Stock Purchase Agreement - Bonso Electronics International Inc. and Augusta Technologie AG
01125-01/0/ck /2
Notary Deed No. 7 Year 2001
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[GRAPHIC OMITTED]
N E G O T I A T E D
in Frankfurt am Main, Eschersheimer Landstra(beta)e 25 - 27,
on 26th April 2001
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Before me, the undersigning Lawyer Dr. Stefan Reinhart
as notary deputy of the notary
Dr. Ulrich Fritze
in the district of the Oberlandesgericht Frankfurt am Main
with his offices in Frankfurt am Main
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appeared today:
1. Herr Udo Zimmer, Dipl.-Betriebswirt
business office in Wilhelm-Leuschner-Stra(beta)e 9-11,
60329 Frankfurt am Main
identifying himself by identity card issued by F.R.G.
declaring not to act on his own behalf but as "Vorstandsmitglied" of AUGUSTA
Technologie AG, Frankfurt am Main, registered in the Commercial Register at the
Amtsgericht Frankfurt am Main no. HRB 41371.
- in the following "Vendor-company" or "Augusta" -
The notary deputy has inspected the Commercial Register at the local court in
Frankfurt today and certifies that AUGUSTA Technologie AG, Frankfurt am Main, is
registered there under the number HRB 41371. The appeared person as of 1) is
however not severally entitled to act on behalf of Augusta. He therefore
submitted the original of a board resolution stating that he is entitled to act
severally on behalf of Augusta in respect to the sale of all shares of KORONA
Haushaltswaren GmbH & Co. KG and KORONA Haushaltswaren GmbH which was attached
to this deed.
The notary deputy cautioned the parties that he can therefore not certify that
Augusta is properly represented by the appeared person as of 1). The parties
nevertheless insisted on the notarisation of the document.
2. Mrs. Kit Teng Pang, born May 31st, 1962,
business office at 3 Salisbury Road, Tsimshatsui, Kln.
Unit 1106-1110, 11/F., Star House, Hong Kong
identifying herself by official passport of Portugal,
declaring not to act on their own behalf but with full power of attorney on
behalf of Bonso Electronics International Inc., a British Virgin Islands
international business corporation, having its address at 3 Salisbury Road,
Tsimshatui Kowloon, Hong Kong (as above).
- in the following "Buyer" or "BONSO" -
The deputy notary deputy advised those appearing that he has before him no
evidence of the existence of BONSO nor of the powers of representation of the
person appearing at 2) and that to this extent he cannot check the existence of
the Buyer and the power of representation of the person at 2) appearing on
behalf of the Buyer. Advised of the inherent risks the appearing persons
requested nevertheless immediate notarisation.
The appearing persons asked the notary deputy to notarise the document in the
English language. The persons appearing have stated that they are capable of
understanding English. The notary deputy has satisfied himself that the person
appearing are capable of understanding the English language.
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The notary deputy asked about a prior involvement (Vorbefassung) in the meaning
of ss. 3 subsection 1 Nr. 7 BeurkG (Law of Notarisation). Such an involvement
was denied by the appearing persons on behalf of the parties they represent.
The notary deputy advised the parties appearing that the following agreement
refers to the notarial deed UR 4/2001 of notary Dr. Fritze and documents
contained therein, a certified copy of which has been handed out to each of the
persons appearing. The persons appearing declared that they waive their right to
have the content of the documents read out by the notary (section 13a subsection
1 Beurkundungsgesetz) and that they also waive that the reference deed shall be
attached to this deed (sec. 13a subsec. 2 Beurkundungsgesetz).
The notary also cautioned the parties that the reference deed and the documents
contained therein is treated as if it were part of this deed.
The appearing persons asked for notarisation of the following:
STOCK PURCHASE AGREEMENT
BETWEEN
BONSO ELECTRONICS INTERNATIONAL INC.
AND
AUGUSTA TECHNOLOGIE AG
April 25, 2001
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TABLE OF CONTENTS
1. Definitions...............................................................6
2. Purchase and Sale of Korona Shares.......................................11
(a) Purchase and Sale...................................................11
(b) Payment at Closing..................................................11
(c) Intentionally omitted...............................................11
(d) Escrow Accounts.....................................................12
(e) Purchase Price Adjustment...........................................12
(f) The Closing.........................................................14
(g) Deliveries at the Closing...........................................14
(h) Transaction Effective Date..........................................15
3. Representations and Warranties Concerning the Transaction................15
(a) Representations and Warranties of Augusta...........................15
(b) Representations and Warranties of Buyer.............................16
4. Representations and Warranties Concerning Korona.........................18
(a) Organization, Qualification, and Corporate Power....................19
(b) Capitalization......................................................19
(c) Noncontravention....................................................19
(d) Brokers' Fees.......................................................20
(e) Title to Assets.....................................................20
(f) Subsidiaries........................................................20
(g) Financial Statements................................................20
(h) Events Subsequent to Most Recent Fiscal Year End....................21
(i) Undisclosed Liabilities.............................................22
(j) Legal Compliance....................................................23
(k) Tax Matters.........................................................23
(l) Real Property.......................................................24
(m) Intellectual Property...............................................26
(n) Sufficiency of Assets...............................................27
(o) Inventory...........................................................27
(p) Contracts...........................................................27
(q) Accounts Receivable.................................................29
(r) Powers of Attorney..................................................29
(s) Insurance...........................................................29
(t) Litigation..........................................................29
(u) Product Warranty....................................................29
(v) Product Liability...................................................29
(w) Employees...........................................................29
(x) Guaranties..........................................................29
(y) Environment, Health, and Safety.....................................30
(z) Certain Business Relationships with Korona..........................30
5. Pre-Closing Covenants....................................................30
(a) General.............................................................30
(b) Notices and Consents................................................31
(c) Operation of Business...............................................31
(d) Preservation of Business............................................31
(e) Full Access.........................................................31
(f) Notice of Developments..............................................31
(g) Exclusivity.........................................................31
(h) Guarantee of Buyer..................................................32
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6. Post-Closing Covenants...................................................32
(a) General.............................................................32
(b) Litigation Support..................................................32
(c) Transition..........................................................32
(d) Confidentiality.....................................................32
(e) Covenant Not to Compete.............................................33
(f) Redemption of Shares................................................33
(g) Retention of Books and Records......................................33
(h) Rule 144............................................................34
(i) Spin Off of RISO....................................................34
(j) Repayment of the Shareholder Loans..................................34
(k) Purchase of Warehouse...............................................34
(l) Corporate filings...................................................34
7. Conditions to Obligation to Close........................................35
(a) Conditions to Obligation of Buyer...................................35
(b) Conditions to Obligation of Augusta.................................36
8. Remedies for Breaches of This Agreement..................................37
(a) Survival of Representations and Warranties..........................37
(b) Indemnification Provisions for Benefit of Buyer.....................37
(c) Indemnification Provisions for Benefit of Augusta...................38
(d) Limitation of Indemnification.......................................38
(e) Matters Involving Third Parties.....................................39
(f) Determination of Adverse Consequences...............................40
(g) Other Indemnification Provisions....................................40
9. Tax Matters..............................................................40
(a) Tax Periods Ending on or Before the Closing Date....................40
(b) Tax Periods Beginning Before and Ending After the Closing Date......40
(c) Cooperation on Tax Matters..........................................41
(d) Tax Sharing Agreements..............................................42
(e) Certain Taxes.......................................................42
10. Termination..............................................................43
(a) Termination of Agreement............................................43
(b) Effect of Termination...............................................43
11. Miscellaneous............................................................44
(a) Consulting Services.................................................44
(b) Press Releases and Public Announcements.............................44
(c) No Third Party Beneficiaries........................................44
(d) Entire Agreement....................................................44
(e) Succession and Assignment...........................................44
(f) Counterparts........................................................44
(g) Headings............................................................44
(h) Notices.............................................................44
(i) Governing Law.......................................................46
(j) Dispute Resolution; Arbitration.....................................46
(k) English Language....................................................46
(l) Amendments and Waivers..............................................47
(m) Severability........................................................47
(n) Expenses............................................................47
(o) Construction........................................................47
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into on April
25, 2001, by and between Bonso Electronics International Inc., a British Virgin
Islands international business corporation ("Buyer"), and Augusta Technologie
AG, a German stock company ("Augusta"). Buyer and Augusta are each referred to
as a "Party" and collectively referred to as the "Parties" herein.
RECITALS
A. Augusta is the sole limited partner (with a capital contribution of DEM
1,000,000) of KORONA Haushaltswaren GmbH & Co. KG, Moringen, a German limited
partnership (Amtsgericht (lower district court) Northeim, HRA 837) (hereinafter
"Korona"). Sole general partner of Korona is KORONA Haushaltswaren GmbH,
Frankfurt am Main (Amtsgericht Frankfurt am Main HRB 42322) (hereinafter the
"General Partner"). Augusta owns 100% of the shares of the General Partner,
namely one share in the nominal amount of DEM 50,000.
B. Buyer proposes to purchase Augusta's equity interest in Korona
consisting of all of the limited partnership interests in Korona and the sole
share of the General Partner.
C. This Agreement contemplates a transaction in which Buyer will purchase
from Augusta, and Augusta will sell and transfer to Buyer, all of the equity
interest in Korona (as described above) in return for cash and shares of Buyer's
common stock.
D. Buyer will purchase the shares of the General Partner Korona from
Augusta through a newly formed wholly-owned British Virgin Islands international
business corporation ("Newco").
NOW, THEREFORE, in consideration of the premises and the mutual promises
made herein, and in consideration of the representations, warranties, and
covenants contained herein, the Parties agree as follows:
1. Definitions.
(a) "Accounting Firm" has the meaning specified in ss.2(e)(iii).
(b) "Adjusted Purchase Price has the meaning specified in ss.2(e)(iv).
(c) "Adverse Consequences" means all actions, suits, proceedings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
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(d) "Affiliate" (and, with a correlative meaning, "Affiliated") shall mean,
with respect to any Person, any other Person that directly, or through one or
more intermediaries, controls or is controlled by or is under common control
with such first Person. For the purpose of this definition and of the definition
of the term "Subsidiary", "control" (including, with correlative meanings,
"controlled by" and "under common control with") means possession, directly or
indirectly, of the power to direct or cause the direction of management or
policies, whether through ownership of securities or other ownership interests,
by contract or otherwise.
(e) "Ancillary Documents" has the meaning specified in ss.11(j)(ii).
(f) "Applicable Rate" means the EUROLIBOR for a three-month period as
announced from time to time plus 1.5% per annum.
(g) "Augusta Escrow Account" has the meaning specified in ss.2(d).
(h) "Base Purchase Price" is U.S. $ 4,200,000
(i) "Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
(j) "Business Day" means a day on which the securities in question are
traded on the Nasdaq National Market System.
(k) "Buyer" has the meaning set forth in the preface above.
(l) "Buyer Escrow Account" has the meaning specified in ss.2(d).
(m) "Cash Consideration" has the meaning specified in ss.2(b).
(n) "Closing" has the meaning set forth in ss.2(f) below.
(o) "Closing Balance Sheet" has the meaning specified in ss.2(e)(i).
(p) "Closing Date" has the meaning set forth in ss.2(f) below.
(q) "Closing Net Book Value" has the meaning specified in ss.2(e)(v).
(r) "Closing Total Assets" has the meaning specified in ss.2(e)(v).
(s) "Closing Total Liabilities" has the meaning specified in ss.2(e)(v).
(t) "Confidential Information" means any information concerning the
businesses (including the strategy), financial information, customer information
and product information of Korona that is not generally available to the public.
(u) "Conversion Price" shall mean the average of the reported closing
market prices of Buyer's common stock on the Nasdaq National Market System
during the 30-trading day period ending two Business Days prior to the Closing;
provided, however, that (i) if such average of the reported closing market
prices shall be lower than U.S.$8.00, the Conversion Price shall equal U.S.$8.00
and (ii) if such average of the reported closing market prices shall be higher
than U.S.$10.00, the Conversion Price shall equal U.S.$10.00.
