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INVESTMENT AGREEMENT
entered into by and among
FiberCore, Inc.
FiberCore Ltda.
and
▇▇▇▇▇ ▇.▇. - Empreendimentos e Participacoes
Xtal Fibras Opticas S.A.
and
Mamore Participacoes S.A.
on
June 01, 2000
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INVESTMENT AGREEMENT
By this Investment Agreement (the "Agreement"), executed and entered into in the
City of Sao Paulo, Sao Paulo, Brazil, on this June 1st, 2000, by and among the
parties below, on one side;
1. FiberCore, Inc., a company duly organized and validly existing under the laws
of the State of Nevada, United States of America, with head offices at ▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ("FCI"), herein duly represented by its authorized
representative, or any other company or individual to be designated by it;
2. FiberCore Ltda. , a corporation duly organized and validly existing under the
laws of the Federal Republic of Brazil, with head offices in the City of Sao
Paulo, State of Sao Paulo, at Rua Libero Badaro, 293 , enrolled with the
National Registry of Legal Entities of the Ministry of Finance ("CNPJ/MF") under
No. 03.767.078/0001-24 , herein represented by its duly authorized
representative (hereinafter referred to as the "FCI Brazil" and, collectively
with FCI, as the "Investors")
and, on the other side,
3. ▇▇▇▇▇ ▇.▇. - Empreendimentos e Participacoes, a company duly organized and
validly existing under the laws of the Federal Republic of Brazil, with head
offices in the City of Uberlandia, State of Minas Gerais, at ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, enrolled with the National Registry of Legal
Entities of the Ministry of Finance ("CNPJ/MF") under No. 17.835.026-0001-52,
herein represented by its duly authorized representative (hereinafter referred
to as "Algar"); and
4. Xtal Fibras Opticas S.A., a corporation duly organized and validly existing
under the laws of the Federal Republic of Brazil, with head offices in the City
of Uberlandia, State of Minas Gerais, at ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, enrolled with the National Registry of Legal Entities of
the Ministry of Finance ("CNPJ/MF") under No. 71.340.707/0001-95, herein
represented by its duly authorized representative (hereinafter referred to as
the "Xtal");
5. Mamore Participacoes S.A., a corporation duly organized and validly existing
under the laws of the Federal Republic of Brazil, Federal Republic of Brazil,
with head offices in the City of Uberlandia, State of Minas Gerais, at ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇, cj. 07, Sala A, Distrito Industrial, enrolled with the
National Registry of Legal Entities of the Ministry of Finance ("CNPJ/MF") under
No. 03.509.491/0001-99, herein represented by its duly authorized representative
(hereinafter referred to as the "Company")
(Investors, Algar, Xtal and the Company, are hereinafter referred to,
individually, as a "Party", and collectively, as the "Parties")
Whereas, Algar will be, until the Capital Increase and Subscription (as such
terms are defined below) are executed, holder of the totality of the capital
stock of the Company, currently represented by 22,276,511 registered common
shares with no par value, validly issued and outstanding, free and clear of all
liens or encumbrances (the "Algar's Shares);
Whereas, the Company is the holder of the totality of the capital stock of Xtal,
currently represented by 10,275,139 registered common shares with no par value,
validly issued and outstanding, free and clear of all liens or encumbrances (the
"Company's Xtal Shares");
Whereas, Investors desire to effect an equity investment in the Company, by
means of subscription and payment in (the "Investment") of new shares to be
issued by the Company with premium for such purposes;
Whereas, the Investors have appointed an auditing firm and a law firm to proceed
with a due diligence in Xtal, and have access to certain documents and
information made available by Xtal by virtue of such due diligence;
Whereas, the Parties intend to legally formalize all the terms and conditions
which shall apply to the transactions described in the foregoing recitals;
Now, therefore, in view of the mutual promises, covenants and agreements
contained herein, and intending to be legally bound, the Parties have agreed to
execute this Agreement, pursuant to the following terms and conditions:
Section I
Issuance and Subscription of Investors' Shares
1.01 Capital Increase; Issuance of Investors' Shares: Subject to the
remaining terms and conditions set forth in this Agreement, in order to
allow the accomplishment of the Investment in the Company, Algar (in
its capacity of sole shareholder of the Company) shall, within fourteen
(14) business days from the date hereof (the "Closing Date"), cause a
capital increase of the Company (the "Capital Increase"), through
issuance by the Company of 5,839,748 new registered common shares of
the Company, all with no par value (the "Investors' Shares"), by means
of an unanimous approval by a Special Shareholders Meeting of the
Capital Increase of the Company, which Capital Increase shall be fully
subscribed and paid for by FCI Brazil . The minutes of Company's
Special Shareholders Meeting which shall approve the Capital Increase
shall be substantially in the form of Annex 1.01 hereto.
