EXHIBIT 10.5
Security Agreement dated as of May 2004 between Silicon Film Technologies, Inc.
and Cornell Capital Partners, LP
SECURITY AGREEMENT
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THIS SECURITY AGREEMENT (the "AGREEMENT"), is entered into and made
effective as of May 14, 2004, by and between SILICON FILM TECHNOLOGIES, INC., an
Illinois corporation (the "COMPANY"), and the BUYER(S) listed on Schedule I
attached to the Securities Purchase Agreement dated the date hereof (the
"SECURED PARTY").
WHEREAS, the Company is a majority owned subsidiary of ▇▇▇▇▇▇▇ ▇▇▇,
Inc. (the "PARENT");
WHEREAS, the Parent shall issue and sell to the Secured Party, as
provided in the Securities Purchase Agreement of even date herewith, and the
Secured Party shall purchase up to One Million One Hundred Thousand Dollars
($1,100,000) of five percent (5%) secured convertible debentures (the
"CONVERTIBLE DEBENTURES"), which shall be convertible into shares of the
Parent's common stock, par value $0.001 (the "COMMON STOCK") (as converted, the
"CONVERSION SHARES") in the respective amounts set forth opposite each Buyer(s)
name on Schedule I attached to the Securities Purchase Agreement;
WHEREAS, to induce the Secured Party to enter into the transaction
contemplated by the Securities Purchase Agreement, the Secured Convertible
Debenture, the Investor Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions, and the Escrow Agreement (collectively referred to as the
"TRANSACTION DOCUMENTS"), the Company hereby grants to the Secured Party a
security interest in and to the pledged property identified on EXHIBIT "A"
hereto (collectively referred to as the "PLEDGED PROPERTY") until the
satisfaction of the Obligations, as defined herein below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
adequacy and receipt of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATIONS
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Section 1.1. RECITALS.
---------
The above recitals are true and correct and are incorporated herein, in
their entirety, by this reference.
Section 1.2. INTERPRETATIONS.
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Nothing herein expressed or implied is intended or shall be construed
to confer upon any person other than the Secured Party any right, remedy or
claim under or by reason hereof.
Section 1.3. OBLIGATIONS SECURED.
--------------------
The obligations secured hereby are any and all obligations of the
Company or the Parent now existing or hereinafter incurred to the Secured Party,
whether oral or written and whether arising before, on or after the date hereof
including, without limitation, those obligations of the Parent to the Secured
Party under the Securities Purchase Agreement, the Secured Convertible
Debenture, the Investor Registration Rights Agreement and Irrevocable Transfer
Agent Instructions, and any other amounts now or hereafter owed to the Secured
Party by the Parent thereunder or hereunder (collectively, the "OBLIGATIONS").
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ARTICLE 2.
PLEDGED COLLATERAL, ADMINISTRATION OF COLLATERAL
------------------------------------------------
AND TERMINATION OF SECURITY INTEREST
------------------------------------
Section 2.1. PLEDGED PROPERTY.
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(a) The Company hereby pledges to the Secured Party, and
creates in the Secured Party for its benefit, a security interest for such time
until the Obligations are paid in full, in and to all of the property of the
Company as set forth in EXHIBIT "A" attached hereto (collectively, the "PLEDGED
PROPERTY"):
The Pledged Property, as set forth in EXHIBIT "A" attached hereto, and
the products thereof and the proceeds of all such items are hereinafter
collectively referred to as the "PLEDGED COLLATERAL."
(b) Simultaneously with the execution and delivery of this
Agreement, the Company shall make, execute, acknowledge, file, record and
deliver to the Secured Party any documents reasonably requested by the Secured
Party to perfect its security interest in the Pledged Property. Simultaneously
with the execution and delivery of this Agreement, the Company shall make,
execute, acknowledge and deliver to the Secured Party such documents and
instruments, including, without limitation, financing statements, certificates,
affidavits and forms as may, in the Secured Party's reasonable judgment, be
necessary to effectuate, complete or perfect, or to continue and preserve, the
security interest of the Secured Party in the Pledged Property, and the Secured
Party shall hold such documents and instruments as secured party, subject to the
terms and conditions contained herein.
Section 2.2. RIGHTS; INTERESTS; ETC.
-----------------------
(a) So long as no Event of Default (as hereinafter defined)
shall have occurred and be continuing:
(i) the Company shall be entitled to exercise any and
all rights pertaining to the Pledged Property or any part thereof for
any purpose not inconsistent with the terms hereof; and
(ii) the Company shall be entitled to receive and
retain any and all payments paid or made in respect of the Pledged Property.
