement shall be construed according to their fair meaning
and neither for nor against any Party hereto irrespective of which Party caused
such provisions to be drafted. Each of the Parties acknowledge that
it has been represented by an attorney in connection with the preparation and
execution of this Agreement.
10.16 Survival. Any
provision of this Agreement which contemplates performance or the existence of
obligations after the Closing Date, and any and all representations and
warranties set forth in this Agreement, shall not be deemed to be merged into or
waived by the execution and delivery of the instruments executed at the Closing,
but shall expressly survive Closing and shall be binding upon the Party or
Parties obligated thereby in accordance with the terms of this Agreement,
subject to any limitations expressly set forth in this Agreement.
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10.17 Attorneys’
Fees. In the event any suit or other legal proceeding is
brought for the enforcement of any of the provisions of this Agreement, the
Parties hereto agree that the prevailing Party or Parties shall be entitled to
recover from the other Party or Parties upon final judgment on the merits
reasonable attorneys’ fees (and sales taxes thereon, if any), including
attorneys’ fees for any appeal, and costs incurred in bringing such suit or
proceeding.
10.18 Risk of
Loss. Prior to the Closing, the risk of loss of damage to, or
destruction of, any and all of a Party’s assets, including without limitation
the Properties, shall remain with such party, and the legal doctrine known as
the “Doctrine of Equitable Conversion” shall not be applicable to this Agreement
or to any of the transactions contemplated hereby.
ARTICLE XI. DEFINITIONS
Capitalized
terms used in this Agreement are used as defined in this Article XI or elsewhere
in this Agreement.
11.1 Affiliate. The term
“Affiliate” means with respect to any
Person, any other Person directly or indirectly controlling (including, but not
limited to, all directors and officers of such Person), controlled by, or under
direct or indirect common control with, such Person. A Person shall
be deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise.
11.2 Buyer Liquidity
Event. The term “Buyer Liquidity Event” shall mean any one of
the following events:
(a) a
Change of Control of the Buyer, for consideration payable in whole or in part in
cash, or
(b) an
initial public offering of the share capital of the Buyer, or
(c) the
merger of the Buyer with or into an inactive corporation that is publicly traded
on a United States or European securities exchange (a “Shell Corporation”)
or the exchange of 100% of the share capital of the Buyer for a controlling
interest in a Shell Corporation, in either case, coupled with a simultaneous
cash financing of not less than United States Five Million Dollars (USD
$5,000,000), or
(d) the
distribution or dividend of 100% of the share capital of the Buyer owned by the
Parent to the stockholders of the Parent, as a result of which the Buyer shall
become a corporation that is publicly traded on a United States securities
exchange, coupled with a simultaneous cash financing for the Buyer of not less
than United States Five Million Dollars (USD $5,000,000).
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11.3 Exhibits. The
term “Exhibits” shall mean any or all of the exhibits to this Agreement and any
and all other agreements, instruments or documents required or expressly
provided under this Agreement to be executed and delivered in connection with
the transactions contemplated by this Agreement.
11.4 Subject Company
Quotas. The term "Subject Company Quotas" shall have the meaning of
hundred percent of the quota in the capital stock of the Company
11.5 Confidential
Information. The term “Confidential Information” shall mean
confidential data and confidential information relating to the business of the
Company (which does not rise to the status of a Trade Secret under applicable
law) which is or has been disclosed to Company Stockholders or of which Company
Stockholders became aware as a consequence of or through his employment with the
Company and which has value to the Company and is not generally known to the
competitors of the Company. Confidential Information shall not
include any data or information that (i) has been voluntarily disclosed to the
general public by the Company or its Affiliates, (ii) has been independently
developed and disclosed to the general public by others, or (iii) otherwise
enters the public domain through lawful means.
11.6 Change of
Control. The term “Change of Control” shall mean the sale of
Buyer and its consolidated Subsidiaries (including the Company), pursuant to a
sale of the Buyer Shares or the assets and properties of Buyer and its
consolidated Subsidiaries (including the Company) to any Person who is not an
Affiliate of the Parent or its Affiliates (each an “Unaffiliated Third
Party”).