1.02 Issuance Price and Premium of Investors' Shares: The total amount of
the Investment to be effected in the Company by FCI Brazil (the
"Investment Amount") shall be R$ 40,373,000.00 (forty million, three
hundred seventy-three thousand Reais).
1.03 Allocation of Proceeds; Capitalization of the Premium: The portion of
the payment of the Investment Amount to be made by the Investors to the
Company (pursuant to Section 1.05 bellow) relating of the issuance
price of the Investors' Shares shall be allocated to the equity
/corporate capital account (capital social) of the Company, whilst the
portion corresponding to the premium (agio) shall be allocated to a
capital reserve (reserva de capital). The minutes of the Special
Shareholders Meeting mentioned in Section 1.01 above and attached
hereto as Annex 1.01 shall further reflect the above Capitalization.
1.04 Subscription by the Investors: The Investors' Shares, issued by the
Company pursuant to the provisions of Sections 1.01 and 1.02 above,
shall be, on the Subscription Date, totally and exclusively subscribed
for by Investors (the "Subscription"). For such purposes, Algar hereby
expressly waives its preemptive rights for the subscription of the
Investors' Shares, and shall once again expressly waive such preemptive
rights during the Special Shareholders Meeting mentioned in Section
1.01 above. After the Subscription, Investors shall own all right,
title, interest and ownership of the Investors' Shares, all free and
clear of any liens and encumbrances. The minutes of the Special
Shareholders Meeting mentioned in Section 1.01 above and attached
hereto as Annex 1.01 shall further reflect the Subscription by
Investors.
1.05 Payment in for the Subscription of Investors' Shares: Immediately after
the Subscription by FCI Brazil, Investors shall pay to the Company, on
the Closing Date, the totality of the Investment Amount, by means of an
administrative check issued by Bank Boston Banco Multiplo S.A. in favor
of the Company.
1.06 Additional Covenants:
a. The Company, in its capacity of sole shareholder of Xtal, shall
cause an amendment to the Xtal's By-laws, by means of an unanimous
approval by a Special Shareholders Meeting. The minutes of Xtal's
Special Shareholders Meeting which shall amend Xtal's By-laws
shall be substantially in the form of Annex 1.06 hereto. In
addition, the Shareholders Meeting mentioned above and attached
hereto as Annex 1.06(a) shall approve the resignation of the
current members of the Board of Directors and the transfer of the
shares held by each one of them to Algar. The current members of
the Board of Directors, who will resign their positions and
transfer their shares to Algar at the Shareholders Meeting
attached hereto as Annex 1.06 are Messrs. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Costa and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Caetano.
▇. ▇▇▇▇▇, in its capacity of sole shareholder of the Company, shall
cause an amendment to the Company's By-laws, by means of an
unanimous approval by a Special Shareholders Meeting. The minutes
of Company's Special Shareholders Meeting which shall amend
Company's By-laws shall be substantially in the form of Annex 1.01
describe above.