(b) Upon the occurrence and during the continuance of an Event
of Default:
(i) All rights of the Company to exercise the rights
which it would otherwise be entitled to exercise pursuant to
Section 2.2(a)(i) hereof and to receive payments which it would otherwise be
authorized to receive and retain pursuant to Section 2.2(a)(ii) hereof shall be
suspended, and all such rights shall thereupon become vested in the Secured
Party who shall thereupon have the sole right to exercise such rights and to
receive and hold as Pledged Collateral such payments; PROVIDED, HOWEVER, that if
the Secured Party shall become entitled and shall elect to exercise its right to
realize on the Pledged Collateral pursuant to Article 5 hereof, then all cash
sums received by the Secured Party, or held by Company for the benefit of the
Secured Party and paid over pursuant to Section 2.2(b)(ii) hereof, shall be
applied against any outstanding Obligations; and
(ii) All interest, dividends, income and other
payments and distributions which are received by the Company contrary to the
provisions of Section 2.2(b)(i) hereof shall be received in trust for the
benefit of the Secured Party, shall be segregated from other property of the
Company and shall be forthwith paid over to the Secured Party; or
(iii) The Secured Party in its sole discretion shall
be authorized to sell any or all of the Pledged Property at public or
private sale in order to recoup all of the outstanding principal plus accrued
interest owed pursuant to the Convertible Debenture as described herein
(c) Each of the following events shall constitute a default
under this Agreement (each an "EVENT OF DEFAULT"):
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(i) any default, whether in whole or in part, shall
occur in the payment to the Secured Party of principal, interest or other
item comprising the Obligations as and when due or with respect to any other
debt or obligation of the Company or the Parent to a party other than the
Secured Party;
(ii) any default, whether in whole or in part, shall
occur in the due observance or performance of any obligations or other
covenants, terms or provisions to be performed under this Agreement or the
Transaction Documents;
(iii) the Company or the Parent shall: (1) make a
general assignment for the benefit of its creditors; (2) apply for or consent to
the appointment of a receiver, trustee, assignee, custodian, sequestrator,
liquidator or similar official for itself or any of its assets and properties;
(3) commence a voluntary case for relief as a debtor under the United States
Bankruptcy Code; (4) file with or otherwise submit to any governmental authority
any petition, answer or other document seeking: (A) reorganization, (B) an
arrangement with creditors or (C) to take advantage of any other present or
future applicable law respecting bankruptcy, reorganization, insolvency,
readjustment of debts, relief of debtors, dissolution or liquidation; (5) file
or otherwise submit any answer or other document admitting or failing to contest
the material allegations of a petition or other document filed or otherwise
submitted against it in any proceeding under any such applicable law, or (6) be
adjudicated a bankrupt or insolvent by a court of competent jurisdiction; or
(iv) any case, proceeding or other action shall be
commenced against the Company or the Parent for the purpose of effecting,
or an order, judgment or decree shall be entered by any court of competent
jurisdiction approving (in whole or in part) anything specified in Section
2.2(c)(iii) hereof, or any receiver, trustee, assignee, custodian, sequestrator,
liquidator or other official shall be appointed with respect to the Company or
the Parent, or shall be appointed to take or shall otherwise acquire possession
or control of all or a substantial part of the assets and properties of the
Company or the Parent, and any of the foregoing shall continue unstayed and in
effect for any period of thirty (30) days.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
-----------------------------
Section 3.1. SECURED PARTY APPOINTED ATTORNEY-IN-FACT.
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Upon the occurrence of an Event of Default, the Company hereby appoints
the Secured Party as its attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company or otherwise, from time to
time in the Secured Party's discretion to take any action and to execute any
instrument which the Secured Party may reasonably deem necessary to accomplish
the purposes of this Agreement, including, without limitation, to receive and
collect all instruments made payable to the Company representing any payments in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same. The Secured Party may demand, collect, receipt for, settle,
compromise, adjust, ▇▇▇ for, foreclose, or realize on the Pledged Property as
and when the Secured Party may determine. To facilitate collection, the Secured
Party may notify account debtors and obligors on any Pledged Property or Pledged
Collateral to make payments directly to the Secured Party.
Section 3.2. SECURED PARTY MAY PERFORM.
--------------------------
If the Company fails to perform any agreement contained herein, the
Secured Party, at its option, may itself perform, or cause performance of, such
agreement, and the expenses of the Secured Party incurred in connection
therewith shall be included in the Obligations secured hereby and payable by the
Company under Section 8.3.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1. AUTHORIZATION; ENFORCEABILITY.
------------------------------
Each of the parties hereto represents and warrants that it has taken
all action necessary to authorize the execution, delivery and performance of
this Agreement and the transactions contemplated hereby; and upon execution and
delivery, this Agreement shall constitute a valid and binding obligation of the
respective party, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights or by the principles
governing the availability of equitable remedies.
Section 4.2. OWNERSHIP OF PLEDGED PROPERTY.
------------------------------
The Company warrants and represents that it is the legal and beneficial
owner of the Pledged Property free and clear of any lien, security interest,
option or other charge or encumbrance except for the security interest created
by this Agreement.
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
----------------------------------------
Section 5.1. DEFAULT AND REMEDIES.
---------------------
(a) If an Event of Default described in Section 2.2(c)(i) and
(ii) occurs, then in each such case the Secured Party may declare the
Obligations to be due and payable immediately, by a notice in writing to the
Company, and upon any such declaration, the Obligations shall become immediately
due and payable. If an Event of Default described in Sections 2.2(c)(iii) or
(iv) occurs and is continuing for the period set forth therein, then the
Obligations shall automatically become immediately due and payable without
declaration or other act on the part of the Secured Party.
(b) Upon the occurrence of an Event of Default, the Secured
Party shall,: (i) be entitled to receive all distributions with respect to the
Pledged Collateral, (ii) to cause the Pledged Property to be transferred into
the name of the Secured Party or its nominee, (iii) to dispose of the Pledged
Property, and (iv) to realize upon any and all rights in the Pledged Property
then held by the Secured Party.
Section 5.2. METHOD OF REALIZING UPON THE PLEDGED PROPERTY :
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OTHER REMEDIES.
---------------
Upon the occurrence of an Event of Default, in addition to any rights
and remedies available at law or in equity, the following provisions shall
govern the Secured Party's right to realize upon the Pledged Property:
(a) Any item of the Pledged Property may be sold for cash or
other value in any number of lots at brokers board, public auction or private
sale and may be sold without demand, advertisement or notice (except that the
Secured Party shall give the Company ten (10) days' prior written notice of the
time and place or of the time after which a private sale may be made (the "SALE
NOTICE")), which notice period shall in any event is hereby agreed to be
commercially reasonable. At any sale or sales of the Pledged Property, the
Company may bid for and purchase the whole or any part of the Pledged Property
and, upon compliance with the terms of such sale, may hold, exploit and dispose
of the same without further accountability to the Secured Party. The Company
will execute and deliver, or cause to be executed and delivered, such
instruments, documents, assignments, waivers, certificates, and affidavits and
supply or cause to be supplied such further information and take such further
action as the Secured Party reasonably shall require in connection with any such
sale.
(b) Any cash being held by the Secured Party as Pledged
Collateral and all cash proceeds received by the Secured Party in respect of,
sale of, collection from, or other realization upon all or any part of the
Pledged Collateral shall be applied as follows:
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(i) to the payment of all amounts due the Secured
Party for the expenses reimbursable to it hereunder or owed to it pursuant
to Section 8.3 hereof;
(ii) to the payment of the Obligations then due and
unpaid.
(iii) the balance, if any, to the person or persons
entitled thereto, including, without limitation, the Company.
(c) In addition to all of the rights and remedies which the
Secured Party may have pursuant to this Agreement, the Secured Party shall have
all of the rights and remedies provided by law, including, without limitation,
those under the Uniform Commercial Code.