11.7 Contracts. The term
“Contracts,” when described as being those of or applicable to any person, shall
mean any and all contracts, agreements, franchises, understandings,
arrangements, leases, licenses, registrations, authorizations, easements,
servitudes, rights of way, mortgages, bonds, notes, guaranties, liens, indebtedness,
approvals or other instruments or undertakings to which such
person is a Party or to which or by which such person or the property of such
person is subject or bound, excluding any Permits.
11.8 Damages. The
term “Damages” shall mean any and all damages, liabilities, obligations,
penalties, fines, judgments, claims, deficiencies, losses, costs, expenses and
assessments (including without limitation income and other taxes, interest,
penalties and attorneys’ and accountants’ fees and disbursements).
11.9 "Excess Cash" The
term “Excess Cash” means, at the end of any financial year of the Buyer and its
Subsidiaries, the aggregate amount of cash and marketable securities that are
retained by the Buyer and its Subsidiaries which is in excess
of the aggregate amount of funds required for the working capital needs of the
Buyer and its Subsidiaries, the purchase or lease of capital equipment and other
related expenditures that are anticipated in good faith by the Board of
Directors of the Buyer to be required by the Buyer and its Subsidiaries for the
next succeeding financial year.
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11.10 Financial
Statements. The term “Financial Statements” shall mean any or
all of the financial statements, including balance sheets and related statements
of income and statements of changes in financial position and the accompanying
notes thereto, of the company’s business prepared in accordance with generally
accepted accounting principles consistently applied, except as may be otherwise
provided herein.
11.11 “Funded
Indebtedness. “Funded Indebtedness” shall mean the aggregate
amount (including the current portions thereof) of all (i) indebtedness of a
company for money borrowed from others, capital lease obligations, dividends
payable to a company’s Stockholders, bonus payables to employees, and purchase
money indebtedness of a company, (ii) indebtedness of the type described in
clause (i) above guaranteed, directly or indirectly, in any manner by the
company, or in effect guaranteed, directly or indirectly, in any manner by the
company, through an agreement, contingent or otherwise, to supply funds to, or
in any other manner invest in, the debtor, or to purchase indebtedness, or to
purchase and pay for property if not delivered or to pay for services if not
performed, primarily for the purpose of enabling the company to make payment of
the indebtedness or to assure the owners of the indebtedness against loss, but
excluding endorsements of checks and other instruments in the ordinary course,
(iii) indebtedness of the type described in clause (i) above secured by any Lien
upon property owned by the company, even though the company has not in any
manner become liable for the payment of such indebtedness and (iv) interest
expense accrued but unpaid, and all prepayment premiums, on or relating to any
of such indebtedness. . Contracts evidencing its Funded Indebtedness are set
forth on Schedule
11.7 hereto
11.12 GAAP The
term “GAAP” means U.S. generally accepted accounting principles.
11.13 Governmental
Authorities. The term “Governmental Authorities” shall mean
any nation or country (including but not limited to the United States) and any
commonwealth, territory or possession thereof and any political subdivision of
any of the foregoing, including but not limited to courts, departments,
commissions, boards, bureaus, agencies, ministries or other
instrumentalities.
11.14 Hazardous
Material. The term “Hazardous Material” shall mean all or any
of the following: (a) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable laws or regulations as “hazardous
substances,” “hazardous materials,” “Hazardous wastes,” “toxic substances” or
any other formulation intended to define, list or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity or “EP toxicity”; (b) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or synthetic gas
and drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; and (d) asbestos in any form or electrical equipment which contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty parts per million.
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11.15 Inventory. The
term “Inventory” shall mean all goods, merchandise and other personal property
owned and held for sale, and all raw materials, works-in-process, materials and
supplies of every nature which contribute to the finished products of a company
in the ordinary course of its business, specifically excluding, however,
damaged, defective or otherwise unsaleable items.
11.16 Knowledge of a
company. The term “Knowledge of the company” shall mean the
actual knowledge of any of the directors, officers or managerial personnel of
the company with respect to the matter in question, and such knowledge of the
directors, officers or managerial personnel of the company reasonably should
have obtained upon diligent investigation and inquiry into the matter in
question.