1.07 Guarantees granted by Algar in favor of Xtal: Investors shall, jointly
and severally, hold Algar harmless from and shall indemnify Algar
against any losses, damages, burdens, payments or compensations derived
from guarantees granted by Algar to third parties, in favor of Xtal, in
connection with Xtal's business. Annex 1.07 attached hereto contains a
list of all guarantees granted by Algar to third parties, in favor of
Xtal. Investors will not be obliged to hold Algar harmless from and
against losses, damages, burdens, payments or compensation derived from
guarantees not disclosed in Annex 1.07 hereto.
a. Investors will use its best efforts to have Algar's guarantees
related to obligations due after August 31, 2000 released on or
before August 31, 2000 and, in the event Investors are unable to
obtain such release, then Investors will jointly and severally,
pay the costs incurred by Algar to maintain such guarantees until
such time these guarantees are released, without prejudice to the
Investors' obligations under Section 1.07 above Notwithstanding
any provision herein, the Investors shall cause Algar to be fully
and completely released of all Algar's guarantees listed in Annex
1.07 on or before September 30, 2000. Algar shall be under no
obligation to renew or extend any of the guarantees listed in
Annex 1.07.
Section II
Deliveries at and Conditions to the Subscription and Closing
The obligation of the Investors to consummate the Investment, effect
the Subscription, pay the Investment Amount and consummate the
remaining transactions set forth herein shall be subject to (i) the
satisfaction in full of each and all of the following conditions
(unless waived in writing by Investors), and (ii) the receipt by the
Investors from Algar, Xtal and the Company (as applicable) of each and
all of the following deliveries (unless waived in writing by
Investors), on or before the Closing Date (as the case may be):
2.01 Consents: Algar and Xtal shall have delivered, until this date, all
authorizations, permits, consents or approvals of any and all
governmental regulatory authorities and third parties required to be
obtained by Algar or Xtal or which are necessary to consummate the
transactions contemplated in this Agreement, except for the approval of
the Brazilian antitrust authorities.
2.02 Approval of Capital Increase: The Company and Xtal shall have received,
on or before the Closing Date, all necessary corporate approvals
(including, without limitation, all necessary Board of Directors
approvals, all necessary shareholder approvals and waivers of
preemptive rights) to approve the amended By-laws and the Capital
Increase (as mentioned in Section I above).
2.03 Tax Clearance Certificates: Algar shall have delivered or cause to be
delivered, on or before the Closing Date, the tax clearance
certificates listed on Annex 2.03 hereto.
2.04 Amended By-laws: Algar shall have delivered, on or before the Closing
Date, amended By-Laws of the Company and of Xtal, pursuant to the
provisions of Sections 1.01 and 1.06 above.
2.05 Performance by the Parties: Each of the obligations of the Company,
Xtal and Algar to be performed pursuant to the provisions of this
Agreement on or before the Closing Date (as the case may be) shall have
been duly performed on or before such dates.
2.06 No Material Adverse Change: No event shall have occurred up to the date
hereof which and until the Closing Date: (i) constitute a Material
Adverse Change (as defined hereunder) with respect to Xtal and the
Company and (ii) constitute a Material Adverse Change in Brazilian
financial, political or economic conditions that render the obligations
of Investors hereunder substantially more onerous. For purposes hereof,
"Material Adverse Change" means an event, or a combination of events,
which are reasonably likely, individually or in the aggregate, to have
a material adverse effect on the business, operations, assets,
liabilities, condition (financial or otherwise), results of operations,
or prospects of Xtal and the Company, or which is reasonably likely to
prevent or materially hinder or delay the transactions contemplated by
this Agreement.
2.07 No Legal Impediment: No law or regulation shall have been enacted,
entered, issued, promulgated or enforced by any governmental authority
or court, nor shall any action have been instituted and remain pending
or have been threatened and remain so at what would otherwise be the
Subscription Date or the Closing Date (as the case may be), that would
prohibit or materially restrict or hinder the consummation of the
transactions contemplated herein. No governmental authority shall have
notified any party hereto that the consummation of the transactions
contemplated hereby would constitute a violation of any law, regulation
or order of any jurisdiction and/or that it intends to commence
proceedings to restrain or prohibit such transactions or force
divestiture or rescission.
2.08 Representations and Warranties True: All representations and warranties
made by Algar, Xtal and the Company, as set forth in Section III of
this Agreement, shall be true and correct in all material respects when
made and on and as of the Subscription Date and Closing Date as if such
representations and warranties were made on and as of such dates,
except for changes expressly permitted or contemplated by the terms of
this Agreement.