(i) If the Company fails to pay such amounts due upon
the occurrence of an Event of Default which is continuing, then the
Secured Party may institute a judicial proceeding for the collection of the sums
so due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company and collect the monies adjudged or
decreed to be payable in the manner provided by law out of the property of
Company, wherever situated. The Secured Party may proceed against the Company
without proceeding first against any other party, including, without limitation,
the Parent.
(ii) The Company agrees that it shall be liable for
any reasonable fees, expenses and costs incurred by the Secured Party in
connection with enforcement, collection and preservation of the Transaction
Documents, including, without limitation, reasonable legal fees and expenses,
and such amounts shall be deemed included as Obligations secured hereby and
payable as set forth in Section 8.3 hereof.
Section 5.3. PROOFS OF CLAIM.
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In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relating to the Company or the property of the Company
or of such other obligor or its creditors, the Secured Party (irrespective of
whether the Obligations shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Secured Party shall
have made any demand on the Company for the payment of the Obligations), subject
to the rights of Previous Security Holders, shall be entitled and empowered, by
intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of
the Obligations and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Secured Party (including any
claim for the reasonable legal fees and expenses and other expenses paid or
incurred by the Secured Party permitted hereunder and of the Secured Party
allowed in such judicial proceeding), and (ii) to collect and receive any monies
or other property payable or deliverable on any such claims and to distribute
the same; and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is hereby
authorized by the Secured Party to make such payments to the Secured Party and,
in the event that the Secured Party shall consent to the making of such payments
directed to the Secured Party, to pay to the Secured Party any amounts for
expenses due it hereunder.
Section 5.4. DUTIES REGARDING PLEDGED COLLATERAL.
------------------------------------
The Secured Party shall have no duty as to the collection or protection
of the Pledged Property or any income thereon or as to the preservation of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Property actually in the Secured Party's possession.
ARTICLE 6.
AFFIRMATIVE COVENANTS
---------------------
The Company covenants and agrees that, from the date hereof and until
the Obligations have been fully paid and satisfied, unless the Secured Party
shall consent otherwise in writing (as provided in Section 8.4 hereof):
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Section 6.1. EXISTENCE, PROPERTIES, ETC.
---------------------------
(a) The Company shall do, or cause to be done, all things, or
proceed with due diligence with any actions or courses of action, that may be
reasonably necessary (i) to maintain Company's due organization, valid existence
and good standing under the laws of its state of incorporation, and (ii) to
preserve and keep in full force and effect all qualifications, licenses and
registrations in those jurisdictions in which the failure to do so could have a
Material Adverse Effect (as defined below); and (b) the Company shall not do, or
cause to be done, any act impairing the Company's corporate power or authority
(i) to carry on the Company's business as now conducted, and (ii) to execute or
deliver this Agreement or any other document delivered in connection herewith,
including, without limitation, any UCC-1 Financing Statements required by the
Secured Party to which it is or will be a party, or perform any of its
obligations hereunder or thereunder. For purpose of this Agreement, the term
"MATERIAL ADVERSE EFFECT" shall mean any material and adverse affect as
determined by Secured Party in its sole discretion, whether individually or in
the aggregate, upon (a) the Company's assets, business, operations, properties
or condition, financial or otherwise; (b) the Company's to make payment as and
when due of all or any part of the Obligations; or (c) the Pledged Property.
Section 6.2. FINANCIAL STATEMENTS AND REPORTS.
---------------------------------
The Company shall furnish to the Secured Party such financial data as
the Secured Party may reasonably request. Without limiting the foregoing, the
Company shall furnish to the Secured Party (or cause to be furnished to the
Secured Party) the following:
(a) as soon as practicable and in any event within ninety (90)
days after the end of each fiscal year of the Company, the balance sheet of the
Company as of the close of such fiscal year, the statement of earnings and
retained earnings of the Company as of the close of such fiscal year, and
statement of cash flows for the Company for such fiscal year, all in reasonable
detail, prepared in accordance with generally accepted accounting principles
consistently applied, certified by the chief executive and chief financial
officers of the Company as being true and correct and accompanied by a
certificate of the chief executive and chief financial officers of the Company,
stating that the Company has kept, observed, performed and fulfilled each
covenant, term and condition of this Agreement during such fiscal year and that
no Event of Default hereunder has occurred and is continuing, or if an Event of
Default has occurred and is continuing, specifying the nature of same, the
period of existence of same and the action the Company proposes to take in
connection therewith;
(b) within forty-five (45) days of the end of each calendar
month, a balance sheet of the Company as of the close of such month, and
statement of earnings and retained earnings of the Company as of the close of
such month, all in reasonable detail, and prepared substantially in accordance
with generally accepted accounting principles consistently applied, certified by
the chief executive and chief financial officers of the Company as being true
and correct; and
(c) promptly upon receipt thereof, copies of all accountants'
reports and accompanying financial reports submitted to the Company by
independent accountants in connection with each annual examination of the
Company.
Section 6.3. ACCOUNTS AND REPORTS.
---------------------
The Company shall maintain a standard system of accounting in
accordance with generally accepted accounting principles consistently applied
and provide, at its sole expense, to the Secured Party the following:
(a) as soon as available, a copy of any notice or other
communication alleging any nonpayment or other material breach or default, or
any foreclosure or other action respecting any material portion of its assets
and properties, received respecting any of the indebtedness of the Company in
excess of $15,000 (other than the Obligations), or any demand or other request
for payment under any guaranty, assumption, purchase agreement or similar
agreement or arrangement respecting the indebtedness or obligations of others in
excess of $15,000, including any received from any person acting on behalf of
the Secured Party or beneficiary thereof; and
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(b) within fifteen (15) days after the making of each
submission or filing, a copy of any report, financial statement, notice or other
document, whether periodic or otherwise, submitted to the shareholders of the
Company, or submitted to or filed by the Company with any governmental authority
involving or affecting (i) the Company that could have a Material Adverse
Effect; (ii) the Obligations; (iii) any part of the Pledged Collateral; or (iv)
any of the transactions contemplated in this Agreement or the Loan Instruments.
Section 6.4. MAINTENANCE OF BOOKS AND RECORDS; INSPECTION.