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(v) "Disclosure Schedule" has the meaning set forth in ss.4 below and is
attached as Exhibit D to the Reference Deed.
(w) "DEM" means the lawful money of the Federal Republic of Germany.
(x) "Dollar" and the sign "$" mean the lawful money of the United States.
(y) "Doubtful Receivables" has the meaning specified in ss.2(e)(vi).
(y(1)) "Effective Date" means May 1, 2001.
(z) "Environmental, Health, and Safety Laws" means all German laws
(including rules, regulations, codes, injunctions, judgments, orders and decrees
thereunder) concerning pollution or protection of the environment, public health
and safety, or employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of Hazardous Substances into
ambient air, surface water, ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Substances, in each case as in effect on the
date of this Agreement.
(aa) "Escrow Accounts" means the Augusta Escrow Account and Buyer Escrow
Account.
(bb) "Estimated Closing Net Book Value" has the meaning specified in
ss.2(e)(i).
(cc) "Euro Currency Exchange Rate" means the European Central Bank
Reference Rate of the Dollar as announced by the European Central Bank in
Frankfurt at the Closing Date.
(dd) "Financial Statement" has the meaning set forth in ss.4(g) below and
is attached as Exhibit B to the Reference Deed.
(ee) "GAAP" means German generally accepted accounting principles in
accordance with the German Commercial Code ("Handelsgesetzbuch") as in effect
(i) with respect of the Financial Statements as of the respective dates of such
Financial Statements, and (ii) otherwise, as of the date of this Agreement.
(ff) "Government Filing" has the meaning specified in ss.3(a).
(gg) "Hazardous Substance" means any substances or materials defined as
"hazardous substances", "hazardous wastes", "toxic substances", "toxic wastes",
"solid wastes", or words of similar import in any applicable German
environmental laws, as presently in effect.
(hh) "ICC Rules" has the meaning specified in ss.11(j)(ii).
(ii) "Indemnified Party" has the meaning set forth in ss.8(e) below.
(jj) "Indemnifying Party" has the meaning set forth in ss.8(e) below.
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(kk) "Initial Payment" shall mean the Base Purchase Price (A) plus an
amount, if any, equal to the amount by which the Estimated Closing Net Book
Value exceeds the Target Amount or (B) minus an amount, if any, equal to the
amount by which the Target Amount exceeds the Estimated Closing Net Book Value;
provided, that any amount in DEM shall be converted into Dollars based on the
Euro Currency Exchange Rate as of the Closing Date.
(ll) "Intellectual Property" means (a) all patents, trademarks, service
marks, trade dress, logos, trade names, and corporate names, including all
appurtenant goodwill associated with such names and marks, and all applications,
registrations, and renewals in connection therewith, (b) all copyrights, and all
applications, registrations, and renewals in connection therewith, (c) all mask
works and all applications, registrations, and renewals in connection therewith,
(d) all trade secrets and know-how and (e) all computer software (including data
and related documentation).
(mm) "Knowledge" with respect to Buyer or Augusta means actual knowledge
after reasonable investigation of the members of the board of directors of such
Party at the date of this Agreement.
(nn) "Korona Shares" means the entire equity interest in Korona, consisting
of all of the limited partnership interests in Korona and the sole share of the
General Partner.
(oo) "Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
(pp) "Material Adverse Effect" means any material adverse change in or
effect on the business, results of operations or financial condition of Korona
taken as a whole.
(qq) "Material Subsidiary" or "Material Subsidiaries" means any
"significant subsidiary" as defined under Regulation S-X of the Securities
Exchange Act of 1934, as amended.
(rr) "Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
(ss) "Most Recent Financial Statements" has the meaning set forth in
ss.4(g) below.
(tt) "Most Recent Fiscal Year End" has the meaning set forth in ss.4(g)
below.
(uu) "Notice of Disagreement" has the meaning specified in ss.2(e)(ii).
(vv) "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
(ww) "Party" or "Parties" has the meaning set forth in the preface above.
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(xx) "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
(yy) "Promissory Note" has the meaning specified in ss.6(f) and is attached
as Exhibit C to the Reference Deed.
(zz) "Purchase Price" shall mean the Base Purchase Price (A) plus an
amount, if any, equal to the amount by which the Closing Net Book Value exceeds
the Target Amount or (B) minus an amount, if any, equal to the amount by which
the Target Amount exceeds the Closing Net Book Value; provided, that any amount
in DEM shall be converted into Dollars based on the Euro Currency Exchange Rate
as of the Closing Date.
(aaa) "Receivables Adjustment" has the meaning specified in ss.2(e)(vi).
(bbb) "Reference Deed" means the notarised deed notarised on April 25, 2001
(UR 4/2001 of Notary Dr. Fritze) which contains all Exhibits and Annexes to this
Agreement, except the "Darlehensvereinbarung" and the "Guarantee" which are
attached to this deed.
(ccc) "Registration Rights Agreement" has the meaning specified in ss.2(g)
and is attached as Exhibit A to the Reference Deed.
(ddd) "Restricted Common Stock" means Buyer's common stock, par value US
$0.003 per share, the issuance of which to Augusta has not been registered under
the Securities Act.
(eee) "RISO" means R.I.S.O. Haushaltswaren GmbH, Moringen (Amtsgericht
Northeim, HRB 1109).
(fff) "SEC" has the meaning set forth in ss.6(h).
(ggg) "SEC Documents" means all reports, schedules, registration statements
and other documents (including all exhibits and schedules thereto) required to
be filed by Buyer with the SEC on or after December 31, 1999.
(hhh) "Securities Act" means the U.S. Securities Act of 1933, as amended.
(iii) "Securities Exchange Act" means the U.S. Securities Exchange Act of
1934, as amended.
(jjj) "Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, (d)
other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money and (e) all similar encumbrances provided
for under German law.
(kkk) "Shares" has the meaning specified in ss.3(b)(v)(3).
(lll) "Specified Lien" means the land charge ("Grundschuld") in favor of
Commerzbank AG, Gottingen, registered in the land register ("Grundbuch") of
Moringen, Bl. 2947, Fl. 48, Flst. 75/1, 7092qm and B1.2947, Fl. 48, Flst. 74/1,
64qm in the amount of DEM 2,000,000.
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(mmm) "Stock Consideration" has the meaning specified in ss.2(b).
(nnn) "Subsidiary" means, with respect to any specified Person, any other
Person which, directly or indirectly, is controlled by such Person.
(ooo) "Target Amount" means DEM 3,000,000 based on U.S. GAAP.
(ppp) "Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, sales, use, transfer, value added, trade taxes
("Gewerbesteuer"), or other tax of any kind whatsoever, imposed by any federal,
state, local or foreign governmental authority, including any interest, penalty,
or addition thereto, whether disputed or not.
(qqq) "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
(rrr) "Third Party Claim" has the meaning set forth in ss.8(e) below.
(sss) "U.S. GAAP" means United States generally accepted accounting
principles, as in effect from time to time.
2. Purchase and Sale of Korona Shares.
(a) Purchase and Sale. On the terms and subject to conditions set forth in
this Agreement, Augusta agrees to sell and transfer to Buyer, Buyer agrees to
purchase and accept from Augusta, all of the Korona Shares owned by Augusta for
the Purchase Price.
(b) Payment at Closing. On the Closing Date, Buyer shall deliver to Augusta
(x) 65% of the Initial Payment in immediately available U.S. funds (the "Cash
Consideration") by wire transfers to (A) the Augusta Escrow Account of such
portion of the Cash Consideration as set forth in ss.2(d) and (B) a bank account
designated by Augusta in a written notice given to Buyer at least two Business
Days prior to the Closing of the remaining portion of the Cash Consideration
minus the amount withheld pursuant to ss.2(e)(vi) (the "Withholding") (if any),
and (y) one or more certificates registered in the name of Augusta representing
that number of fully paid and nonassessable shares of Buyer's Restricted Common
Stock (the "Stock Consideration") equal to (i) 35% of the Initial Payment,
divided by (ii) the Conversion Price, provided that the certificate representing
the portion of the Stock Consideration to be placed in escrow pursuant to
ss.2(d) will directly be placed in the Augusta Escrow Account. The Stock
Consideration will be "restricted," as that term is defined in Rule 144 adopted
under the Securities Act and subject to the Registration Rights Agreement
attached as Exhibit A to the Reference Deed.
(c) Intentionally omitted.
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(d) Escrow Accounts. At the Closing, Buyer shall deliver, or cause to be
delivered, 12% of the Stock Consideration and 12% of the Cash Consideration (it
being understood that the aggregate value of the Augusta Escrow Account will be
in any event not less than DEM 1,000,000 computed based on the Conversion Price)
to be held in escrow to the escrow account to be established at a bank or law
firm proposed by Augusta with Buyer's consent (the "Augusta Escrow Account"). At
the Closing, Buyer shall remit the funds of the Withholding to be held in escrow
in the escrow account to be established at a bank or law firm proposed by Buyer
with Augusta's consent (the "Buyer Escrow Account") as provided for in
ss.2(e)(vi) below. Buyer Escrow Account and the cash portion of the Augusta
Escrow Account shall be interest bearing and all interest income, after
deduction of all fees and applicable Taxes, will be allocated one half to
Augusta and one half to Buyer. The Escrow Accounts shall be closed no later than
six months after the Closing Date and any balance or Stock Consideration
remaining in the respective Escrow Account shall be distributed to Buyer and
Augusta as provided herein.
(e) Purchase Price Adjustment. (i) Not later than two (2) Business Days
prior to the Closing Date, Augusta shall prepare and deliver to Buyer a balance
sheet of Korona dated April 30, 2001 in accordance with GAAP and in a manner
consistent with that used to prepare the Financial Statements and reconciled to
U.S. GAAP (the "Closing Balance Sheet"), providing an estimate of the Closing
Net Book Value (the "Estimated Closing Net Book Value") based on U.S. GAAP.
(ii) During the 60-day period following Buyer's receipt of the Closing
Balance Sheet, Buyer and (if applicable) Buyer's designated independent auditors
shall be permitted to review and make copies reasonably required of (x) the
working papers of Korona and, if relevant, its independent auditors relating to
the preparation of the Closing Balance Sheet and (y) any supporting schedules,
supporting analyses and other supporting documentation relating to the
preparation of the Closing Balance Sheet. The Closing Balance Sheet shall become
final and binding upon the Parties on the sixtieth day following delivery
thereof, unless Buyer gives written notice of disagreement with the Closing
Balance Sheet ("Notice of Disagreement") to Augusta prior to such date. Any
Notice of Disagreement shall (A) specify in reasonable detail the nature of any
disagreement so asserted, (B) only include disagreements based on mathematical
errors or based on Closing Net Book Value not being calculated in accordance
with this ss.2(e), (C) be accompanied by a certificate of Buyer that it has
complied with the covenants set forth in this ss.2(e) and (D) if Buyer's
independent auditors are engaged by Buyer in connection with the preparation of
the Notice of Disagreement, be accompanied by a certificate of Buyer's
independent auditors that they concur with each of the positions taken by Buyer
in the Notice of Disagreement. If a Notice of Disagreement complying with the
preceding sentence is received by Augusta in a timely manner, then the Closing
Balance Sheet (as revised in accordance with clause (I) or (II) below) shall
become final and binding upon the parties on the earlier of (I) the date Augusta
and Buyer resolve in writing any differences they have with respect to the
matters specified in the Notice of Disagreement or (II) the date any disputed
matters are finally resolved in writing by the Accounting Firm (as defined
below).
