EQUITY TRANSFER AGREEMENT
among
NIPPON SHEET GLASS CO., LTD.
APPLIED FILMS CORPORATION
and
SUZHOU NSG AFC THIN FILMS ELECTRONICS CO.,
LTD.
November 28, 2005
TABLE OF CONTENTS
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ARTICLE I
PURCHASE AND SALE OF STEC
EQUITY
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1
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1.1
Purchase and Sale of STEC Equity
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1
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ARTICLE II
PURCHASE PRICE
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2
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2.1
Purchase Price
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2
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2.2
Manner of Payment
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2
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ARTICLE
III CLOSING
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2
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3.1
Closing Date
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2
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3.2
Closing
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2
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ARTICLES
IV CONDITIONS TO CLOSING
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2
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4.1
Conditions to Obligations of Each Party
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2
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4.2
Conditions to Obligations of NSG
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3
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4.3
Conditions to the Obligations of AFC
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3
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
AFC
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4
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5.1
AFC
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4
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5.1.1
Corporate Existence
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4
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5.1.2
Capitalization of STEC
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4
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5.1.3
Authorizations
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4
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5.1.4
Complete Information
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4
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5.2
STEC
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5
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5.2.1
Financial Statements
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5
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5.2.2
Tax
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6
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5.2.3
Personal Property (Equipment)
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6
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5.2.4
Intellectual Property
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6
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5.2.5
Material Contracts
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6
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5.2.6
Employment Matters
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7
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5.2.7
Environmental Matters
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8
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5.2.8
Compliance with the Legal Requirements, Permits
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8
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5.2.9
Actions and Proceedings
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8
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ARTICLE
VI REPRESENTATIONS AND WARRANTIES OF
NSG
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8
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6.1
Organization and Good Standing of NSG
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8
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6.2
Authorizations
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8
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6.3
Complete Information
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9
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ARTICLE
VII COVENANTS
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9
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7.1
STEC Board Approval
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9
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7.2
Regulatory Approvals
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9
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7.3
Resignations
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9
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7.4
Cooperation in Pursuing the Equity Transfer
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10
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7.5
Post-Closing Cooperation by AFC
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10
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7.6
Maintenance of the Equipment
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10
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7.7
Supply of SiO2
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10
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7.8
Non-Competition
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10
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ARTICLE
VIII ADDITIONAL AGREEMENTS
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11
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8.1
STEC Joint Venture Agreement
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11
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8.2
Marketing Service Agreement
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11
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8.3
Employee Transfer Agreement
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11
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8.4
Name of STEC
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11
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ARTICLE IX
TERMINATION
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11
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9.1
Termination
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11
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9.2
Force Majeure
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12
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9.3
Effect of Termination
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12
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ARTICLE X
DEFINITIONS
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12
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ARTICLE XI
INDEMNIFICATION
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14
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11.1
Indemnification
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14
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11.2
Mitigation
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14
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ARTICLE
XII MISCELLANEOUS
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14
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12.1
Press Releases and Announcements
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14
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12.2
Further Documentation
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15
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12.3
Amendment and Waiver
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15
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12.4
Notices
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15
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12.5
Binding Agreement; Assignment
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15
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12.6
Severability
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16
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12.7
Captions
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16
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12.8
Entire Agreement
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16
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12.9
Counterparts
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16
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12.10
Governing Law
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16
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12.11
Arbitration
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16
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12.12
Parties in Interest
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17
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12.13
Expenses
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17
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ii
EQUITY TRANSFER AGREEMENT
This
Equity Transfer Agreement (“ Agreement ”)
made on the 28th day of November, 2005, in Suzhou, the
People’s Republic of China (“ PRC ”)
among:
Nippon
Sheet Glass Co., Ltd., a corporation organized and existing
pursuant to the laws of Japan (“NSG”);
Applied Films Corporation (“ AFC ”), a
corporation established and existing pursuant to the laws of the
state of Colorado, United States of America; and
Suzhou NSG AFC Thin Films Electronics Co., Ltd.
(“STEC”) , a corporation established and existing
pursuant to the laws of People’s Republic of
China.
RECITALS
A.
In 1999, after friendly consultations conducted in accordance with
the principles of equality and mutual benefit, AFC and NSG agreed
to participate in, and formed, an equity joint venture, STEC, to
produce and sell ITO coated glass.
B.
STEC is a joint venture formulated in accordance with the law of
the PRC under the provisions of an Equity Joint Venture Contract
between AFC and NSG dated February 17, 1999 (the “
STEC Joint Venture Agreement ”), and the Articles of
Association relating to STEC dated June 12, 1998, as amended, (the
“ STEC Articles of Association ”) and is
operating under a business license dated September 8,
2004.