--------------------------------------------
The Company shall maintain its books, accounts and records in
accordance with generally accepted accounting principles consistently applied,
and permit the Secured Party, its officers and employees and any professionals
designated by the Secured Party in writing, at any time to visit and inspect any
of its properties (including but not limited to the collateral security
described in the Transaction Documents and/or the Loan Instruments), corporate
books and financial records, and to discuss its accounts, affairs and finances
with any employee, officer or director thereof.
Section 6.5. MAINTENANCE AND INSURANCE.
--------------------------
(a) The Company shall maintain or cause to be maintained, at
its own expense, all of its assets and properties in good working order and
condition, making all necessary repairs thereto and renewals and replacements
thereof.
(b) The Company shall maintain or cause to be maintained, at
its own expense, insurance in form, substance and amounts (including
deductibles), which the Company deems reasonably necessary to the Company's
business, (i) adequate to insure all assets and properties of the Company, which
assets and properties are of a character usually insured by persons engaged in
the same or similar business against loss or damage resulting from fire or other
risks included in an extended coverage policy; (ii) against public liability and
other tort claims that may be incurred by the Company; (iii) as may be required
by the Transaction Documents and/or applicable law and (iv) as may be reasonably
requested by Secured Party, all with adequate, financially sound and reputable
insurers.
Section 6.6. CONTRACTS AND OTHER COLLATERAL.
-------------------------------
The Company shall perform all of its obligations under or with respect
to each instrument, receivable, contract and other intangible included in the
Pledged Property to which the Company is now or hereafter will be party on a
timely basis and in the manner therein required, including, without limitation,
this Agreement.
Section 6.7. DEFENSE OF COLLATERAL, ETC.
---------------------------
The Company shall defend and enforce its right, title and interest in
and to any part of: (a) the Pledged Property; and (b) if not included within the
Pledged Property , those assets and properties whose loss could have a Material
Adverse Effect, the Company shall defend the Secured Party's right, title and
interest in and to each and every part of the Pledged Property, each against all
manner of claims and demands on a timely basis to the full extent permitted by
applicable law.
Section 6.8. PAYMENT OF DEBTS, TAXES, ETC.
-----------------------------
The Company shall pay, or cause to be paid, all of its indebtedness and
other liabilities and perform, or cause to be performed, all of its obligations
in accordance with the respective terms thereof, and pay and discharge, or cause
to be paid or discharged, all taxes, assessments and other governmental charges
and levies imposed upon it, upon any of its assets and properties on or before
the last day on which the same may be paid without penalty, as well as pay all
other lawful claims (whether for services, labor, materials, supplies or
otherwise) as and when due
Section 6.9. TAXES AND ASSESSMENTS; TAX INDEMNITY.
-------------------------------------
The Company shall (a) file all tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Company, upon its income and profits or upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or levies
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that, if unpaid, might become a lien or charge upon any of its properties;
PROVIDED, HOWEVER, that the Company in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect thereto.
Section 6.10. COMPLIANCE WITH LAW AND OTHER AGREEMENTS.
----------------------------------------
The Company shall maintain its business operations and property owned
or used in connection therewith in compliance with (a) all applicable federal,
state and local laws, regulations and ordinances governing such business
operations and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound. Without limiting the
foregoing, the Company shall pay all of its indebtedness promptly in accordance
with the terms thereof.
Section 6.11. NOTICE OF DEFAULT.
-----------------
The Company shall give written notice to the Secured Party of the
occurrence of any default or Event of Default under this Agreement, the
Transaction Documents or any other Loan Instrument or any other agreement of
Company for the payment of money, promptly upon the occurrence thereof.
Section 6.12. NOTICE OF LITIGATION.
--------------------
The Company shall give notice, in writing, to the Secured Party of (a)
any actions, suits or proceedings wherein the amount at issue is in excess of
$50,000, instituted by any persons against the Company, or affecting any of the
assets of the Company, and (b) any dispute, not resolved within fifteen (15)
days of the commencement thereof, between the Company on the one hand and any
governmental or regulatory body on the other hand, which might reasonably be
expected to have a Material Adverse Effect on the business operations or
financial condition of the Company.
ARTICLE 7.
NEGATIVE COVENANTS
------------------
The Company covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Company shall not, unless
the Secured Party shall consent otherwise in writing:
Section 7.1. INDEBTEDNESS.
-------------
The Company shall not directly or indirectly permit, create, incur,
assume, permit to exist, increase, renew or extend on or after the date hereof
any indebtedness on its part, including commitments, contingencies and credit
availabilities, or apply for or offer or agree to do any of the foregoing.
Section 7.2. LIENS AND ENCUMBRANCES.
-----------------------
The Company shall not directly or indirectly make, create, incur,
assume or permit to exist any assignment, transfer, pledge, mortgage, security
interest or other lien or encumbrance of any nature in, to or against any part
of the Pledged Property or of the Company's capital stock, or offer or agree to
do so, or own or acquire or agree to acquire any asset or property of any
character subject to any of the foregoing encumbrances (including any
conditional sale contract or other title retention agreement), or assign, pledge
or in any way transfer or encumber its right to receive any income or other
distribution or proceeds from any part of the Pledged Property or the Company's
capital stock; or enter into any sale-leaseback financing respecting any part of
the Pledged Property as lessee, or cause or assist the inception or continuation
of any of the foregoing.
Section 7.3. ARTICLES, BY-LAWS, MERGERS, CONSOLIDATIONS,
-------------------------------------------
ACQUISITIONS AND SALES.
-----------------------
Without the prior express written consent of the Secured Party, the
Company shall not: (a) be a party to any merger, consolidation or corporate
reorganization, (b) purchase or otherwise acquire all or substantially all of
the assets or stock of, or any partnership or joint venture interest in, any
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other person, firm or entity, (c) sell, transfer, convey, grant a security
interest in or lease all or any substantial part of its assets, nor (d) create
any subsidiaries nor convey any of its assets to any subsidiary.
Section 7.4. MANAGEMENT, OWNERSHIP.
----------------------
The Company shall not materially change its executive staff as it
relates to the positions and authority held by ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
without the prior written consent of the Secured Party. Positions and authority
held by ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ are material factors in the Secured
Party's willingness to institute and maintain a lending relationship with the
Company.
Section 7.5. DIVIDENDS, ETC.