(iii) During the 60-day period following Augusta's receipt of a Notice
of Disagreement that complies with the preceding paragraph, Buyer and Augusta
shall seek in good faith to resolve in writing any differences which they may
have with respect to the matters specified in the Notice of Disagreement. During
such period Augusta and its independent auditors shall be permitted to review
and make copies reasonably required of (x) the working papers of Buyer and, if
relevant, Buyer's designated independent auditors (if any) relating to the
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preparation of the Notice of Disagreement and (y) any supporting schedules,
supporting analyses and other supporting documentation relating to the
preparation of the Notice of Disagreement. If, at the end of such 60-day period,
the differences as specified in the Notice of Disagreement are not resolved,
Augusta and Buyer shall submit to an independent accounting firm (the
"Accounting Firm") for review and resolution any and all matters which remain in
dispute and which are properly included in the Notice of Disagreement. The
Accounting Firm shall be the Frankfurt office of Deloitte Touche (or an other
mutually acceptable independent public accounting firm and office agreed upon by
the Parties in writing). Augusta and Buyer shall use reasonable efforts to cause
the Accounting Firm to render a decision resolving the matters in dispute within
30 days following the receipt of the submission of such matters by the
Accounting Firm. Upon receipt by Augusta and Buyer of such decision, either
Augusta and Buyer may request that judgment be entered upon the determination of
the Accounting Firm in any court having jurisdiction over the party against
which such determination is to be enforced. Except as specified in the following
sentence, the cost of any dispute resolution procedure (including the fees and
expenses of the Accounting Firm) pursuant to this ss.2(e) shall be borne by
Augusta, on the one hand, and Buyer, on the other hand, in inverse proportion as
they may prevail on matters resolved by the Accounting Firm, which proportionate
allocations shall be determined by the Accounting Firm at the time the decision
of the Accounting Firm is rendered on the merits of the matters submitted. The
fees and expenses of the Augusta's independent auditors (if any) incurred in
connection with the issuance of the Closing Balance Sheet shall be borne by
Augusta, and the fees and expenses of the independent auditors of Buyer incurred
in connection with their review of the Closing Balance Sheet shall be borne by
Buyer.
(iv) If the Purchase Price is greater than the Initial Payment, Buyer
shall, within 10 Business Days after the Closing Balance Sheet becomes final and
binding upon the Parties, make payment to Augusta equal to the amount of such
difference, together with interest earned thereon, calculated on the basis of
the actual number of days elapsed and a 365-day year, from the Closing Date to
the date of actual payment, compounded annually, by delivering to Augusta (A)
65% of such difference and the accrued interest in immediately available U.S.
funds by wire transfer and (B) a certificate registered in the name of Augusta
representing that number of fully paid and nonassessable shares of Buyer's
Restricted Common Stock equal to (x) 35% of such difference and the accrued
interest, divided by (y) the Conversion Price. If the Initial Payment is greater
than the Purchase Price, Augusta shall, within 10 Business Days after the
Closing Balance Sheet becomes final and binding upon the parties, make payment
to Buyer equal to the amount of such difference, together with interest earned
thereon, calculated on the basis of the actual number of days elapsed and a
365-day year, from the Closing Date to the date of actual payment, compounded
annually, by delivering (I) 65% of such difference and the accrued interest in
immediately available U.S. funds by wire transfer and (II) Stock Consideration
equal to (1) 35% of such difference and the accrued interest, divided by (2) the
Conversion Price computed using the Conversion Price applied to determine the
Stock Consideration. Any Payment obligation of Augusta pursuant to the
proceeding sentence shall be satisfied by releasing first the founds and the
stock consideration held in the Augusta Escow amount. Any remaining balance in
the Augusta Escow account after the Purchase Price adjustment pursuant to
ss.2(e), (i)-(v) shall be paid out of Austria.
(v) The term "Closing Net Book Value" means Closing Total Assets minus
Closing Total Liabilities (in each case as defined below). The term "Closing
Total Assets" means the total assets of Korona as of April 30, 2001, determined
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in accordance with GAAP and reconciled to U.S. GAAP. The term "Closing Total
Liabilities" shall mean the sum of (x) total Liabilities of Korona as of April
30, 2001 (A) determined in accordance with GAAP and (B) determined in a manner
consistent with the determination of Liabilities of Korona for purposes of the
balance sheet of Korona at December 31, 2000 included in the Financial
Statements and reconciled to U.S. GAAP (it being understood and agreed that any
conflict between the principles specified in clauses (A) and (B) shall be
determined in the manner that would result in the greatest amount of
Liabilities), plus (y) any Liabilities arising upon the occurrence of, or as a
result of the consummation of, the Closing.
(vi) Notwithstanding the foregoing, the Purchase Price shall be
adjusted in the amount of outstanding Korona's Doubtful Receivables (the
"Receivables Adjustment") as described in this clause (vi). "Doubtful
Receivables" means any receivable which is more than 60 days past due as of the
Closing Date and is listed in ss.2(e)(vi) of the Disclosure Schedule. At
Closing, Buyer will remit funds to Buyer Escrow Account in the aggregate amount
of the Doubtful Receivables. Buyer will use its reasonable best efforts to
collect the Doubtful Receivables. It is understood that any funds collected by
Buyer with respect to any customer will be applied first against any Doubtful
Receivable of such customer. Buyer will not discount any of the Doubtful
Receivables without Augusta's prior written consent. As Buyer and Augusta work
together to collect the Doubtful Receivables, the collected funds will be
remitted to Buyer. Augusta shall receive funds from the Withholding from Buyer
Escrow Account in the amount equal to the collected Doubtful Receivables. At the
end of six months from the Closing, Buyer will assign all remaining Doubtful
Receivables (if any) to Augusta and Buyer will receive any remaining funds
relating to the Doubtful Receivables from Buyer Escrow Account.
(f) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Knauthe Paul
Schmitt, Eschersheimer Landstrasse 27 60322 Frankfurt am Main, Germany, or such
other place as mutually agreed by the Parties, commencing at 9:00 a.m. local
time on May 10, 2001, subject to the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself), or such other date as Buyer and Augusta may
mutually determine (the "Closing Date").
(g) Deliveries at the Closing. At the Closing, (i) Augusta will deliver to
Buyer the various certificates, instruments, and documents referred to in
ss.7(a) below, (ii) Buyer will deliver to Augusta the various certificates,
instruments, and documents referred to in ss.7(b) below, (iii) Augusta and Buyer
shall execute the Registration Rights Agreement in substantially the form
attached as Exhibit A to the Reference Deed ("Registration Rights Agreement"),
(iv) Augusta and Buyer will enter into a legally binding agreement on the
transfer of the Korona Shares, (v) Buyer will deliver to Augusta (A) the Cash
Consideration and (B) one or more certificates representing the Stock
Consideration of the Purchase Price, each as specified in ss.2(b) above, and
(vi) the Parties will deliver such other documents as Augusta or Buyer, as the
case may be, reasonably request in order to effectuate the transactions
contemplated by this Agreement to be consummated at the Closing. The stock
certificate(s) to be delivered by Buyer pursuant to this ss.2(g) shall bear the
following legend:
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The Securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and may not be sold or otherwise transferred unless (i) pursuant to an
effective registration statement under the Act, (ii) in accordance
with an exemption from registration under the Act, (iii), or unless
sold pursuant to Rule 144 under the Act, or (iv) the registration
requirements of the Act do not apply.
(h) Transaction Effective Date. The Parties agree that in the event
the Closing occurs, the transfer of the economic interest and risk will be
deemed to have taken effect on May 1, 2001 (the "Effective Date").
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of Augusta. Except as set forth in
Annex I attached to the Reference Deed, Augusta represents and warrants to
Buyer as of the date hereof as follows:
(i) Organisation of Korona. Augusta is duly organised and validly
existing under the laws of Germany. Augusta is the sole limited
partner (with a capital contribution of DEM 1,000,000) of Korona, a
German limited partnership (Amtsgericht Northeim, HRA 837). The sole
general partner of Korona is the General Partner (Amtsgericht
Frankfurt am Main, HRB 42322). Augusta owns 100% of the shares of the
General Partner, namely one share in the nominal amount of DEM 50,000.
(ii) Authorisation of Transaction. Augusta has full corporate
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby
have been duly authorised and approved by the directors of Augusta and
no other corporate proceedings on the part of Augusta are necessary to
authorise and approve this Agreement and the transactions contemplated
hereby. This Agreement constitutes subject to (x) the notarisation of
this Agreement and (y) the notarised transfer of the share in the
General Partner, the valid and legally binding obligation of Augusta,
enforceable in accordance with its terms and conditions, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganisation, moratorium, fraudulent transfer or similar laws
affecting creditors' rights generally or by the principles governing
the availability of equitable rights. Augusta need not give any notice
to, make any filing with, or obtain any authorisation, consent, or
approval of any government or governmental agency (a "Governmental
Filing"), except for (A) Governmental Filings in respect of Taxes, (B)
Governmental Filings that may be obtained or made in the Ordinary
Course of Business of Augusta or Korona (as the case may be) and (C)
such Government Filings the failure to obtain or make, as the case may
be, would not in the aggregate reasonably be expected to have a
Material Adverse Effect or have a material adverse effect on Augusta's
ability to consummate the transactions contemplated by this Agreement.
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(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will violate the "Satzung" (articles of incorporation) of
Augusta or will violate in any material respect any constitution,
statute, regulation, rule, injunction, judgement, order, decree,
ruling, charge, or other restriction of any government, governmental
agency, or court to which Augusta or Korona is subject.
(iv) Brokers' Fees. Augusta has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which Buyer
could become liable or obligated.
(v) Investment. Augusta (A) understands that the transfer of
Restricted Common Stock to Augusta has not been registered under the
Securities Act, or under any applicable state securities laws, and is
being offered and sold in reliance upon federal and state exemptions
for transactions not involving any public offering, (B) is not a U.S.
person (as defined in Rule 902(k) of Regulation S) and is not
acquiring the Shares to be issued under this Agreement for the account
or benefit of any U.S. person (as defined in Rule 902(k) of Regulation
S), (C) will resell the Shares to be issued under this Agreement only
in accordance with the provisions of Regulation S, pursuant to
registration under the Securities Act, or pursuant to an available
exemption from registration under the Securities Act, and (D) will not
engage in hedging transactions with regard to the Shares to be issued
under this Agreement unless in compliance with the Securities Act.
(vi) Korona Shares. Augusta holds of record and owns beneficially
100% of the Korona Shares, free and clear of any restrictions on
transfer (other than any restrictions (A) under the Securities Act and
state securities laws or (B) contained in the Gesellschaftsvertrag of
Korona, Taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. Augusta is not
a party to any option, warrant, purchase right, or other contract or
commitment that could require Augusta to sell, transfer, or otherwise
dispose of any of Korona's capital stock (other than this Agreement).
Augusta is not a party to any voting trust, proxy, or other agreement
or understanding with respect to the voting of any capital stock of
Korona.
(b) Representations and Warranties of Buyer. Except as set forth in
Annex II attached to the Reference Deed, Buyer represents and warrants to
Augusta as of the date hereof as follows:
(i) Organisation of Buyer. Buyer is a corporation duly organizsd,
validly existing, and in good standing under the laws of the British
Virgin Islands.
(ii) Authorisation of Transaction. Buyer has full power and
authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder.
The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly authorised and
approved by the board of directors of Buyer and neither any other
corporate proceedings on the part of Buyer nor any action by the
shareholders of Buyer are necessary to authorise and approve this
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Agreement and the transactions contemplated hereby. This Agreement
constitutes the valid and legally binding obligation of Buyer,
enforceable in accordance with its terms and conditions, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganisation, moratorium, fraudulent transfer or similar laws
affecting creditors' rights generally or by the principles governing
the availability of equitable rights. Buyer need not give any notice
to, make any filing with, or obtain any authorisation, consent, or
approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will violate Memorandum and Articles of Association of Buyer,
or will violate in any material respect any constitution, statute,
regulation, rule, injunction, judgement, order, decree, ruling,
charge, or other restriction of any government, governmental agency,
or court to which Buyer is subject or any provision of its charter or
bylaws.
(iv) Brokers' Fees. Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which Augusta
could become liable or obligated.
(v) Capitalization. (1) The authorised capital stock of Buyer
consists of 23,333,334 shares of common stock, $0.003 par value per
share. As of the date of this Agreement, only 5,496,133 shares of
Common Stock of Buyer ($0.003 par value) are issued and outstanding.
(2) Buyer has sufficient funds to complete payment of the Cash
Consideration of the Purchase Price hereunder.