C.
STEC has proven to be a successful joint venture that has increased
the reputation of both AFC and NSG, both individually and as joint
venture partners.
D.
Nevertheless, after amicable and fair negotiation, AFC and NSG have
agreed that it is in their mutual best interest to enter into a
transaction in which NSG will acquire the fifty percent (50%) of
the equity of STEC owned by AFC (the “ STEC Equity
”) pursuant to this Agreement.
NOW, THEREFORE , the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF STEC EQUITY
1.1
Purchase and Sale of STEC Equity . Subject to the terms and
conditions of this Agreement, AFC agrees to transfer and deliver to
NSG, and NSG agrees to acquire from AFC, as of the Closing Date,
all of AFC’s right, title and interest in and to the STEC
Equity. On the Closing Date, STEC will become a wholly-owned
enterprise of NSG.
ARTICLE II
PURCHASE PRICE
2.1
Purchase Price . Subject to the terms and conditions set
forth in this Agreement, NSG shall acquire the STEC Equity for the
aggregate consideration of US$14,600,000 (the "Purchase
Price").
2.2
Manner of Payment . The Purchase Price shall be paid in
United States Dollars by NSG to AFC on the Closing Date by wire
transfer of immediately available funds to such account(s) as AFC
may specify in writing to NSG five (5) business days prior to the
Closing Date.
ARTICLE III
CLOSING
3.1
Closing Date . The Closing Date shall be five (5) business
days after the date on which the last of the Conditions is met or
waived, or such other date as agreed between AFC and
NSG.
3.2
Closing . Closing shall take place on the Closing
Date.
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(a)
At the Closing, NSG shall pay the Purchase Price to AFC pursuant to
Section 2.2 and deliver to AFC all of the following:
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(i)
A certificate dated the Closing Date, stating that the
preconditions specified in Sections 4.3 (a)-(d) have been
satisfied;
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(ii)
Such other certificates, documents or instruments as AFC reasonably
requests to effect the transactions contemplated hereby.
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(b)
At the Closing, AFC shall deliver to NSG all of the
following:
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(i)
A certificate dated the Closing Date, stating that the
preconditions specified in Sections 4.2(a)-(d) have been
satisfied;
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(ii)
Such other certificates, documents or instruments as NSG reasonably
requests to effect the transactions contemplated hereby.
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ARTICLE IV
CONDITIONS TO CLOSING
4.1
Conditions to Obligations of Each Party . The respective
obligations of each party to this Agreement to consummate the
transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions before the Closing
Date:
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(a)
Governmental Approvals . All consents and approvals of,
filings and registrations with, and notifications to, all
regulatory authorities required for the consummation of the
transactions contemplated by this Agreement shall have been
obtained or made on terms reasonably satisfactory to the parties
hereto. This condition includes the following: (i) approvals from
the STEC Approval Authority of the transfer of the STEC Equity from
AFC to NSG, (ii) issuance of a new Business License from the STEC
Approval Authority to STEC as a wholly owned foreign enterprise
whose sole equity owner is NSG, and (iii) any other governmental
approvals necessary for accomplishing the transactions set forth in
this Agreement.
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(b)
Legal Proceedings . No court or governmental authority of
competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any law, order or injunction (whether
temporary, preliminary or permanent) or taken or threatened to take
any other action that prohibits, restricts or makes illegal the
consummation of the transactions contemplated by this Agreement or
cause such transactions to be rescinded.
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Any
condition specified in this Section 4.1 may be waived by the
parties to this Agreement, provided that no such waiver will be
effective unless it is set forth in a writing executed by each of
the parties to this Agreement.
4.2
Conditions to Obligations of NSG . The obligations of NSG to
consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions on or
before the Closing Date:
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(a)
Representations and Warranties . The representations and
warranties of AFC set forth in Article V hereof will be true and
correct in all material respects at and as of the Closing
Date;
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(b)
Performance of Agreements and Covenants . AFC will have
performed and complied with all of the covenants and agreements
required to be performed or complied with by it under this
Agreement prior to the Closing Date;
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(c)
Consents . All material third party consents that are
required for the consummation of the transactions contemplated by
this Agreement will have been obtained on terms reasonably
satisfactory to NSG.
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(d)
Board Approval . The Board of Directors of AFC shall have
approved this Agreement and the consummation of the transactions
contemplated by this Agreement;
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Any
condition specified in this Section 4.2 may be waived by NSG,
provided that no such waiver will be effective unless it is set
forth in a writing executed by NSG.