---------------
The Company shall not declare or pay any dividend of any kind, in cash
or in property, on any class of its capital stock, nor purchase, redeem, retire
or otherwise acquire for value any shares of such stock, nor make any
distribution of any kind in respect thereof, nor make any return of capital to
shareholders, nor make any payments in respect of any pension, profit sharing,
retirement, stock option, stock bonus, incentive compensation or similar plan
(except as required or permitted hereunder), without the prior written consent
of the Secured Party.
Section 7.6. GUARANTIES; LOANS.
------------------
The Company shall not guarantee nor be liable in any manner, whether
directly or indirectly, or become contingently liable after the date of this
Agreement in connection with the obligations or indebtedness of any person or
persons, except for (i) the indebtedness currently secured by the liens
identified on the Pledged Property identified on Exhibit A hereto and (ii) the
endorsement of negotiable instruments payable to the Company for deposit or
collection in the ordinary course of business. The Company shall not make any
loan, advance or extension of credit to any person other than in the normal
course of its business.
Section 7.7. DEBT.
----
The Company shall not create, incur, assume or suffer to exist any
additional indebtedness (i) that is secured by any of the Company's assets
(whether real or personal and whether now owned or hereinafter acquired) or (ii)
of any description whatsoever in an aggregate amount in excess of $10,000,000
(excluding with respect to subpart (ii) hereunder any indebtedness of the
Company to the Secured Party, trade accounts payable and accrued expenses
incurred in the ordinary course of business and the endorsement of negotiable
instruments payable to the Company, respectively for deposit or collection in
the ordinary course of business).
Section 7.8. CONDUCT OF BUSINESS.
--------------------
The Company will continue to engage, in an efficient and economical
manner, in a business of the same general type as conducted by it on the date of
this Agreement.
Section 7.9. PLACES OF BUSINESS.
-------------------
The location of the Company's chief place of business is ▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Company shall not change the
location of its chief place of business, chief executive office or any place of
business disclosed to the Secured Party or move any of the Pledged Property from
its current location without thirty (30) days' prior written notice to the
Secured Party in each instance.
10
ARTICLE 8.
MISCELLANEOUS
-------------
Section 8.1. NOTICES.
--------
All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as duly
given on: (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five (5) days after mailing if
mailed from within the continental United States by certified mail, return
receipt requested to the party entitled to receive the same:
If to the Secured Party: Cornell Capital Partners, LP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Portfolio Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Cornell Capital Partners, LP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
And if to the Company: Silicon Film Technologies, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change its address by giving notice to the other party
stating its new address. Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.
Section 8.2. SEVERABILITY.
-------------
If any provision of this Agreement shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
Section 8.3. EXPENSES.
---------
In the event of an Event of Default, the Company will pay to the
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel, which the Secured Party may incur
in connection with: (i) the custody or preservation of, or the sale, collection
from, or other realization upon, any of the Pledged Property; (ii) the exercise
or enforcement of any of the rights of the Secured Party hereunder or (iii) the
failure by the Company to perform or observe any of the provisions hereof.
11
Section 8.4. WAIVERS, AMENDMENTS, ETC.
-------------------------
The Secured Party's delay or failure at any time or times hereafter to
require strict performance by Company of any undertakings, agreements or
covenants shall not waiver, affect, or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance herewith. Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type. None of the undertakings,
agreements and covenants of the Company contained in this Agreement, and no
Event of Default, shall be deemed to have been waived by the Secured Party, nor
may this Agreement be amended, changed or modified, unless such waiver,
amendment, change or modification is evidenced by an instrument in writing
specifying such waiver, amendment, change or modification and signed by the
Secured Party.
SECTION 8.5. CONTINUING SECURITY INTEREST.
-----------------------------
This Agreement shall create a continuing security interest in the
Pledged Property and shall: (i) remain in full force and effect until payment in
full of the Obligations; and (ii) be binding upon the Company and its successors
and heirs and (iii) inure to the benefit of the Secured Party and its successors
and assigns. Upon the payment or satisfaction in full of the Obligations, the
Company shall be entitled to the return, at its expense, of such of the Pledged
Property as shall not have been sold in accordance with Section 5.2 hereof or
otherwise applied pursuant to the terms hereof.
Section 8.6. INDEPENDENT REPRESENTATION.
---------------------------
Each party hereto acknowledges and agrees that it has received or has
had the opportunity to receive independent legal counsel of its own choice and
that it has been sufficiently apprised of its rights and responsibilities with
regard to the substance of this Agreement.
Section 8.7. APPLICABLE LAW: JURISDICTION.
------------------------------
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New Jersey without regard to the principles of conflict
of laws. The parties further agree that any action between them shall be heard
in ▇▇▇▇▇▇ County, New Jersey, and expressly consent to the jurisdiction and
venue of the Superior Court of New Jersey, sitting in ▇▇▇▇▇▇ County and the
United States District Court for the District of New Jersey sitting in Newark,
New Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph.
Section 8.8. WAIVER OF JURY TRIAL.
---------------------
AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS
AGREEMENT AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY
WAY TO THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS
TRANSACTION.
Section 8.9. ENTIRE AGREEMENT.
-----------------
This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect to the
subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
SILICON FILM TECHNOLOGIES, INC.
By: /S/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
SECURED PARTY:
CORNELL CAPITAL PARTNERS, LP
BY: YORKVILLE ADVISORS, LLC
ITS: GENERAL PARTNER
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Portfolio Manager
Quest Manufacturing, Inc. hereby subordinates in all respects its
interest in any and all of the Pledged Property as set forth in the Asset
Purchase Agreement, attached hereto as Exhibit B, between Quest Manufacturing,
Inc. and Silicon Film Technologies, Inc. dated February 1st, 2003.
QUEST MANUFACTURING, INC.