(3) Buyer's shares of Restricted Common Stock to be issued to
Augusta pursuant to ss.2 of this Agreement (the "Shares") have been,
or prior to the Closing will be, duly authorised, and such Shares,
when issued and delivered to Augusta pursuant to this Agreement, shall
be validly issued, fully paid and non-assessable shares, free of any
liens, encumbrance and restriction other than the restrictions set
forth in ss.2(g).
(vi) Litigation. There is no litigation, proceeding or
investigation of any nature pending or, to Buyer's Knowledge,
threatened against or affecting Buyer that would affect the ability of
Buyer fully to carry out the transactions contemplated by this
Agreement nor, to the Knowledge of Buyer, after due and careful
inquiry, is there any Basis for any such litigation, proceeding or
investigation.
(vii) Investment Intent of Buyer. Buyer is buying and receiving
the Korona Shares to be delivered pursuant to this Agreement for
investment purposes for its own account, and not with the view to or
in connection with any distribution thereof. Buyer understands that
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its purchase of the Korona Shares has not been registered under the
Securities Act or applicable securities laws of any other jurisdiction
and that the Korona Shares may not be sold, assigned, offered for
sale, pledged or otherwise transferred unless such transaction is
registered under the Securities Act and applicable securities laws of
any other jurisdiction, or exemptions for such requirements are
available or such requirements are not applicable. Buyer is an
"accredited investor", as the term is defined in Rule 501(a) under the
Securities Act, and its management has such knowledge and experience
in financial matters as make it capable of evaluating the merits and
risks of the purchase of the Korona Shares upon the terms of this
Agreement.
(viii) SEC Documents; Financial Information. Augusta has had
access to Buyer's SEC Documents on the SEC's web site which contains
true and complete copies of all SEC Documents filed with the SEC. As
of their respective filing dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act, the
Exchange Act and the rules and regulations of the SEC thereunder
applicable to such SEC Documents, and as of their respective dates
none of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
financial statements of Buyer and its Material Subsidiaries included
in the SEC Documents comply as of their respective dates in all
material respects with applicable accounting requirements and the
rules and regulations of the SEC with respect thereto (except as may
be indicated in the notes thereto) and present fairly in all material
respects as of their respective dates the consolidated financial
position of Buyer and its Subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated cash
flows for each of the respective periods, in conformity with U.S.
GAAP.
(2) Except as and to the extent expressly set forth in the
balance sheet, or the notes, schedules or exhibits thereto, or as
disclosed in the SEC Documents, (i) as of December 31, 2000, neither
Buyer nor the Material Subsidiaries had any material liabilities or
obligations (whether absolute, contingent, accrued or otherwise) that
would be required to be included on a balance sheet or in the notes,
schedules or exhibits thereto prepared in accordance with U.S. GAAP.
4. Representations and Warranties Concerning Korona. Except as set forth
in the disclosure schedule delivered by Augusta to Buyer on the date hereof
(the "Disclosure Schedule"), Augusta represents and warrants to Buyer as of
the date hereof as follows:
(a) Organisation, Qualification, and Corporate Power. Korona is a
German limited partnership duly organised and validly existing under the
laws of Germany. The General Partner is a German limited liability company
duly organised and validly existing under the laws of Germany. Korona has
full corporate power and authority, and all licenses, permits, and
authorisations, necessary to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it, with such
exceptions which would not reasonably be expected to have a Material
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Adverse Effect. Section 4(a) of the Disclosure Schedule lists the General
Partner's managing directors. Augusta has delivered to Buyer correct and
complete copies of the "Satzung" (articles of association) of the General
Partner and the "Gesellschaftsvertrag" (partnership agreement) (each as
amended to date) of Korona. Neither Korona nor the General Partner is in
default under or in violation of any provision of its Satzung or
Gesellschaftsvertrag, respectively, with such exceptions which would not
reasonably be expected to have a Material Adverse Effect.
(b) Capitalization. The entire paid in capital contribution of Augusta
in Korona consists of DEM 1,000,000. There is no capital contribution of
the General Partner in Korona. The sole existing share in the General
Partner in the nominal amount of DEM 50,000 is validly issued, fully paid,
and non-assessable, and is held of record by Augusta. There are no
outstanding or authorised options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or
commitments that could require Korona to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorised stock appreciation, phantom stock, profit participation, or
similar rights with respect to Korona or the General Partner. There are no
voting trusts, proxies, or other agreements or understandings with respect
to the voting of any of Korona's equity interest.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgement, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Korona is subject or any
provision of the Gesellschaftsvertrag of Korona or Satzung of the General
Partner or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to
which Korona is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest
upon any of its assets), with such exceptions which would not reasonably be
expected to have a Material Adverse Effect or have a material adverse
effect on Augusta's ability to consummate the transactions contemplated by
this Agreement. Korona does not need to give any notice to, make any filing
with, or obtain any authorisation, consent, or approval of any government
or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement except for (A) Governmental
Filings in respect of Taxes, (B) Governmental Filings that may be obtained
or made in the Ordinary Course of Business of Korona and (C) such
Government Filings the failure to obtain or make, as the case may be, would
not in the aggregate reasonably be expected to have a Material Adverse
Effect or have a material adverse effect on Augusta's ability to consummate
the transactions contemplated by this Agreement.
(d) Brokers' Fees. Korona has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(e) Title to Assets. Korona has good and marketable title to, or a
valid leasehold interest in, the properties and assets reflected on the
Most Recent Balance Sheet or acquired after the date thereof, free and
clear of all Security Interests, except for (i) the Specified Lien and (ii)
properties and assets disposed of in the Ordinary Course of Business since
the date of the Most Recent Balance Sheet, with such exceptions which would
not reasonably be expected to have a Material Adverse Effect.
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(f) Subsidiaries. Section 4(f) of the Disclosure Schedule sets forth
for each Subsidiary of Korona as of the date of this Agreement (i) its name
and jurisdiction of incorporation, (ii) the number of shares of authorised
capital stock of each class of its capital stock, (iii) the number of
issued and outstanding shares of each class of its capital stock, the names
of the holders thereof, and the number of shares held by each such holder,
and (iv) the number of shares of its capital stock held in treasury. All of
the issued and outstanding shares of capital stock of each Subsidiary of
Korona have been duly authorised and are validly issued, fully paid, and
non-assessable. Korona holds of record and owns beneficially all of the
outstanding shares of each Subsidiary of Korona, free and clear of any
restrictions on transfer (other than restrictions under the Securities Act
and state securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands.
Subject to ss.6(i), there are no outstanding or authorised options,
warrants, purchase rights, conversion rights, exchange rights, or other
contracts or commitments that could require Korona to sell, transfer, or
otherwise dispose of any capital stock of any of its Subsidiaries or that
could require any Subsidiary of Korona to issue, sell, or otherwise cause
to become outstanding any of its capital stock. There are no outstanding
stock appreciation, phantom stock, profit participation, or similar rights
with respect to any Subsidiary of Korona. There are no voting trusts,
proxies, or other agreements or understandings with respect to the voting
of any capital stock of any Subsidiary of Korona. Augusta expressly
warrants that neither Korona nor Buyer bears any risk or obligation arising
out of the former business of, or the former participation in, AUGUSTA
Venture GmbH, Frankfurt am Main (previously a subsidiary of Korona under
the firm name Richardson Sheffield GmbH). Augusta further expressly
warrants that neither Korona nor Buyer bears any risk or obligation arising
out of the former business of, or the former participation in, RISO.
(g) Financial Statements. Attached to the Reference Deed as Exhibit B
are the following financial statements (collectively the "Financial
Statements"): (i) audited consolidated balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the
fiscal years ended December 31, 1998, December 31, 1999, and December 31,
2000 (the "Most Recent Fiscal Year End") for Korona; and (ii) unaudited
consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow (the "Most Recent Financial
Statements") as of and for the month ended March 31, 2001 for Korona and
the General Partner. The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly in all material respects the financial
condition of Korona as of such dates and the results of operations of
Korona for such periods, are correct and complete, and are consistent with
the books and records of Korona (which books and records are correct and
complete); provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not be material, i.e.,
more than DEM 50,000, individually or in the aggregate) and lack footnotes
and other presentation items.
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End and prior to the date of this Agreement, there has
not been any Material Adverse Effect. Without limiting the generality of
the foregoing, since the Most Recent Fiscal Year End, except as
specifically contemplated by this Agreement, to the best of Augusta's
Knowledge:
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(i) Subject toss.6(i), Korona has not sold, leased, transferred,
or assigned any of its assets, tangible or intangible, other than in
the Ordinary Course of Business;
(ii) Korona has not entered into any agreement, contract, lease,
or license (or series of related agreements, contracts, leases, and
licenses) involving more than DEM 60,000;
(iii) No party (including Korona and the General Partner) has
accelerated, terminated, modified, or cancelled any material
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving a remaining
payment of more than DEM 10,000 to which any of Korona is a party or
by which any of them is bound other than in the Ordinary Course of
Business;
(iv) Korona has not imposed any Security Interest or in any other
way encumbered any of its material assets, tangible or intangible
other than in the Ordinary Course of Business;
(v) Korona has not made any capital expenditure (or series of
related capital expenditures) involving more than DEM 60,000 other
than in the Ordinary Course of Business;
(vi) Korona has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans, and acquisitions)
involving more than DEM 60,000 other than in the Ordinary Course of
Business;
(vii) Korona has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalised lease obligation either involving
more than DEM 50,000 singly or DEM 100,000 in the aggregate other than
in the Ordinary Course of Business;
(viii) Korona has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) Korona has not cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims) either
involving more than DEM 25,000 or outside the Ordinary Course of
Business;
(x) Korona has not issued, sold, or otherwise disposed of any of
its capital stock or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise)
any of its capital stock;
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(xi) Korona has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of
its capital stock;
(xii) Korona has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to any of its property which is
material to its business;
(xiii) Neither Korona nor the General Partner has made any loan
to, or entered into any other transaction with, any of its directors
and employees outside the Ordinary Course of Business;
(xiv) Neither Korona nor the General Partner has entered into any
material employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract
or agreement;
(xv) Neither Korona nor the General Partner has granted any
material increase in the base compensation of any of its directors and
employees outside the Ordinary Course of Business;
(xvi) Korona has not adopted, amended, modified, or terminated
any material bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors
and employees outside the Ordinary Course of Business.
(xvii) Korona has not made any other material change in
employment terms for any of its directors and employees outside the
Ordinary Course of Business;
(xviii) Korona has not made or pledged to make any material
charitable or other capital contribution outside the Ordinary Course
of Business; and
(xix) Korona has not committed to any of the foregoing.
(i) Undisclosed Liabilities. Korona has no Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability), except for (i) Liabilities reflected or
reserved against in the Most Recent Balance Sheet, (ii) Liabilities which
have arisen after March 31, 2001 in the Ordinary Course of Business, (iii)
such other liabilities as are not required to be reflected on a balance
sheet of Korona prepared in accordance with GAAP or in a manner consistent
with the preparation of the Financial Statements and (iv) liabilities for
Taxes, except for such Taxes as allocated pursuant to ss.9.
(j) Legal Compliance. Korona and its Subsidiaries are in compliance
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgements, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies
thereof) with such exceptions which would not reasonably be expected to
have a Material Adverse Effect, and, to the best of Augusta's Knowledge, no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging
any failure so to comply.
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(k) Tax Matters.
(i) To the best of Augusta's Knowledge, Korona and the General
Partner have filed all Tax Returns that they were required to file as
follows:
Korona has filed the VAT returns including the year 1999, the
trade tax returns, including the year 1999, the uniform and specified
income determination (,,einheitliche und gesonderte
Gewinnfeststellung") including the year 1999, the VAT monthly
prepayment notice including February 2001, the monthly wage tax filing
until March 2001.
The General Partner has filed the VAT returns including the year
1999, the trade tax returns including the year 1999, the corporate tax
including the year 1999, the assessment of the distributable equity
capital ("Verwendbares Eigenkapital") according to (ss. 47 KStG -
German Corporate Tax Act) until the year 1999.