4.3
Conditions to the Obligations of AFC . The obligations of
AFC to consummate the transactions contemplated by this Agreement
are subject to the satisfaction of the following conditions on or
before the Closing Date:
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(a)
Representations and Warranties . The representations and
warranties of NSG set forth in Article VI hereof will be true and
correct in all material respects at and as of the Closing
Date;
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(b)
Performance of Agreements and Covenants . NSG will have
performed and complied with all of the covenants and agreements
required to be performed or complied with by NSG under this
Agreement prior to the Closing Date;
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(c)
Consents . All material third party consents that are
required for the consummation of the transactions contemplated by
this Agreement will have been obtained on terms reasonably
satisfactory to AFC;
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(d)
Authorization . NSG shall have been duly authorized to
execute this Agreement and to perform its obligations under this
Agreement and NSG shall have delivered an officer’s
certificate certifying such authorization;
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Any
condition specified in this Section 4.3 may be waived by AFC,
provided that no such waiver will be effective unless it is set
forth in a writing executed by AFC.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AFC
As
a material inducement to NSG to enter into this Agreement, AFC
hereby represents and warrants to NSG on the date hereof and on the
Closing Date:
5.1
AFC .
5.1.1
Corporate Existence . AFC is a corporation duly organized,
validly existing and in good standing under the law of the State of
Colorado, United States of America and has the corporate power to
carry on its business substantially as it is now being
conducted.
5.1.2
Capitalization of STEC . The STEC Equity constitutes (i)
fifty percent (50%) of the total issued, outstanding and registered
capital of STEC, and (ii) the entire rights and interests in AFC
owned or controlled by AFC. AFC owns, beneficially and of record,
all right, title and interest in and to the STEC Equity free and
clear of any security interests, claims, liens, pledges, options,
encumbrances, charges, agreements, voting trusts or other
arrangements, restrictions or limitations of any kind.
5.1.3
Authorizations . The execution, delivery and performance of
this Agreement by AFC and the consummation of the transactions
contemplated hereby have been duly and validly authorized and
approved by all necessary action and, when executed and delivered,
this Agreement shall be legally binding on and enforceable against
AFC in accordance with its terms. The execution and delivery of
this Agreement do not, and the consummation of the transactions
contemplated in this Agreement will not, violate the Governing
Documents of AFC, nor will the consummation of the transactions
contemplated in this Agreement result in any breach, violation or
default or result in acceleration of the performance of any
obligations of AFC under any judgment, decree, mortgage, agreement,
indenture or other instrument applicable to AFC or to which AFC is
a party or to which any of its properties are subject. No consent,
approval or authorization of any third party or government
authority other than the STEC Approval Authority is required for
the consummation by AFC of the transactions contemplated by this
Agreement.
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5.1.4
Complete Information . Neither this Agreement nor any
schedule, statement, list, certificate or other written information
furnished or to be furnished by AFC in connection with this
Agreement contains or will contain any untrue statement by AFC of a
material fact or omits or will omit to state a material fact
necessary to make any material statements made by AFC contained
herein or therein, in light of the circumstances once they are
made, not misleading.
5.2
STEC
5.2.1
Financial Statements .
To the knowledge of AFC:
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(a)
STEC has delivered to NSG copies of the audited financial
statements of STEC at and for the years ended December 31, 1999,
2000, 2001, 2002, 2003 and 2004 together with the related schedules
and notes (the “Financial Statements”). Each of the
Financial Statements is true, complete and accurate, has been
prepared in accordance with the U.S. generally accepted accounting
principles (“GAAP”), applied on a consistent basis, and
fairly presents the financial condition at the date thereof and the
results of the operations and changes in financial condition for
the period then ended, of STEC.
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(b)
As of the Closing Date, STEC does not have any liabilities or
obligations of any nature, whether required to be reflected as
liabilities on a balance sheet prepared in accordance with GAAP,
and whether accrued, absolute, contingent, known, unknown or
otherwise, which has arisen or may arise out of or in relation to
any cause which existed on or prior to the Closing Date, except
such liabilities that (i) were reflected or reserved against in the
Financial Statements, or (ii) were incurred after December 31,
2004, in the usual and ordinary course of business of STEC
consistent with past practice and that are not material,
individually or collectively, to the financial condition of STEC;
provided, however, that for the purpose of this Section 5.2.1(b),
AFC shall be deemed to have knowledge of a fact that is recorded in
any tangible media or electric form in any language within STEC on
or prior to the Closing Date, unless, on or prior to the Closing
Date, the NSG appointed general manager or any of the current or
former NSG appointed directors of STEC knows or could reasonably
have known such fact.