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
13
EXHIBIT A
DEFINITION OF PLEDGED PROPERTY
------------------------------
For the purpose of securing prompt and complete payment and performance
by the Company of all of the Obligations, the Company unconditionally and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Company:
(a) all goods of the Company, including, without limitation,
machinery, equipment, furniture, furnishings, fixtures, signs, lights, tools,
parts, supplies and motor vehicles of every kind and description, now or
hereafter owned by the Company or in which the Company may have or may hereafter
acquire any interest, and all replacements, additions, accessions, substitutions
and proceeds thereof, arising from the sale or disposition thereof, and where
applicable, the proceeds of insurance and of any tort claims involving any of
the foregoing;
(b) all inventory of the Company, including, but not limited
to, all goods, wares, merchandise, parts, supplies, finished products, other
tangible personal property, including such inventory as is temporarily out of
Company's custody or possession and including any returns upon any accounts or
other proceeds, including insurance proceeds, resulting from the sale or
disposition of any of the foregoing;
(c) all contract rights and general intangibles of the
Company, including, without limitation, goodwill, trademarks, trade styles,
trade names, leasehold interests, partnership or joint venture interests,
patents and patent applications (including, without limitation, all patents and
patent applications, worldwide, relating to or connected with digital cameras or
permitting standard 35mm cameras to take digital cameras, copyrights, deposit
accounts whether now owned or hereafter created;
(d) all documents, warehouse receipts, instruments and chattel
paper of the Company whether now owned or hereafter created;
(e) all accounts and other receivables, instruments or other
forms of obligations and rights to payment of the Company (herein collectively
referred to as "ACCOUNTS"), together with the proceeds thereof, all goods
represented by such Accounts and all such goods that may be returned by the
Company's customers, and all proceeds of any insurance thereon, and all
guarantees, securities and liens which the Company may hold for the payment of
any such Accounts including, without limitation, all rights of stoppage in
transit, replevin and reclamation and as an unpaid vendor and/or lienor, all of
which the Company represents and warrants will be bona fide and existing
obligations of its respective customers, arising out of the sale of goods by the
Company in the ordinary course of business;
(f) to the extent assignable, all of the Company's rights
under all present and future authorizations, permits, licenses and franchises
issued or granted in connection with the operations of any of its facilities;
(g) all products and proceeds (including, without limitation,
insurance proceeds) from the above-described Pledged Property.
A-1
EXHIBIT B
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is made and entered at Hinsdale,
Illinois, on February 1, 2003, by and between QUEST MANUFACTURING, INC. an
Illinois corporation ("Seller"), and SILICON FILM TECHNOLOGIES, INCORPORATED, an
Illinois corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller owns certain proprietary electronic film systems and
other digital imaging products and services (the "Business"); and
WHEREAS, Seller desires to sell, assign and transfer to Purchaser, and
Purchaser desires to purchase, acquire and accept from Seller, a substantial
portion of the assets utilized in the Business, including, without limitation,
all patents, trademarks, and other intellectual property rights associated with
the Business, upon the terms and subject to the conditions set forth in this
Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Purchaser and Seller hereby agree
as set forth in this Agreement:
1. SALE AND PURCHASE OF ASSETS. Except as provided in Section 2, Seller
hereby sells, assigns and transfers to Purchaser, and Purchaser hereby
purchases, acquires and accepts from Seller, substantially all the assets,
personal property, powers and privileges of Seller, tangible and intangible,
whether written-off, expensed, fully depreciated or otherwise, utilized in the
Business (collectively, the "Assets"), free and clear of any and all liens,
claims, charges, liabilities, pledges, mortgages, security interests,
encumbrances or rights or claims of any other person or entity of any kind,
nature or description whatsoever (collectively, the "Liens"). The Assets shall
include in it's entirety the assets of Silicon Film Technology, Inc. (a
California corporation), which were purchased by Quest Manufacturing on February
2nd, 2002 by a court order free and clear, without limitation, plastic tooling,
molds, metal tooling, software, patents, trademarks, intellectual property and
licenses agreements. The only exception to the above is payable to Knobbe,
Martens, ▇▇▇▇▇ & Bear, LLP the technologies patent attorney that is owed
$76,000.
2. EXCLUDED ASSETS. Purchaser is not purchasing the following assets of
Seller, which assets shall remain the property of Seller and shall be excluded
from the definition of "Assets":
(a) Seller's accounts receivable, if any; provided, however,
Purchaser agrees to collect Seller's accounts receivable in the ordinary course
of business for ninety (90) days following closing, after which time Purchaser
shall assign to Seller any outstanding receivables. Purchaser shall account to
Seller at least weekly for all accounts receivable collected. All payments
received shall be allocated to the receivable designated with such payment.
(b) Cash and cash equivalents, including all account balances
and deposits in bank accounts;
(c) Tangible assets and inventory that Purchaser deems to be
unusable for its continuation of the Business;
(d) Pre-paid expenses, if any;
(e) All refunds and deposits of all federal, state, local and
municipal taxes paid, or which may be paid, by Seller with respect to the
Business for any period; and
(f) All closes of action and litigation.
B-1
3. NON-ASSUMPTION OF LIABILITIES. Purchaser is not assuming and will
not be liable for any trade and accounts payables, debts, liabilities or
obligations of Seller, except payments to Knobbe, Martens, ▇▇▇▇▇ & Bear, LLP as
noted in section 1.
4. CLOSING. The closing of the sale and purchase of the Assets shall
take place on February 1st, 2003, at Purchaser's principal place of business or
at a place as shall be mutually agreed to by the parties ("Closing").
5. PURCHASE PRICE, PAYMENT TERMS AND ALLOCATION OF PURCHASE PRICE.
(a) The purchase price for the Assets is One Million One
Hundred Fifty Eight Thousand Two Hundred Fifty Dollars (US$1,158,250.00) [the
"Purchase Price"].
(b) Purchaser shall pay the Purchase Price to Seller, as
follows:
(1) At closing Quest will be allocated 15,365,000
shares Common A Stock of Silicon Film Technologies, Inc., valued at $768,250 or
$0.05 per share. The shares must be issued to Quest by December 31st, 2004.
(2) By June 30th, 2003, the sum of Seventy Thousand
Dollars ($70,000) ["Initial Payment"]. The balance of the Purchase Price,
$320,000, shall be payable as monies are available, but must be completed by
December 31, 2004.
(3) Unpaid balance shall accrue interest at 6% per
annum.
(c) The Purchase Price shall be allocated among the Assets in
the manner determined by the Purchaser, the cash payment allocation shall also
be utilized by the Seller in any required filings with the Internal Revenue
Service.
6. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and
warrants to Purchaser as follows:
(a) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Illinois, and is duly
qualified to transact business in the State of Illinois and other states where
qualification is necessary for the conduct of the Business.
(b) Seller has the requisite power and authority to execute,
deliver and perform its covenants, duties and obligations set forth in this
Agreement.
(c) The execution of this Agreement and Seller's full and
timely performance of its covenants, duties and obligations described herein has
been authorized by Seller.
(d) This Agreement is the valid, legal and binding obligation
of Seller, enforceable in accordance with its terms. No other action by Seller
is necessary to authorize the execution and delivery of this Agreement, the
performance of Seller's covenants, duties and obligations and the consummation
of the transactions described in and contemplated by this Agreement.
(e) Neither the execution and delivery of this Agreement, the
performance of Seller's covenants, duties and obligations nor the consummation
of the transactions described in or contemplated by this Agreement, constitute a
default under or conflict with any judgment, decree or order of any court or
other governmental body to which Seller is subject and will not conflict or be
inconsistent with or result in the termination, modification, breach or default
under the terms of any contract, commitment, covenant, agreement, instrument,
document or understanding to which Seller is a party.
(f) The execution and delivery of this Agreement and the
performance by Seller of its covenants, duties and obligations set forth in this
Agreement do not require the consent, approval or other action of, or any filing
with or notice to, any governmental agency or authority or any other person or
entity whatsoever.
B-2
(g) Seller is not obligated for, nor are any of the Assets
subject to, any liabilities, adverse claims or obligations, absolute or
contingent, which could have a material impact or effect on the Business, the
sale, assignment and transfer of the Assets to Purchaser in accordance with the
terms of this Agreement or Purchaser's operation of the Business on and after
the date of this Agreement.
(h) Seller has no knowledge of any condition or circumstance
which would prevent Purchaser from obtaining all federal, state and local
permits, authorizations and licenses necessary for Purchaser to conduct the
Business utilizing the Assets on and after the date hereof, nor does Seller know
of any basis or reason for any litigation, arbitration or other proceeding
against Purchaser arising from or in connection with the Purchaser's operation
of the Business or Purchaser's utilization of the Assets on and after the date
hereof.
(i) Seller has fully reported and fully and timely paid, and
will continue to fully and timely report and pay, all federal, state, local and
foreign taxes of every kind, nature and description whatsoever that are due and
payable or accrued with respect to Seller's business and the Assets, including,
without limitation, all income, excise, payroll, social security, sales, use,
license, franchise, property, head, employment and unemployment taxes.
(j) There is no litigation, arbitration, proceeding or
controversy which is pending, threatened or anticipated before any court,
governmental agency or authority, arbitrator or board of arbitrators to which
Seller is a party or which may affect or is threatened against the Business, the
Assets or Seller's right to carry on the Business as conducted on and before the
date of this Agreement. There is no action, suite or proceeding pending or
threatened before any court or governmental agency or authority which would give
any party the right to rescind or enjoin any transaction described in or
contemplated by this Agreement.
(k) All documents containing Seller's financial information
that Seller has furnished to Purchaser are true and correct copies and present
fairly the financial condition of Seller.
(l) Since January 1, 2003, Seller has actively conducted the
Business in the ordinary and regular course and there has not been any material
adverse change in the Business, the Assets, Seller's liabilities or the
Business' prospects or operations.
(m) Seller is not represented by a broker in connection with
the sale and purchase of the Assets and the other transactions described in or
contemplated by this Agreement, and Seller warrants that it owes no broker's or
finder's fee or commission in connection with the sale of the Assets and the
other transactions described in or contemplated by this Agreement.
(n) No representation or warranty made by Seller in this
Agreement or in any document, written statement, certificate or Exhibit
furnished or to be furnished to Purchaser or its counsel pursuant hereto, or in
connection with the transactions described in and contemplated by this
Agreement, contains or will contain any untrue statement of any material fact,
or omits or will omit any material fact necessary to prevent the statements of
facts contained therein from being materially false or misleading. All
statements made and data presented by Seller in any document, written statement,
certificate or Exhibit provided to Purchaser pursuant to or in connection with
this Agreement, or contemplated by this Agreement, are deemed to be
representations and warranties made by Seller to Purchaser in this Agreement.
7. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser represents and
warrants unto Seller as follows:
(a) Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois.
B-3
(b) Purchaser has the requisite corporate power and authority
to execute, deliver and perform its covenants, duties and obligations set forth
in this Agreement.
(c) The execution of this Agreement and Purchaser's full and
timely performance of its covenants, duties and obligations described herein
have been duly authorized by Purchaser's Board of Directors in accordance with
all applicable laws and the Articles of Incorporation and By-Laws of Purchaser.
(d) This Agreement is the valid, legal and binding obligation
of Purchaser, enforceable in accordance with its terms. No other action by
Purchaser is necessary to authorize the execution and delivery of this
Agreement, the performance of purchaser's covenants, duties and obligations and
the consummation of the transactions described in and contemplated by this
Agreement.
(e) Neither the execution and delivery of this Agreement, the
performance of purchaser's covenants, duties and obligations nor the
consummation of the transactions described in or contemplated by this Agreement,
constitute a default under or conflict with any judgment, decree or order of any
court or other governmental body to which Purchaser is subject and will not
conflict or be inconsistent with or result in the terminating, modification,
breach or default under the terms of any contract, commitment, covenant,
agreement, instrument, document or understanding to which Purchaser is a party.
8. INDEMNIFICATION.
(a) Seller shall defend, indemnify and hold Purchaser and its
officers, directors, shareholders, employees, agents, accountants, attorneys,
legal representatives, successors and assigns (collectively the "Purchaser
Group"), harmless of, from and against any and all suits, actions, proceedings,
losses, claims, damages, liabilities, penalties and other costs or expenses,
including, without limitation, reasonable attorneys' fees and costs, at law or
in equity, now existing or hereafter arising, liquidated or unliquidated,
foreseeable or unforeseeable, insured or uninsured (collectively "Claims"),
incurred or sustained by the Purchaser, arising from or relating to:
(i) A default or breach by Seller of any term,
provision, representation, warranty, covenant, duty, agreement or obligation
of Seller set forth in this Agreement or in any document, written statement,
certificate or Exhibit delivered pursuant to or in connection with this
Agreement;
(ii) Seller's operation of the Business;
(iii) Seller's ownership and use of the Assets on and
prior to the closing of the transaction contemplated by this Agreement;
and
(iv) Any federal, state, county, local or municipal
tax or assessment against Seller or arising from or in connection with the
operation of Seller's business, Seller's income or otherwise.