For RISO the filings have been made in accordance with the
filings of the General Partner. All the relevant assessment notes
("Steuerbescheide") are with the company, except, with respect to the
trade tax and the VAT of the General Partner and RISO, because of the
integrated inter-company relation ("steuerliches
Organschaftsverhaltnis") to Augusta.
There are no objections filed to the tax authorities.
All such Tax Returns were correct and complete in all respects.
All Taxes due (whether or not shown on any Tax Return) have been paid
by Korona and the General Partner, respectively. No claim has ever
been made by an authority in a jurisdiction where Korona does not file
Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of Korona's
assets that arose in connection with any failure (or alleged failure)
to pay any Tax.
(ii) To the best of Augusta's Knowledge, Korona and the General
Partner have 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, except with respect to the VAT monthly prepayment notice
March 2001, which will be paid on May 10th, 2001 in accordance with
the Tax authorities.
(iii) To the best of Augusta's Knowledge, no managing director
(or employee responsible for Tax matters) of Korona expects any
authority to assess any additional Taxes for any period for which Tax
Returns have been filed, except as mentioned in Section ss. 4 (k)(iii)
of the Disclosure Schedule. To the best of Augusta's Knowledge, there
is no dispute or claim concerning any Tax Liability of Korona either
(A) claimed or raised by any authority in writing or (B) as to which
Korona's managing directors (and employees responsible for Tax
matters) has knowledge based upon personal contact with any agent of
such authority. Section 4(k) of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with
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respect to Korona and the General Partner for taxable periods ended on
or after December 31, 2000. The most recent governmental tax
assessment ("Betriebsprufung") is listed in Section 4(k)(iii) of the
Disclosure Schedule. Korona has delivered to Buyer correct and
complete copies of trade tax returns from 1996 until 1999 of Korona
and the corporate tax returns of the General Partner since 1997.
(iv) To the best of Augusta's Knowledge, Korona and the General
Partner have not waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(v) To the best of Augusta's Knowledge, the unpaid Taxes of
Korona (A) did not, as of March 31, 2001, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on
the face of the Most Recent Balance Sheet and (B) do not exceed that
reserve as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of Korona in filing
its Tax Returns.
(vi) To the best of Augusta's Knowledge, all warranties as set
forth under (i) to (v) above shall also apply to Subsidiaries and to
legal predecessors of Korona.
(l) Real Property.
(i) Section 4(l)(i) of the Disclosure Schedule lists and
describes briefly all real property that Korona owns. Buyer has
received current excerpts from the respective land registers. With
respect to each such parcel of owned real property:
(a) the identified owner is the rightful owner of the parcel of
real property, free and clear of any Security Interest,
easement, covenant, or other restriction, except for (A) the
Specified Lien, (B) installments of special assessments not
yet delinquent and (C) recorded easements, covenants, and
other restrictions; and
(b) all facilities have received all approvals of governmental
authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have
been operated and maintained in accordance with applicable
laws, rules, and regulations with such exceptions which
would not reasonably be expected to have a Material Adverse
Effect;
(ii) Section 4(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to Korona.
Augusta has delivered to Buyer correct and complete copies of the
leases and subleases listed in ss.4(l)(ii) of the Disclosure Schedule
(as amended to date). With respect to each lease and sublease listed
in ss.4(l)(ii) of the Disclosure Schedule with such exceptions which
would not reasonably be expected to have a Material Adverse Effect:
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(a) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect in accordance with its terms,
except that such enforcement may be limited by any
bankruptcy, insolvency, reorganisation, moratorium,
fraudulent transfer or other laws (whether statutory,
regulatory or decisional), now or hereafter in effect,
relating to or affecting the rights of creditors generally
or by equitable principles (regardless of whether considered
in a proceeding at law or in equity);
(b) the lease or sublease will not be effected by the
consummation of the transactions contemplated hereby;
(c) no party to the lease or sublease is in breach or default in
any material respect, and, to the Knowledge of Augusta, no
event has occurred which, with notice or lapse of time,
would constitute a material breach or default or permit
termination, modification, or acceleration thereunder;
(d) there are no material disputes or oral agreements in effect
as to the lease or sublease;
(e) Korona has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold
or subleasehold;
(f) all facilities leased or subleased thereunder have received
all material approvals of governmental authorities
(including licenses and permits) required in connection with
the operation thereof and have been operated and maintained
in accordance with applicable laws, rules, and regulations;
and
(g) all facilities leased or subleased thereunder have direct
access to utilities and other services necessary for the
operation of said facilities.
(m) Intellectual Property.
(i) Korona owns, or has the right to use pursuant to license,
sublicense, agreement, or permission, all Intellectual Property
necessary for the operation of the businesses of Korona as presently
conducted.
(ii) To the Knowledge of Augusta, Korona has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of third parties, and none of the
managing directors (and employees with responsibility for Intellectual
Property matters) of Korona has received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Korona must
license or refrain from using any Intellectual Property rights of any
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third party) which is still pending and which is reasonably likely to
be adversely determined and which, if adversely determined, would
reasonably be expected to have a Material Adverse Effect. To the
Knowledge of Augusta, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any of
Korona's Intellectual Property rights.
(iii) Section 4(m)(iii) of the Disclosure Schedule identifies
each patent or registration which has been issued to Korona with
respect to any of its Intellectual Property, identifies each pending
patent application or application for registration which Korona has
made with respect to any of its Intellectual Property, and identifies
each license, agreement, or other permission which Korona has granted
to any third party with respect to any of its Intellectual Property
(together with any exceptions). Korona has delivered to Buyer correct
and complete copies of all such patents, registrations, applications,
licenses, agreements, and permissions (as amended to date). Section
4(m)(iii) of the Disclosure Schedule also identifies each trade name
or registered trademark used by Korona in connection with any of its
businesses including, but not limited to, the name "Korona" and
identifies each country or jurisdiction in which it has registered and
currently maintains the trademark or trade name. With respect to each
item of Intellectual Property identified in ss.4(m)(iii) of the
Disclosure Schedule:
(1) Korona possesses all right, title, and interest in and to the
item, free and clear of any Security Interest, license, or other
restriction;
(2) the item is, to the best of Augusta's Knowledge, not subject
to any outstanding injunction, judgment, order, decree, ruling,
or charge;
(3) to the best of Augusta's Knowledge, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or
demand is pending or is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(4) to the best of Augusta's Knowledge, Korona is under no
obligation to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict
with respect to the item.
(iv) Section 4(m)(iv) of the Disclosure Schedule identifies each
material item of Intellectual Property that any third party owns and
that Korona uses pursuant to license, sublicense, agreement, or
permission. Korona has delivered to Buyer correct and complete copies
of all such licenses, sublicenses, agreements, and permissions (as
amended to the date hereof). With respect to each item of Intellectual
Property identified in ss.4(m)(iv) of the Disclosure Schedule:
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(1) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force
and effect, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or similar laws affecting creditors' rights generally or
by the principles governing the availability of equity rights;
(2) to the best of Augusta's Knowledge, no party to the license,
sublicense, agreement, or permission is in breach or default, and
no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(3) to the best of Augusta's Knowledge, no party to the license,
sublicense, agreement, or permission has repudiated any provision
thereof; and
(4) Korona has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.
(n) Sufficiency of Assets. All material tangible assets are free from
known defects, have been maintained in accordance with normal industry
practice, are in good operating condition and repair (normal wear and tear
excepted), and are suitable for the purposes for which they are used, with
such exceptions which would not reasonably be expected to have a Material
Adverse Effect.
(o) Inventory. Korona's inventory consists of supplies, purchased
parts and finished goods, all of which is usable and salable in the
Ordinary Course of Business, not obsolete, damaged or defective, subject to
the reserve for inventory writedown set forth on the Most Recent Balance
Sheet (or in the notes thereto) as adjusted for the passage of time through
the Closing Date in accordance with Korona's custom and practice.
(p) Contracts. Section 4(p) of the Disclosure Schedule lists the
following contracts and other agreements to which Korona is a party:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease
payments in excess of DEM 25,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of supplies, products, or other personal property, or
for the furnishing or receipt of services, the performance of which
will extend over a period of more than one year, result in a material
loss to Korona or involve consideration in excess of DEM 50,000 per
annum;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of DEM
50,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
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(v) any agreement concerning confidentiality or non-competition;
(vi) any agreement with Augusta or any of Augusta's directors;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of its current or former directors, and
employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of DEM 100,000 or providing severance benefits;
(x) any agreement under which it has advanced or lent any amount
of money to any of its directors and employees outside the Ordinary
Course of Business; and
(xi) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of DEM 50,000.
Augusta has delivered to Buyer a correct and complete copy of each written
agreement listed in ss.4(p) of the Disclosure Schedule (as amended to the date
hereof). With respect to each such agreement: (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect, except that such enforcement
may be limited by any bankruptcy, insolvency, reorganisation, moratorium,
fraudulent transfer or other laws (whether statutory, regulatory or decisional),
now or hereafter in effect, relating to or affecting the rights of creditors
generally or by equitable principles (regardless of whether considered in a
proceeding at law or in equity); (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) to the
Knowledge of Augusta, no party is in breach or default in any material respect,
and no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the agreement; and (D) no party has repudiated any provision of the agreement,
in each case, with such exceptions which would not reasonably be expected to
have a Material Adverse Effect.
(q) Accounts Receivable. Except for the Doubtful Receivables pursuant
toss.2(e)(vi), all of Korona's accounts receivable are reflected properly
on its books and records and are believed to be collectible.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed by Korona.
(s) Insurance. Section 4(s) of the Disclosure Schedule contains a
complete and correct list and summary description (including only the name
of the insurer, coverage, premium and expiration date) of all policies of
insurance relating to the business or assets of Korona which are in force
as of the date hereof, maintained by Korona. Augusta has delivered to Buyer
or provided Buyer with access to true and complete copies of all binders
with respect to such policies of insurance. Such policies are in full force
and effect.
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(t) Litigation. Section 4(t) of the Disclosure Schedule sets forth
each instance in which Korona (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of Augusta, is threatened in writing to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator, in each case,
which is reasonably likely to be adversely determined and which, if
adversely determined, would reasonably be expected to have a Material
Adverse Effect.
(u) Product Warranty. To Augusta's Knowledge, since 1998 and as of the
date hereof, Korona has not experienced any material warranty claims
resulting from or arising out of the warranties described in ss.4(u) of the
Disclosure Schedule other than (i) in the Ordinary Course of Business or
(ii) as reflected or reserved against in the Most Recent Balance Sheet.
(v) Product Liability. To Augusta's Knowledge, Korona has no Liability
arising out of any injury to individuals caused by a product sold by Korona
and RISO, except for Liabilities disclosed, reflected or reserved against
on the Most Recent Balance Sheets.
(w) Employees. To the Knowledge of Augusta, no executive, key
employee, or group of employees has any plans to terminate employment with
Korona. Korona is not a party to or bound by any collective bargaining
agreement. As of the date of this Agreement, there are no labor strikes,
grievances, claims of unfair labor practices, or other collective
bargaining dispute. To the Knowledge of Augusta, there is not any
organisational effort presently being made or threatened by or on behalf of
any labor union with respect to Korona's employees.
(x) Guaranties. Korona is not a guarantor or is otherwise liable for
any Liability or obligation (including indebtedness) of any other Person.
(y) Environment, Health, and Safety.
(i) Korona and its Subsidiaries have in all material respects
complied with all Environmental, Health, and Safety Laws with such
exceptions which would not reasonably be expected to have a Material
Adverse Effect. Without limiting the generality of the preceding
sentence, Korona and its Subsidiaries have obtained and been in
compliance in all material respects with the terms and conditions of
all material permits, licenses, and other authorisations which are
required under, and have in all material respects complied with all
other material limitations, restrictions, conditions, standards,
prohibitions, requirements and obligations which are contained in, all
Environmental, Health, and Safety Laws.
(ii) Except for each Liability disclosed, reflected or reserved
against in the Financial Statements, Korona has no Liability (and none
of Korona or its Subsidiaries has handled or disposed of any
substance, arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition, or owned
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or operated any property or facility in any manner that could form the
Basis for any present or future action, suit, proceeding,
investigation, charge, complaint, claim, or demand against Korona
giving rise to any Liability) for damage to any site, location, or
body of water (surface or subsurface), for any illness of or personal
injury to any employee or other individual, or for any reason under
any Environmental, Health, and Safety Law.