11.17 Legal
Requirements. The term “Legal Requirements,” when described as
being applicable to any person, shall mean any and all laws (statutory, judicial
or otherwise), ordinances, regulations, judgments, orders, directives,
injunctions, writs, decrees or awards of, and any Contracts with, any
Governmental Authority, in each case as and to the extent applicable to such
person or such person’s business, operations or properties.
11.18 Minority. The
term “Minority” means and includes all of the Company Stockholders and their
Permitted Transferees (as that term is defined in the Shareholders
Agreement).
11.19 Parent Public
Filings The term “Parent Public Filings” means and
includes all of the filings by the Parent with the United States Securities and
Exchange Commission under the United States Securities Act of 1933, as amended
(the “33 Act”),
and the United States Securities Exchange Act of 1934, as amended (the “34 Act”), for all
periods from and after January 1, 2005, including, without limitation, all (a)
registration statements on Form S-1 or other forms for registering securities
under the 33 Act, (b) all Form 10KSB Annual Reports, Form 8-K Interim Report,
Form 10-Q Quarterly Report, and all proxy statements on Form 14A and other
filings under the 34 Act.
11.20 Parent Qualified Equity
Financing. The term Parent Qualified Equity Financing” shall
mean one or more public or private sales and issuances by the Parent of its
Common Stock, convertible notes or convertible preferred stock, as a result of
which the Parent shall receive aggregate gross proceeds of United States Ten
Million Dollars (USD $10,000,000) or more.
11.21 Permits. The term
“Permits” shall mean any and all permits, rights, approvals, licenses,
authorizations, legal status, orders or Contracts under any Legal Requirement or
otherwise granted by any Governmental Authority.
11.22 Person. The
term “Person” shall mean any individual, partnership, joint venture, firm,
corporation, association, limited liability company, trust or other enterprise
or any governmental or political subdivision or any agency, department or
instrumentality thereof.
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11.23 Product. The
term “Product” shall mean each product, repair process or service under
development, developed, manufactured, licensed, distributed or sold by the Party
and any other products in which the Party has any proprietary rights or
beneficial interest.
11.24 Properties. The
term “Properties” shall mean any and all properties and assets (real, personal
or mixed, tangible or intangible) owned or Used by the Party.
11.25 Real
Property. The term “Real Property” shall mean the real
property Used by the Party in the conduct of its business.
11.26 Regulations. The
term “Regulations” shall mean any and all regulations promulgated by the
Department of the Treasury pursuant to the Internal Revenue Code.
11.27 Subsidiary. The
term “Subsidiary” shall mean any Person of which a majority of the outstanding
voting securities or other voting equity interests are owned, directly or
indirectly, by the Company.
11.28 Trade
Secrets. The term “Trade Secrets” shall mean information of a
company including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, financial data, financial plans, product or
service plans or lists of actual or potential customers or suppliers which (i)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (ii) is the subject of
efforts that are reasonable under the circumstances to maintain its
secrecy.
11.29 Used. The
term “Used” shall mean, with respect to the Properties, Contracts or Permits of
a company, those owned, leased, licensed or otherwise held by such company which
were acquired for use or held for use by the company in connection with the
company’s business and operations, whether or not reflected on the company’s
books of account.
balance
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IN
WITNESS WHEREOF, the Parties hereto have executed this Stock Exchange Agreement
as of the date first written above.
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PARENT:
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By:
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/s/ Xxxxxx X. Xxxxx
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Name:
Xxx Xxxxx, Chairman of the Board
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BUYER:
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KRAFT
ELEKTRONIKAI ZRT
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By:
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/s/ Xxxxxx Xxxxxx
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Xxxxxx
Xxxxxx, CEO
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COMPANY:
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BUDASOLAR
TECHNOLOGIES CO.
LTD.
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By:
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/s/ Xxxxxx Xxxxxxxx
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Xxxxxx Xxxxxxxx,
President
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COMPANY STOCKHOLDERS:
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NEW
PALACE INVESTMENTS LTD.
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By:
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/s/ Xxxxxx Xxxxxxxx
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Xxxxxx Xxxxxxxx,
President
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/s/ Xxxxxx Xxxxxxxx
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XXXXXX
XXXXXXXX
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/s/ Xxxxxx Xxxxxxx
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XXXXXX
XXXXXXX
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