(b) Purchaser shall defend, indemnify and hold Seller, its
officers, directors, shareholders, employees, agents, accountants, attorneys,
legal representatives, successors and assigns, as the case may be (collectively
the "Seller Group") harmless of, from and against any and all Claims incurred or
sustained by the Seller Group, or any of them, arising from or relating to:
(i) A default or breach by Purchaser of any term,
provision, representation, warranty, covenant, duty, agreement or
obligation of Purchaser set forth in this Agreement or in any document, written
statement, certificate or Exhibit delivered pursuant to or in connection with
this Agreement; and
B-4
(ii) Purchaser's operation of the Business.
9. SURVIVAL. Notwithstanding any investigation made by or on behalf of
Seller or Purchaser, the representations and warranties of Seller and Purchaser
contained in this Agreement and or in any document, written statement,
certificate or Exhibit delivered pursuant to or in connection with this
Agreement and the respective covenants, agreements and obligations of Seller and
Purchaser to indemnify each other pursuant to Paragraph 8 will survive the
execution of this Agreement.
10. NOTICES. All notices, requests, demands and other communications
required or desired to be given pursuant to this Agreement will be given in
writing and will be deemed duly given upon personal delivery, or on the third
day after mailing if sent by registered or certified mail, postage prepaid,
return receipt requested, or on the day after mailing if sent by a nationally
recognized overnight delivery service which maintains records of the time, place
and recipient of delivery, and in each case if directed as follows:
If to Seller, then to: Quest Manufacturing, Inc.
▇▇ ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Drive Unit F
Spring Grove, IL 60081
With a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇
▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Purchaser, then to: Silicon Film Technologies, Inc.
Address TBD
With a copy to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other person, entity or address as a party may respectively designate
in like manner, from time to time.
11. MISCELLANEOUS.
(a) This Agreement is delivered and intended to be performed
in the State of Illinois and will be construed, interpreted and enforced in
accordance with the laws of the State of Illinois.
(b) This Agreement may be assigned by Seller or Purchaser
without the prior written consent of the other party hereto, except that Seller
or Purchaser must notify the other party of the assignment in writing as long as
there is a balance due as described in Section 5.
(c) This Agreement will be binding upon, inure to the benefit
of and will be enforceable by Seller and Purchaser, and their respective legal
representatives, successors and permitted assigns, if any, and no other person
or entity will be deemed a third-party beneficiary of this Agreement.
(d) This Agreement will not be amended, changed, modified or
discharged, except by a writing signed by Seller and Purchaser.
(e) This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
B-5
(f) This Agreement, together with the Exhibits attached
hereto, constitutes the entire agreement and understanding between the parties
hereto with regard to the subject matter hereof, and supersedes all prior and
contemporaneous verbal and written communications, agreements, assurances and
understandings between the parties hereto. No statement, representation,
warranty, covenant, agreement, obligation, indemnity or undertaking of any kind,
nature or description whatsoever not expressly set forth in this Agreement will
be deemed a part of or will affect or be used to interpret, change or restrict
the express terms and provisions of this Agreement.
(g) A waiver of any party's default or breach of any of their
respective representations, warranties, covenants, duties, agreements or
obligations or any term or provision of this Agreement, will be effective only
if in writing and signed by all of the parties hereto and will be limited to the
default or breach described therein; no such waiver will be or be deemed a
waiver of any other, similar, prior, continuing or subsequent default or breach.
(h) The numbers, headings or titles of the various paragraphs
of this Agreement are not a part of this Agreement, but are for convenience of
reference only and do not, and will not be used to, define, limit, continue,
modify or affect the meaning or content of the paragraphs.
(i) Seller and Purchaser will pay their own fees and expenses
in connection with this Agreement and the transactions described in and
contemplated by this Agreement, whether or not such transactions are
consummated, including, without limitation, the fees of any attorneys,
accountants or other persons or entities engaged by such party.
(j) The recitals set forth at the beginning of this Agreement
are hereby incorporated into and made a part of this Agreement as if fully set
forth herein.
(k) Whenever required by context, the masculine pronouns will
include the feminine and neuter genders, and the singular will include the
plural and vice versa.
(l) The Exhibits referred to in this Agreement are attached
hereto, made a part hereof and incorporated herein by this reference.
(m) If any provision contained herein is held to be invalid or
unenforceable by a court of competent jurisdiction, such provision will be
severed herefrom and such invalidity or unenforceability will not affect any
other provision of this Agreement, the balance of which will remain in and have
its intended full force and effect; provided, however, if such invalid or
unenforceable provision may be modified so as to be valid and enforceable as a
matter of law, such provision will be deemed to have been modified so as to be
valid and enforceable to the maximum extent permitted by law.
(n) Seller and Purchaser shall execute and deliver such
additional documents and instruments, and take such other actions, as may be
necessary or advisable to document or consummate the transactions described in
or contemplated by this Agreement.
(o) Each party to this Agreement acknowledges and agrees that
any information or data involving the sale and purchase of the Assets and the
consummation of the other transactions described in or contemplated by this
Agreement, including, without limitation, the purchase price and other terms and
provisions set forth herein, is of a confidential nature and not generally known
to the public. In order to preserve the confidentiality of all such information
and data and the goodwill associated with the sale and purchase of the Assets,
each party hereto agrees that it shall not divulge, communicate or disclose any
such information or data, except as may be required by law, in connection with
the performance of their respective covenants, duties and obligations set forth
in this Agreement or Purchaser's operation of the Business on and after the date
of this Agreement, or use to the detriment of any other party hereto or for the
benefit of any other person or entity, or misuse in any way, any such
information or data.
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IN WITNESS WHEREOF, Seller and Purchaser have each duly executed this
Agreement as of the date first set forth above.
QUEST MANUFACTURING, INC. SILICON FILM TECHNOLOGIES, INC.
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Its: CEO Its: President
Date: February 1, 2003 Date: February 1, 2003
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