(iii) To the best of Augusta's Knowledge, all properties and
equipment used in Korona's business have been free of asbestos, PCB's,
methylene chloride, trichloroethylene, 1,2-trans-dichloroethylene,
dioxins, dibenzofurans, and Hazardous Substances.
(z) Certain Business Relationships with Korona. None of Augusta's
shareholders have been involved in any business arrangement or relationship
with Korona within the past 12 months, and none of Augusta or its
Affiliates owns any asset, tangible or intangible, which is used in the
business of Korona's shareholders, other than the outstanding shareholder
loans ("Gesellschafterdarlehen") in the amount of DEM 2,300,000 plus
accrued interest and the variable capital (`variables Kapital") in the
amount of DEM 1,500,000 plus accrued interest. Buyer agrees and
acknowledges that it is aware of the fact, that Mr. Haas is a shareholder
of Augusta, CEO of Augusta and a managing director of General Partner.
5. Pre-Closing Covenants. The Parties covenant and agree as follows with
respect to the period between the execution of this Agreement and the
Closing:
(a) General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable in
order to consummate and make effective the transactions contemplated by
this Agreement (including satisfaction, but not waiver, of the closing
conditions set forth in ss.7 below).
(b) Notices and Consents. Augusta will cause Korona to give any
notices to third parties, and will cause Korona to use its best efforts to
obtain any third party consents, that Buyer may request in connection with
the matters referred to in ss.4(c) above. Each of the Parties will (and
Augusta will cause Korona to) give any notices to, make any filings with,
and use its best efforts to obtain any authorizations, consents, and
approvals of governments and governmental agencies in connection with the
matters referred to in ss.3(a)(ii), ss.3(b)(ii), and ss.4(c) above. Without
limiting the generality of the foregoing, each of the Parties will file
(and Augusta will cause Korona to file) any notification and report forms
and related material that it may be required to file with the German
Anti-Trust authorities, if necessary. Augusta shall use its reasonable
efforts to ensure that the current loan agreements of Korona, referring to
the borrower being a subsidiary of Augusta shall be amended to reflect the
new ownership, and Buyer will use its reasonable efforts to accomplish the
amendments of such loan agreements and to ensure that such amendments take
effect as of the Closing.
(c) Operation of Business. Without Buyer's consent, which shall not be
unreasonably withheld or delayed, Augusta will not cause or permit Korona
to engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business, except for such transactions
specifically contemplated by this Agreement. Without limiting the
generality of the foregoing, without Buyer's consent, which shall not be
unreasonably be withheld or delayed, Augusta will not cause or permit
Korona to (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock; or (ii) otherwise engage in any
practice, take any action, or enter into any transaction of the sort
described in ss.4(h) above.
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(d) Preservation of Business. Augusta will cause Korona to use its
reasonable efforts to keep its business and properties substantially
intact, including its operations, physical facilities, working conditions,
and relationships with lessors, licensors, suppliers, customers, and
employees.
(e) Full Access. Augusta will permit, and Augusta will cause Korona to
permit, representatives of Buyer to have full access during normal business
hours and upon reasonable notice, and in a manner so as not to interfere
with Korona's normal business operations, to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents
of or pertaining to Korona. All information provided to Buyer or its
representatives by or on behalf of Augusta, Korona or their representatives
(whether pursuant to this ss.5(e) or otherwise) shall be deemed
Confidential Information and may not be disclosed or otherwise disseminated
by Buyer, and Buyer covenants to provide this Confidential Information to
its Employees only on a "need to know" basis.
(f) Notice of Developments. Augusta will give prompt written notice to
Buyer of any material adverse development causing a breach of any of the
representations and warranties in ss.4 above. Each Party will give prompt
written notice to the other of any material adverse development causing a
breach of any of its own representations and warranties in ss.3 above.
(g) Exclusivity. Prior to May 10, 2001, Augusta will not (and Augusta
will not cause or permit Korona to): (i) solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to the
acquisition of any capital stock or other voting securities, or any
substantial portion of the assets of Korona (including any acquisition
structured as a merger, consolidation, or share exchange), (ii) participate
in any discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner any
effort or attempt by any Person to do or seek any of the foregoing, (iii)
Augusta will not vote its Korona Shares in favor of any such acquisition
structured as a merger, consolidation, or share exchange, and (iv) Augusta
will notify Buyer immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
(h) Guarantee of Buyer. Buyer shall negotiate in good faith and use
its reasonable best efforts to enter into a guarantee agreement with
Commerzbank to replace Augusta's guarantee obligation arising out of or
resulting from the guarantee dated as of January 11, 2001 to said credit
institution.
6. Post-Closing Covenants. The Parties covenant and agree as follows with
respect to the period following the Closing:
(a) General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably
may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
ss.8 below). Augusta and Korona acknowledge and agree that from and after
the Closing Buyer will be entitled to review all documents, books, records
(including Tax records), agreements, and financial data of any sort
relating to Korona.
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(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving Korona, each of the other Party will
cooperate with it and its counsel in the contest or defense, make available
its personnel, and provide such testimony and access to its books and
records as may be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless
the contesting or defending Party is entitled to indemnification therefor
under ss.8 below).
(c) Transition. Augusta will take no action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of Korona from maintaining the same
business relationships with Korona after the Closing as it maintained with
Korona prior to the Closing. Augusta will refer all customer inquiries
relating to the businesses of Korona to Buyer for a period of six months
after the Closing.
(d) Confidentiality. Subject to ss.6(g) and ss.9(c), Augusta will
treat and hold as such all of the Confidential Information, refrain from
using any of the Confidential Information except in connection with this
Agreement, and deliver promptly to Buyer at the request of Buyer, or
destroy, all tangible embodiments (and all copies) of the Confidential
Information which are in their possession other than such Confidential
Information which Augusta in good faith determines it will need to comply
with statutory or regulatory requirements. If Augusta is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, Augusta will,
unless prohibited by such legal proceeding, subpoena, court order or
similar process, notify Buyer promptly of the request or requirement so
that Buyer may seek an appropriate protective order or waive compliance
with the provisions of this ss.6(d). If, in the absence of a protective
order or the receipt of a waiver hereunder, Augusta is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal
or else stand liable for contempt, Augusta may disclose the Confidential
Information to the tribunal; provided, however, that Augusta uses its
reasonable efforts to obtain, at the request and expense of Buyer, an order
or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as Buyer
shall designate. The foregoing provisions shall not apply to any
Confidential Information which is generally available to the public or
comes into Augusta's possession not in violation of this Agreement prior to
the time of disclosure.
(e) Covenant Not to Compete. For a period of two years from and after
the Closing Date, Augusta will not, and will use its reasonable best
efforts to cause its directors and key managerial employees not to, engage
directly or indirectly in any business that Korona conducts prior to the
Closing Date in any geographic area in which Korona conducts that business
prior to the Closing Date; provided, however, that ownership of less than
5% of the outstanding stock of any publicly traded corporation shall not be
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deemed to be engaged in such businesses. If the final judgment of a court
of competent jurisdiction declares that any term or provision of this
ss.6(e) is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which
the judgment may be appealed.
(f) Redemption of Shares. Buyer hereby covenants and agrees that if
the Registration Statement of the Mandatory Registration (as such terms are
defined in the Registration Rights Agreement) is not declared effective on
or before January 31, 2002 (as provided for in more detail in the
Registration Rights Agreement), Augusta may elect to return the Shares
issued to it and receive a promissory note, in substantially the form
attached as Exhibit C to the Reference Deed (the "Promissory Note"), in the
full amount of the Stock Consideration and any additional Shares which may
be received pursuant to ss.2; provided that Augusta makes this election on
or before March 31, 2002. The Promissory Note shall bear interest at a rate
of 8% per annum, and the principal amount will be payable in nine (9)
monthly payments commencing on April 1, 2002.
(g) Retention of Books and Records. Buyer will cause Korona to retain
all books, records and other documents pertaining to Korona in existence on
the Closing Date for at least five (5) years thereafter and to make the
same available after the Closing Date for examination and copying by
Augusta or its representatives, at Augusta's expense, upon reasonable
notice. Buyer agrees that no such books, records or documents will be
destroyed by Buyer or Korona without first advising Augusta in writing and
providing to Augusta a reasonable opportunity (and in any event not less
than 30 days) to obtain possession or make copies thereof at Augusta's
expense.
(h) Rule 144. Buyer will take all action reasonably necessary to
enable Augusta to sell the Shares without registration under the Securities
Act within the limitations of the exemptions provided by (i) Rule 144 under
the Securities Act or (ii) any similar rule or regulation hereafter adopted
by the U.S. Securities and Exchange Commission (the "SEC"), including
without limiting the generality of the foregoing, filing on a timely basis
all reports required to be filed with the SEC under the Securities Exchange
Act, or if Buyer is not subject to Section 13 or 15(d) of the Securities
Exchange Act, it will make publicly available information required by
Section (c)(2) of Rule 144. Upon request of Augusta from time to time,
Buyer will deliver to Augusta a written statement as to whether it has
complied with such requirements.
(i) Spin Off of RISO. After the Closing, Augusta shall purchase from
Korona, and Buyer shall cause Korona to sell and transfer to Augusta, all
of the capital stock of RISO (consisting of one share in the nominal amount
of DEM 50,000 for the higher of (i) DEM 50,000 or (ii) the book value as
reflected on the Closing Balance Sheet not later than June 30, 2001 (it
being understood that Augusta and Korona will use its reasonable best
efforts to consummate the purchase as soon as possible after the Closing).
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(j) Repayment of the Shareholder Loans. Buyer will cause Korona to
repay the shareholder loans ("Gesellschafterdarlehen") granted by Augusta
to Korona in the amount of DEM 2,300,000, plus accrued interest in the
amount of DEM 11,425.14 (collectively, the "Principal Amount"), in eight
(8) monthly installments, beginning May 31, 2001. The outstanding Principal
Amount shall bear interest at a rate of 6% per annum. The interest shall be
paid with the last installment prior to or on December 31, 2001. Buyer
irrevocably guarantees to Augusta as set out in the Guarantee attached to
this deed the payment of the Principal Amount and the interest thereon by
Korona. Augusta and Korona have entered into a loan agreement as set out in
the "Darlehensvereinbarung und Garantieerklarung" attached to this deed.
(k) Purchase of the Warehouse Property. Augusta will purchase from
Korona, and Buyer will cause Korona to sell to Augusta, not later than June
30, 2001, (A) the real property with warehouse recorded in the land
register of Moringen, Blatt 2947, Flur 48, Flurstucke 75/1 and 74/1,
vacated and clear of any items, goods or machinery ("besenrein"), free and
clear of the Special Lien and any other lien, easement or covenant, for a
purchase price equal to (i) the book value at the date the purchase
agreement for such property transfer is notarised (ii) minus the
equal-installment depreciation in accordance with GAAP and past practice
and (B) - if bought by Korona - the additional parcel which is anticipated
to be bought by Korona in connection with the execution of the lease with
UPS (to which Augusta consents) (located in Moringen, Flur 48, Flurstuck
76/11, 745 qm) for the purchase price equal to the proposed purchase price
in the amount of approximately DM 50.000,00 to be paid by Korona. Augusta
will assume all of Korona's obligation and liabilities related to such real
property (including any lease related thereto) pursuant to a purchase
agreement for real property on terms and conditions commonly used in
Germany for the transfer of such real property and such other conditions as
to which the parties shall reasonably agree; provided, however, that Korona
shall not enter into new obligations (including without limitation any
lease) without the prior written consent of Augusta. Korona will have the
right to offset its payment obligations with respect to the repayment of
shareholder loans under ss.6(j) if Augusta should not perform its
obligation under this ss.6(k).