2.09 Receipt of Corporate Documents: On or before the Subscription Date or
the Closing Date (as the case may be), Investors shall receive: (a)
copies of all corporate documents involved in the Capital Increase and
Subscription, including, without limitation, duly executed subscription
form (boletim de subscricao) related to the Investors' Shares,
certified copies of the relevant pages of the Book of Registry of
Registered Shares (Livro de Registro de Acoes Nominativas) of the
Company with the entries related to the Investors' Shares and
evidencing the subscription of same by Investors, and copies of the
corporate documents mentioned in Sections 1.01, 2.01 and 3.03 above.
2.10 Resignations and Releases of Directors and Officers;
Powers-of-attorney: Except if otherwise provided herein, Investors
shall have received duly executed resignations terms and releases
effective as of the Subscription Date, in form and substance
satisfactory to Investors, from all officers, members of the Board of
Directors of Xtal and the Company, respectively, and such other persons
as shall be identified by the Investors prior to the Subscription Date.
If requested by Investors, Algar shall deliver evidence, in form and
substance acceptable to Investors, of the cancellation of the
powers-of-attorney granted by Xtal and the Company.
2.11 Closing Balance Sheet. Algar, Xtal and the Company shall provide
Financial Statements of Xtal and the Company as of May 31, 2000 (the
"Closing Balance Sheet") to be included as Annex 3.04.
2.12 Algar Debt Assumption (the "Assumed Indebtedness"): Algar shall execute
at the Closing Date a revised, updated and consolidated version of the
Assumption of Debt Agreements celebrated by Algar and Xtal on December
1st, 1998 and December 31, 1998 respectively, stating: (i) the exact
outstanding balance of the debts assumed by Algar on behalf of Xtal in
each Assumption of Debt and (ii) its obligation before the Investors to
pay directly to the creditors the amount due at each maturity date.
The obligations of Algar to consummate its obligations hereunder are
subject to (i) the payment of the Investment Amount; and (iii) the
non-occurrence of a material adverse change, as established in item
(iii) of Section 2.06 above.
Section III
Representations and Warranties of Algar, Xtal and the Company
Algar, Xtal and the Company hereby represent and warrant to the
Investors, as of the date hereof, the following, each of which is
material to and is being relied upon by the Investors:
3.01 Organization and Standing of Xtal and the Company:
a. Xtal and the Company are corporations duly organized, validly
existing and in good standing under the laws of Brazil.
b. Xtal and the Company are duly qualified to do business and are in
good standing in every jurisdiction in which the property owned,
leased or operated by Xtal and the Company, or the nature of the
business conducted by Xtal and the Company, make such
qualification necessary.
3.02 Authorization:
▇. ▇▇▇▇▇, Xtal and the Company have all requisite power, capacity
and authority to execute, deliver and perform this Agreement and
the documents and agreements furnished and delivered hereunder.
b. The execution and delivery of this Agreement and the documents or
agreements furnished and delivered hereunder by Algar, Xtal
and/or the Company and the performance by Algar, Xtal and the
Company of the transactions contemplated herein and therein have
been duly authorized by all necessary action on the part of
Algar, Xtal and the Company, and no further action on the part of
either of Algar, Xtal or the Company is necessary to make this
Agreement and such other documents or agreements valid and
binding on such parties and enforceable against such parties in
accordance with its terms. Algar, Xtal and the Company's
execution, delivery and performance of this Agreement and such
documents, and the consummation of the transactions contemplated
herein and therein, do not, with the passage of time, the giving
of notice or otherwise: (i) result in a violation or breach of
any provision of or constitute a default under the By-laws of
Algar, Xtal or the Company or any subsequent amendments thereto;
(ii) conflict with, violate or result in a breach, acceleration
or termination of any provisions or constitute a default under
any term or provision of any Lien (as such term is defined in
Section 3.08 below), shareholder agreement, indenture, loan
agreement, promissory note, credit agreement, security agreement,
lease, license, deed of trust, order, arbitration, award,
judgment, decree, rule, regulation, law, contract, instrument or
other agreement to which Algar, Xtal and/or the Company is a
party or by which Algar, Xtal and/or the Company is otherwise
subject or bound; and/or (iii) violate or conflict with any other
restrictions of any kind or nature nor result in the creation of
any Lien on the Investors' Shares and/or the assets of Xtal and
the Company, nor the loss of any license or contractual right
with respect to the operation of the business of Xtal and the
Company.