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(c)
Since December 31, 2004, STEC has not disposed of any assets
otherwise than in the usual and ordinary course of business
consistent with past practice and in a manner that does not
adversely affect the financial condition of STEC.
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(d)
Since December 31, 2004, STEC has conducted its businesses only in
the ordinary and usual course in substantially the same manner as
previously conducted and has not undergone or suffered any change
in its financial condition or results of operations that would
reasonably be expected to have a material adverse
effect.
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5.2.2
Tax .
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(a)
STEC has timely filed with the appropriate tax authority all tax
returns required to be filed in all jurisdictions in which such tax
returns are required to be filed, and all such tax returns and the
information contained therein are true and complete in all material
respects for the periods covered thereby. STEC has paid all taxes
due and owing by each of them when due.
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(b)
Except as disclosed on Schedule 5.2.2, STEC is not being audited by
a tax authority and no deficiencies for taxes have been assessed
against STEC and there has been no claim against STEC relating to
or attributable to taxes due and owing by AFC or STEC.
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(c)
Except as disclosed on Schedule 5.2.2, STEC has never engaged in
any transactions the lawfulness of which, or the tax treatment
relating to which, could be disputed by any competent tax
authority
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5.2.3
Personal Property (Equipment) .
To
the knowledge of AFC:
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(a)
Schedule 5.2.3(a) is a true and accurate list of all personal
property owned by STEC that has a book value of US$ 10,000 or more
as of the date hereof. STEC has, with respect to all such personal
property, good title, free and clear of any security interests,
claims, liens, pledges, options, encumbrances, charges, agreements,
or other arrangements, restrictions or limitations of any kind. The
assets contained in Schedule 5.2.3(a) are in good operating
condition and repair subject to continued repair and replacement in
accordance with the past practice of STEC.
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(b)
The inventory listed in Schedule 5.2.3(b) consists of raw materials
and supplies, manufactured and purchased parts, goods in process,
and finished goods, all of which are in good marketable condition
for their intended purposes, do not contain defects and are not
excess or obsolete, except to the extent of allowances reported in
the Financial Statements.
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5.2.4
Intellectual Property .
To
the knowledge of AFC:
There
is no intellectual property owned by, or leased from, any third
party which is required to operate the Business of STEC. The
conduct of the Business of STEC does not, or will not after the
Closing, infringe any intellectual property rights of any third
party or other rights or privileges of or from any third
party.
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5.2.5
Material Contracts . Schedule 5.2.5 is a true and
accurate list of all contracts, agreements, commitments, or any
arrangements (i) which involve on an annual basis or as a
cumulative aggregate consideration an obligation by or to STEC to
pay amounts in excess of US$ 100,000, (ii) pursuant to which STEC
is reasonably anticipated to pay or receive an amount in excess of
US$ 100,000 on an annual basis or as a cumulative aggregate
consideration, or (iii) which is otherwise material to STEC (the
“Material Contracts”). All of the Material Contracts
were entered into in the ordinary course of business, are necessary
or advisable for the conduct of the Business by STEC, contain terms
and conditions that are customary and usual for contracts of this
nature, and are legal, valid and enforceable in accordance with the
terms thereof. STEC has performed in all respects the obligations
required to be performed by it to date under any Material Contracts
and there is no default or event of default, real or claimed, or
events which with notice or lapse of time or both would constitute
a default, by any other party to any Material Contract. There
exists no actual or threatened termination, cancellation, or
limitation of, or any amendment, modification, or change to any
Material Contract. With respect to any Material Contract, no
consent of the counterparty is required in connection with the
consummation of the transactions contemplated hereby, and none of
these Material Contracts contain any provision providing that the
counterparty thereunder may terminate the same by reason of the
transactions contemplated thereby or any provision which would be
altered by reason of such transactions. STEC is neither
renegotiating any of the Material Contracts nor is it paying
damages in lieu of performance thereunder.
5.2.6
Employment Matters .
To
the knowledge of AFC:
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(a)
There are no work rules and other internal regulations of STEC
applicable to any director, officer, employee or consultant of
STEC, including, without limitation, all consulting, employment and
severance agreements of STEC with any present director, officer,
employee or consultant, which are less advantageous to STEC than
the generally applicable work rules.
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(b)
STEC is not a party to or bound by any union contract and has not
experienced any strike, slow downs, work stoppages or other similar
labor actions by a
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