(l) Corporate Filings . Buyer shall file with the respective
Commercial Registers ("Handelsregister") all necessary filings under
applicable German law with respect to the transactions contemplated by this
Agreement as soon as practicable after the Closing but in no event later
than 5 days after the Closing.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions prior or at
the Closing:
(i) the representations and warranties set forth inss.3(a)
andss.4 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) Augusta shall have performed and complied with all of its
covenants underss.5 in all material respects through the Closing;
(iii) Korona shall have procured all of the material third-party
consents specified inss.5(b) above;
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(iv) no action, suit or proceeding shall be pending at any court
or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction which is reasonably likely to result in
an unfavorable injunction, judgment, order, decree, ruling, or charge
which would (A) prevent consummation of any of the material
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of Buyer to own Korona
Shares and to control Korona, or (D) affect adversely the right of
Korona to own its assets and to operate its business (and no such
injunction, judgment, order decree, ruling, or charge shall be in
effect);
(v) Augusta shall have delivered to Buyer a certificate, dated as
of the Closing Date, to the effect that each of the conditions
specified above in ss.7(a)(i)-(iv) is satisfied in all material
respects;
(vi) Augusta shall have delivered written confirmation to Buyer
that any and all consulting agreements it may have with Korona are
terminated and no fees pursuant to those agreements are due and owing;
and
(vii) Buyer shall have obtained on terms and conditions
reasonably satisfactory to it extensions or continuations of credit or
bank facilities in the aggregate amount of DEM 11,000,000 as currently
granted to Korona, provided, however, that Buyer shall have complied
with ss.5(b) and ss.5(h);
and Buyer may waive any condition specified in this ss.7(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of Augusta. The obligation of Augusta to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions at or prior
to the Closing:
(i) the representations and warranties set forth inss.3(b) above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) Buyer shall have performed and complied with all of its
covenants underss.5 in all material respects through the Closing;
(iii) no action, suit or proceeding shall be pending at any court
or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction which is reasonably likely to result in
an unfavorable injunction, judgment, order, decree, ruling, or charge
which would (A) prevent consummation of any of the material
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order decree, ruling,
or charge shall be in effect);
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(iv) Buyer shall have delivered to Augusta a certificate, dated
as of the Closing Date, to the effect that each of the conditions
specified above in ss.7(b)(i)-(iii) is satisfied in all material
respects;
(v) all actions to be taken by Buyer in connection with
consummation of the transactions contemplated hereby (including
without limitation the execution of the Registration Rights Agreement)
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to Augusta;
(vi) Augusta and Korona shall have entered into a loan agreement
(see attachment) and Buyer shall have guaranteed the repayment of the
Principal Amount and the interest thereon under such loan agreement;
and
(vii) Augusta has been released from all obligations and
liabilities arising out of or resulting from its guarantee in favor of
Commerzbank, dated as of January 11, 2001, and has received a release
satisfactory to Augusta in its sole and absolute discretion;
and Augusta may waive any condition specified in this ss.7(b) if it
executes a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
(i) All of the representations and warranties of the Parties
contained in this Agreement shall survive the Closing. Notwithstanding
the foregoing, the representations and warranties contained in or made
pursuant to this Agreement shall terminate on, and no claim or action
with respect thereto may be brought after, the first anniversary of
the Closing Date, provided, however, that the representations and
warranties contained in ss.3(a)(i) and (ii), ss.3(b)(i), (ii) and (v),
ss.4(a), ss.4(b), ss.4(k) and ss.4(y) shall continue in full force and
effect forever thereafter (subject to any applicable statutes of
limitations).
(b) Indemnification Provisions for Benefit of Buyer.
(i) Subject to clause (d) of this ss.8, if Augusta breaches any
of its representations, warranties, and covenants (in the case of each
representation and warranty (x) as made and given on the date of this
Agreement or (y) as if made and given on the Closing Date exactly as
written herein (including references to "the date hereof", "the date
of this Agreement" or other particular dates)) contained herein (other
than the representations and warranties in ss.3(a) above), and, if
there is an applicable survival period pursuant to ss.8(a) above,
provided that Buyer makes a written claim for indemnification against
Augusta pursuant to ss.11(h) below within such survival period, then
Augusta agrees to indemnify Buyer from and against the entirety of any
Adverse Consequences Buyer may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences
Buyer may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or
caused by the breach.
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(ii) Subject to clause (d) of this ss.8, in the event Augusta
breaches (or in the event any third party alleges facts that, if true,
would mean Augusta has breached) any of its representations and
warranties (in the case of each representation and warranty (x) as
made and given on the date of this Agreement or (y) as if made and
given on the Closing Date exactly as written herein (including
references to "the date hereof", "the date of this Agreement" or other
particular dates)) in ss.3(a) above, and, if there is an applicable
survival period pursuant to ss.8(a) above, provided that Buyer or
Newco makes a written claim for indemnification against Augusta
pursuant to ss.11(h) below within such survival period, then Augusta
agrees to indemnify Buyer from and against the entirety of any Adverse
Consequences Buyer or Newco may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences
Buyer or Newco may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach.
(c) Indemnification Provisions for Benefit of Augusta. Subject to
clause (d) of this ss.8, in the event Buyer or Newco breaches (or in the
event any third party alleges facts that, if true, would mean Buyer or
Newco has breached) any of its representations, warranties, and covenants
contained herein, and, if there is an applicable survival period pursuant
to ss.8(a) above, provided that Augusta makes a written claim for
indemnification against Buyer pursuant to ss.11(h) below within such
survival period, then Buyer agrees to indemnify Augusta from and against
the entirety of any Adverse Consequences Augusta may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences Augusta may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or
caused by the breach.
(d) Limitation of Indemnification. Notwithstanding anything to the
contrary in this Agreement:
(i) the aggregate liability of Augusta pursuant toss.8(b) will
not exceed the Purchase Price;
(ii) no Indemnified Party (as defined below) will be entitled to
recover indirect, special, consequential or punitive damages (other
than expenses and fees of counsel to which it is entitled to
indemnification pursuant to ss.8(b) or ss.8(c), as the case may be)
pursuant to ss.8(b) or ss.8(c);
(iii) Augusta shall not be liable, and shall not be required to
indemnify Buyer, for any Adverse Consequence pursuant to ss.8(b) until
the aggregate amount of all Adverse Consequences which are otherwise
recoverable hereunder by Buyer or Newco exceeds $50,000, after which
Augusta will be responsible pursuant to ss.8(b) only for amounts in
excess of such threshold;
(iv) Augusta shall not have any Liability pursuant to ss.8(b) to
the extent the Adverse Consequences arise as a result of the operation
of the business or assets of Korona after the Closing Date or any
action taken or omitted to be taken by Buyer or any of its Affiliates;
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(v) Buyer shall not be liable, and shall not be required to
indemnify Augusta, for any Adverse Consequence pursuant to ss.8(c)
until the aggregate amount of all Adverse Consequences which are
otherwise recoverable hereunder by Augusta exceeds $50,000, after
which Buyer will be responsible pursuant to ss.8(c) only for amounts
in excess of such threshold; and
(vi) Each of Buyer and Augusta agrees that, unless the other
party shall otherwise direct in writing, it will (and cause its
Affiliates to) use commercially reasonable efforts to recover amounts
under insurance policies to the extent such recoveries would reduce
amounts required to be paid by the other Party pursuant to ss.8(c) or
ss.8(b), as the case may be.
(e) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification against the other Party (the
"Indemnifying Party") under this ss.8, then the Indemnified Party
shall promptly notify the Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 15
days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by, the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence
acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) the Third
Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim does not (1) impose an
injunctive or other equitable relief against the Indemnified Party or
(2) establish a precedential custom or practice materially adverse to
the continuing business interests of the Indemnified Party, and (E)
the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with ss.8(e)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B)
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the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (not to be
unreasonably withheld), and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnified Party (not to be unreasonably withheld).
(iv) In the event any of the conditions in ss.8(e)(ii) above is
or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it may
deem appropriate (and the Indemnified Party need not consult with, or
obtain any consent from, the Indemnifying Party in connection
therewith), (B) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the costs of defending against the
Third Party Claim (including reasonable attorneys' fees and expenses),
and (C) the Indemnifying Party will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this ss.8.
(f) Determination of Adverse Consequences. The Parties shall take into
account the time cost of money (using the Applicable Rate as the discount
rate) in determining Adverse Consequences for purposes of this ss.8. All
indemnification payments under this ss.8 shall be deemed adjustments to the
Purchase Price.
(g) Other Indemnification Provisions. The rights of the Parties under
ss.8(b) and ss.8(c) will be the exclusive remedy of the Parties with
respect to breaches of representations, warranties, covenants or agreements
contained in or made pursuant to this Agreement. Augusta hereby agrees that
it will not make any claim for indemnification against Korona or the
General Partner solely by reason of the fact that it was a shareholder of
any such entity or was serving at the request of any such entity as a
partner, trustee, or agent of another entity (whether such claim is for
judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with respect to
any action, suit, proceeding, complaint, claim, or demand brought by Buyer
against Augusta (whether such action, suit, proceeding, complaint, claim,
or demand is pursuant to this Agreement, applicable law, or otherwise).
9. Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyer and Augusta for certain tax matters
following the Closing Date:
(a) Tax Periods Ending on or Before the Effective Date. Augusta shall
prepare or cause to be prepared and file or cause to be filed all Tax
Returns for Korona for all periods ending on or prior to the Effective Date
which are filed after the Effective Date. Augusta shall permit Buyer to
review and comment on each such Tax Return described in the preceding
sentence prior to filing. Augusta shall reimburse Buyer for Taxes owed by
Korona with respect to such periods within fifteen (15) days after payment
by Buyer or Korona of such Taxes to the extent such Taxes are not reflected
in the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax
income) shown on the face of the Closing Balance Sheet. In the case that
the reserve for Tax Liability will be released an exceeding amount, which
has not to cover Tax Liability shall be paid back to Augusta. In the case
of any tax refund with respect to a period before the Effective Date,
Augusta shall be refunded insofar as an asset is not reflected in the
relevant Financial Statements.
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(b) Tax Periods Beginning Before and Ending After the Effective Date.
Buyer shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns of Korona for Tax periods which begin before the Closing
Date and end after the Closing Date. Augusta shall pay to Buyer within
fifteen (15) days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of such Taxes which relates to
the portion of such Taxable period ending on the Closing Date to the extent
such Taxes are not reflected in the reserve for Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the Closing Balance
Sheet. For purposes of this Section, in the case of any Taxes that are
imposed on a periodic basis and are payable for a Taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax
which relates to the portion of such Taxable period ending on the Closing
Date shall (x) in the case of any Taxes other than Taxes based upon or
related to income or receipts, be deemed to be the amount of such Tax for
the entire Taxable period multiplied by a fraction the numerator of which
is the number of days in the Taxable period ending on the Closing Date and
the denominator of which is the number of days in the entire Taxable
period, and (y) in the case of any Tax based upon or related to income or
receipts be deemed equal to the amount which would be payable if the
relevant Taxable period ended on the Closing Date. Any credits relating to
a Taxable period that begins before and ends after the Closing Date shall
be taken into account as though the relevant Taxable period ended on the
Closing Date. All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with prior practice of
Korona. Not only positive income but also a loss of Korona shall be
allocated to Augusta and Buyer based upon the period before and after the
Closing.
In addition to the aforementioned paragraph, with respect to the
fiscal year 2001, however, the following procedure is agreed: Buyer shall
prepare or cause to prepare and file or cause to be filed any Tax return of
Korona and the General Partner. Korona - for taxable reasons - shall be
caused to prepare a Balance Sheet on the Effective Date ("steuerliche
Zwischenbilanz"), including the relevant special purpose balances which
have been and are used in the Limited Partnership (including
"Erganzungsbilanz" and "Sonderbilanz"). These Balances shall derive from
the Closing Balance Sheet as set up under this Agreement. The same
procedure is for the General Partner. The Taxes to be paid shall be
reflected as Tax Liability or as Tax Reserve in the relevant Balance Sheet
("steuerliche Zwischenbilanz"). If, under any final due governmental tax
assessment (,,Veranlagung") the Tax Liabilities or Tax Reserves reflected
in the relevant Balance Sheet ("steuerliche Zwischenbilanz") amount to less
than the Tax Liability to be effectively to be paid, Augusta shall
indemnify Buyer to that specific amount. If the Tax Liability to be
effectively to be paid is lower than the Tax Liabilities or Tax Reserves
reflected in the relevant Balance Sheet ("steuerliche Zwischenbilanz"),
Buyer will indemnify Augusta to the amount. Tax Returns in 2001 shall be
based on the relevant Balance Sheet ("steuerliche Zwischenbilanz"). To any
Tax Return to be filed with respect to the fiscal year 2001, Buyer shall
permit Augusta to review and comment on each such Tax Return described in
this section prior to filing.