3.03 Capitalization of the Company: The subscribed and paid-in capital of
the Company is R$ 22,276,514.00 (twenty-two million, two hundred and
seventy-six and five hundred and fourteen Reais) divided into the
shares mentioned in the first "whereas" clause above. The subscribed
and paid-in capital of Xtal is R$ 25,668,978.23 (twenty-five million,
six hundred sixty-eight thousand and nine hundred and seventy-eight
Reais and twenty-three cents), divided into the shares mentioned in the
second "whereas" clause above. Algar is the record and beneficial owner
of 22,276,511 registered common shares, all with no par value of
Algar's Shares. The Company is the owner of the totality of Xtal's
shares as mentioned in the "whereas", there are no outstanding
obligations, options, warrants, puts, calls, rights to subscribe,
agreements or other commitments or rights of any kind or nature
whatsoever affecting or related to the shares of Xtal. Xtal has no
obligation of any kind or nature whatsoever to issue any additional
shares or other securities.
There are no other shares of Xtal or the Company, issued or
outstanding. Algar' Shares and the Company's Xtal Shares have been
fully paid, and will be on the Subscription Date owned beneficially and
of record by Algar or the Company, as the case may be, free and clear
of any Liens of any kind or nature whatsoever. On the Subscription Date
and the Closing Date, the Investors' Shares shall be free and clear of
all Liens. There will be on the Closing and on the Subscription Date no
outstanding obligations, options, warrants, puts, calls, rights to
subscribe, agreements or other commitments or rights of any kind or
nature whatsoever affecting or related to the shares of Xtal and the
Company. Xtal and the Company have no obligation of any kind or nature
whatsoever to issue any additional shares or other securities.
3.04 Financial Statements of Xtal and the Company: The Financial Statements
of Xtal as of December 31st, 1999 and of Xtal and the Company as of May
31st, 2000 (the "Closing Balance Sheet") (collectively, "Financial
Statements") are attached as Annex 3.04. The Financial Statements were
prepared in accordance with generally accepted accounting principles
consistently applied, fairly present the financial condition of Xtal
and the Company as of the dates thereof and the results of operations
for the periods then ended, and are true and complete. The books of
account and other financial records of Xtal and of the Company have
been maintained in accordance with sound business practices.
3.05 No Material Adverse Change: Except as set forth on Annex 3.05 hereto,
since December 31, 1999, Xtal and the Company have operated only in the
ordinary course of business consistent with past practices and no
Material Adverse Change in the assets, liabilities, financial
condition, results of operation, business or prospects of Xtal and the
Company have occurred. There has not occurred any event, nor has any
governmental regulation or order become effective, which could cause
such a Material Adverse Change, nor, to Xtal's, the Company's and
Algar's knowledge, is the occurrence or implementation of any such
event, regulation or order threatened.
3.06 Consents and Approvals: Except as listed on Annex 3.06, no consent,
approval or authorization of, or declaration, filing or registration
with, any federal, state, local or other governmental or regulatory
authority or third party (including creditors, suppliers, vendors and
other contractors in general) is required in connection with the
execution and delivery by either of Algar, Xtal or the Company of this
Agreement and the consummation by either of Algar, Xtal or the Company
of the transactions contemplated hereby.
3.07 Title to and Condition of Real and Leased Property:
a. Annex 3.07(a) hereto sets forth all real property owned by Xtal,
including, but not limited to, all buildings, structures,
fixtures and improvements located on or attached thereto, as well
as all rights and/or interests of Xtal arising out of or relating
to the ownership thereof, and all leases, subleases, franchises,
licenses, permits, easements, rights of way, permits, and profits
which are appurtenant or related to such real property or as to
which Xtal otherwise has any right, title or interest
(collectively, "Real Property"). Subject to the qualification set
forth in Annex 3.10(c), Annex 3.07(a) also sets forth copies of
all property ownership deeds, title insurance policies and/or
commitments issued in favor of Algar, Xtal and/or the Company
with respect to the Real Property, a true and complete legal
description of each parcel of the Real Property and all copies of
any maps and drawings of the Real Property. With respect to the
Real Property, Xtal owns title to its Real Property in fee simple
and in full ownership which title shall, on the Closing Date, be
of record, marketable and free and clear of any and all Liens,
leases, tenancies, and all other matters affecting title except:
(i) liens for taxes not yet due and payable; and (ii) the leases
of tenants, if any, identified on Annex 3.07(a). The Real
Property shall, on the Closing Date, be free and clear of any and
all easements under which the Real Property may be a servient
estate as well as all rights of way, encroachments, restrictions,
covenants, recorded or unrecorded, excepting only customary
rights of way and/or easements to public authorities and/or
publicly regulated utility companies as set forth on Annex
3.07(a).