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(c) Cooperation on Tax Matters.
(i) Buyer and Augusta shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing
of Tax Returns pursuant to this ss.9 and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Korona and Augusta
agree (A) to retain all books and records with respect to Tax matters
pertinent to Korona relating to any taxable period beginning before
the Closing Date until the expiration of the statute of limitations
(and, to the extent notified by Buyer or Augusta, any extensions
thereof) of the respective taxable periods, and to abide by all record
retention agreements entered into with any taxing authority, and (B)
to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records and,
if the other party so requests, Korona or Augusta, as the case may be,
shall allow the other party to take possession of such books and
records.
(ii) Buyer and Augusta further agree, upon request, to use their
best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
(iii) Buyer and Augusta further agree, upon request, to provide
the other Party with all information that either Party may be required
to report pursuant to applicable tax provisions in Germany, Hong Kong,
the U.S., or the British Virgin Islands. Augusta and, if Augusta so
elects, its designated independent auditors shall be entitled in its
discretion to undertake or promote any tax audit by the tax
authorities ("Betriebsprufung"), and any filing, procedure or action
relating thereto, and to avert or defend against any claim,
assessment, procedure or actions by the tax authorities, until the
assessment period comprising the Closing Date, for which a tax audit
may be carried out by the tax authorities, expires.
(iv) It is agreed, that if the amount of trade taxes and VAT
("Gewerbe- und Umsatzsteuer") reflected by reserves in the Closing
Balance Sheet exceed the respective amount of trade taxes or VAT being
payable by Augusta according to these provisions, it shall be refunded
to Augusta or shall be used for payment of trade taxes of prior years
for the period for which Augusta is responsible for the payment of
these taxes according to the provisions of this Section (c).
(d) Tax Sharing Agreements. All tax sharing agreements or similar
agreements between Augusta, or any of its Subsidiaries, as the case may be,
and Korona shall be terminated as of the Closing Date and, after the
Closing Date, Korona shall not be bound thereby or have any liability
thereunder. Augusta shall be entitled to terminate the integrated
inter-company relation (,,gewerbesteuerliche Organschaft") between itself
and the General Partner and / or RISO on the Effective Date or at its sole
discretion before December 31, 2000.
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(e) Certain Taxes. Buyer shall bear all transfer, documentary, sales,
use, stamp, registration, and such other Taxes (excluding trade tax or
"Gewerbesteuer") and fees (including any penalties and interest) incurred
in connection with this Agreement and shall pay, to the extent permitted by
applicable law, when due all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees.
10. Termination.
(a) Termination of Agreement. The Parties may terminate this Agreement
as provided below:
(i) The Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(ii) Either Party may terminate this Agreement, if any court, or
other governmental or judicial authority, of competent jurisdiction
has issued an injunction, restraining order or other decree of any
nature that restrains, enjoins or otherwise prohibits in any material
respect the consummation of the transactions contemplated hereby, and
such injunction, restraining order or other decree has become final
and non-appealable;
(iii) Buyer may terminate this Agreement by giving written notice
to Augusta at any time prior to the Closing (A) in the event Augusta
has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Buyer has
notified Augusta of the breach, and the breach has continued without
cure for a period of 30 days after the notice of breach; or (B) if the
Closing shall not have occurred on or before May 15, 2001, by reason
of the failure of any condition precedent under ss.7(a) hereof (unless
the failure results primarily from Buyer breaching any representation,
warranty, or covenant contained in this Agreement); and
(iv) Augusta may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (A) in the event
Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Augusta has
notified Buyer of the breach, and the breach has continued without
cure for a period of 30 days after the notice of breach or (B) if the
Closing shall not have occurred on or before May 15, 2001, by reason
of the failure of any condition precedent under ss.7(b) hereof (unless
the failure results primarily from Augusta breaching any
representation, warranty, or covenant contained in this Agreement).
(b) Effect of Termination. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in ss.10(a),
this Agreement shall become null and void and of no further force and
effect, except for the provisions of (i) ss.3(a)(iv), ss.3(b)(iv) and
ss.4(d) relating to broker's fees, (ii) this Agreement relating to expenses
(including ss.11(n)), (iii) this ss.10 and (iv) ss.11. Nothing in this
ss.10(b) shall be deemed to release any Party hereto from any Liability for
any breach, prior to termination of this Agreement, by such Party of its
obligations or covenants under this Agreement.
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11. Miscellaneous.
(a) Consulting Services. Upon the Closing and without any further
action all management and consulting agreements between Augusta and Korona
will terminate effective April 30, 2001.
(b) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior approval of
the other Party; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in
which case the disclosing Party will use its best efforts to advise the
other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way
to the subject matter hereof (including the Confidentiality Agreement dated
as of February 15, 2001).
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that Buyer may (i) assign
any or all of its rights and interests hereunder to one or more of its
Subsidiaries and (ii) designate one or more of its Subsidiaries to perform
its obligations hereunder (in any and all of which cases Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given when
received by the intended recipient at the address set forth below:
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If to Augusta:
Herrn Udo Zimmer
AUGUSTA Technologie AG
Wilhelm-Leuschner-Strasse 9-11
D-60329 Frankfurt am Main, Germany
Copies to:
Herrn RA
Alexander Schmitz-Elsen
Knauthe Paul Schmitt
Eschersheimer Landstrasse 27
60322 Frankfurt am Main, Germany
Edward S. Davis, Esq.
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, NY 10004
If to Buyer:
Mr. Anthony So, President
Bonso Electronics International Inc.
Unit 1106-1110, 11/F., Star House, 3, Salisbury Road
Tsimshatui Kowloon, Hong Kong
Copies to:
Henry F. Schlueter, Esq.
Schlueter & Associates, P.C.
1050 Seventeenth Street, Suite 1700
Denver, Colorado 80265
Herrn RA
Friedhold Andreas
PricewaterhouseCoopersVeltins
Rechtsanwaltsgesellschaft mbH
Im Trutz Frankfurt 55
60322 Frankfurt am Main, Germany
Any notice, request, demand, claim, or other communication hereunder may be sent
to the intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail, or electronic mail), but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given unless and
until it actually is received by the intended recipient. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
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(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, U.S.A. without regard
to the conflict of law principals thereof, provided, however, that the
transfer of the shares of Korona, the General Partner and Buyer and the
real property shall be governed by and construed in accordance with the
respectively applicable lex rei sitae.
(j) Dispute Resolution; Arbitration.
(i) All claims for specific performance of one or more provisions
of this Agreement prior to the Closing, including all such claims with
respect to the obligations hereunder to consummate the Closing, shall
be resolved exclusively by litigation before a court of competent
jurisdiction located in New York. The Parties hereby irrevocably (A)
submit to the exclusive jurisdiction of any of such court in any
action or proceedings relating to the aforementioned claims, (B)
submit to the jurisdiction of any court, located in any jurisdiction
in which such Party has contacts or assets sufficient to sustain
jurisdiction, in any action or proceeding relating to the enforcement
of any arbitral award or judgment pursuant to ss.11(j)(ii), and (C)
waive the defenses of lack of personal jurisdiction, sovereign
immunity, improper venue, and inconvenient forum in any action or
proceeding as set forth in this ss.11(j).
(ii) Except for (A) the claims covered by ss.ss.11(j)(i) of this
Agreement, and (B) disputes covered by ss.2(e) of this Agreement, all
disputes or claims arising out of or in connection with this Agreement
or the certificates, instruments and document delivered at the Closing
(the "Ancillary Documents") shall be finally settled by arbitration
under the Rules of Arbitration of the International Chamber of
Commerce (the "ICC Rules"). The place of arbitration shall be New
York. The number of arbitrators shall be three (3), and the
arbitrators shall be appointed in accordance with the ICC Rules and
this Agreement. The two party-appointed arbitrators shall agree on a
third arbitrator, who shall serve as chairman of the arbitral
tribunal, within twenty (20) days after appointment of the second
party-appointed arbitrator, failing which the third arbitrator shall
be appointed by the ICC International Court of Arbitration. The
language to be used in the arbitral proceedings shall be English. Any
award of the arbitral tribunal shall be made in writing, shall be
final and binding on the parties and may be entered in any court of
competent jurisdiction. The Parties hereby waive any right to appeal
insofar as such waiver can validly be made. Each of the Parties agree
that arbitration under this ss.11(j)(ii) is the exclusive method for
resolving any of the disputes defined in this ss.11(j)(ii), and that
no Party shall commence any action or proceeding in any court with
respect to any such dispute, except to (1) enforce this ss.11(j)(ii),
(2) obtain provisional judicial assistance in aid of arbitration under
this ss.11(j)(ii), or (3) file a petition to enforce or set aside an
arbitral award made in accordance with this ss.11(j)(ii).
(k) English Language. The English language version of any documents
furnished by one Party to the other and the English language version of
this Agreement and the related schedules and exhibits shall control in the
event of any conflict between the English language version and non-English
language version of any such documents. With respect to documents furnished
by one Party to the other, such as balance sheets, tax declarations and tax
assessments, Commercial Register files and the like ("Official Documents"),
that the language of origin shall govern in the event of a conflict between
the English language version and non-English versions of any such Official
Documents.
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(l) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
the Parties. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(m) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
(n) Expenses. Each of the Parties, Korona, and its Subsidiaries will
bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions
contemplated hereby. Augusta agrees that Korona has not borne or will bear
any of Augusta' costs and expenses (including any of it's legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby. The Parties agree to share the costs of the German
Notary for notarizing this Agreement as follows: Buyer will pay the fees
and costs up to the amount of DEM 30,000.00. Augusta will pay any fees and
costs exceeding the first DEM 30,000.00 up to an amount of DEM 60,000.00.
Any fees and costs in excess of DEM 60,000.00 will be split equally between
Augusta and Buyer.
(o) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring a Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean including
without limitation. The Parties intend that each representation, warranty,
and covenant contained herein shall have independent significance. If a
Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of
the relative levels of specificity) which the Party has not breached shall
not detract from or mitigate the fact that the Party is in breach of the
first representation, warranty, or covenant.
12. Advice and cautioning by the notary deputy
1. The notary deputy advised the parties that this document must be
presented to the local tax office under ss.54 EStDV (German income tax
execution regulations).
2. The notary deputy advised the parties that since the agreement is
subject to the laws of the state of New York, he is neither in a
position to give advice on or to examine the legal validity of the
provisions contained in the agreement, nor can the notary deputy
advice on the foreign law applicable to the transfer of the Buyer's
shares to Augusta.
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3. The notary deputy advised the parties that the execution of this
agreement, in particular the transfer of the shares of Korona
Haushaltswaren GmbH and the transfer of the real property, will need
to be notarised according to German law.
4. The notary deputy cautioned the parties that he has not given and is
not in a position to give tax advice in respect to the above read
agreement. The parties declared that they have sought separate advice
on tax issues involved therein.
5. The notary deputy cautioned the parties that the transfer of the
Kommanditanteil will need the approval of the shareholders of Korona
Haushaltswaren GmbH & Co KG.
The above text and the both attachments were read out to the appeared persons
who consented to its content. The attachment "Darlehensvereinbarung und
Garantieerklarung" which is kept in German was translated by the notary deputy
to the person appearing and 2.). The translation of the document is attached to
this deed. The document was personally signed by them and the notary deputy as
follows:
gez.: Udo Zimmer
gez.: Kit Teng Pang
L.S. gez.: Stefan Reinhart, Notarvertreter
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