b. With respect to all real property leased by Xtal, including all
leasehold improvements, (collectively, the "Leased Property"),
except as set forth on Annex 3.07(b), (i) all leases are in
writing and are duly executed and, where required, witnessed,
notarized, acknowledged and recorded to make them valid and
binding and in full force and effect for their full term, and
none have been modified, amended, sublet or assigned; (ii) the
rental set forth in each such lease is the actual rental being
paid, and there are no separate agreements or understandings with
respect to the same and (iii) there is no default by Xtal which
affects the Leased Property.
c. Subject to the qualification set forth in Annex 3.10(c), with
respect to the Real Property and the Leased Property, including
all leasehold improvements, except as set forth on Annex 3.07(c),
(i) the Real Property and the Leased Property are occupied under
valid and current certificates of occupancy, governmental
authorizations or the like, and the transactions contemplated by
this Agreement will not require the issuance of any new or
amended certificates of occupancy, governmental authorizations or
the like; (ii) the Real Property and the Leased Property do not
violate, and all improvements are constructed in compliance with,
any applicable federal, state or local statues, laws, ordinances,
regulations, rules, codes, orders or requirements, including
without limitation, any building, land use, zoning, fire or
environmental laws or codes (the "Laws and Ordinances"), and Xtal
has obtained all required licenses, permits, building permits,
occupancy permits and approvals required to own, possess and
operate its Real Property and the Leased Property and conduct its
business as it is presently being conducted; (iii) there are no
outstanding variances or special use permits affecting the Real
Property or the Leased Property or their uses; and (iv) no notice
of a violation of any Laws and Ordinances, or of any covenant,
condition, easement or restriction affecting the Real Property or
the Leased Property or relating to their use or occupancy, has
been given, nor is Xtal, the Company or Algar aware of any such
violation; and (v) the Real Property and the Leased Property have
adequate water supply, storm and sanitary sewage facilities,
telephone, gas, electricity, fire protection, means of ingress
and egress to and from public highways and other required public
utilities
3.08 Intellectual Property:
a. Annex 3.08(a) lists: (i) all Brazilian and foreign (segregated by
country) names, patents, patent applications, inventions, marks,
formulas (patented and unpatented), symbols, trade names,
trademarks, service marks, trade secrets, technical know-how,
methods, operations, copyrights, copyright applications, logos,
franchises, software processes (patented and unpatented) and
process instructions, permits, licenses and sublicenses (and
agreements in respect thereof or applications therefor), patent,
trademark and copyright histories, laboratory notebooks and all
other proprietary rights, documents, information and records,
including, but not limited to, all filings, registrations, or
issuance of any of the foregoing with or by any federal,
provincial, state or local or foreign regulatory, administrative
or governmental office or offices, and all federal, provincial,
state and common law rights protecting such in Brazil and
throughout the world (where applicable), owned by Xtal and/or
used in the operations of the businesses of Xtal ("Proprietary
Rights"); (ii) all licenses and agreements under which Xtal has
given the right to use any of the Proprietary Rights to any third
party; and (iii) all licenses and agreements under which Xtal has
the right to use any third party's similar type of property.
b. Except as provided for in Annex 3.08(b), no proceedings have been
instituted, are pending or, threatened which challenge the
validity of the ownership or use by Xtal of the Proprietary
Rights or any third party's similar type of property.
c. Neither Xtal, nor the Company nor Algar have infringed the use of
any Proprietary Rights or the infringement of any of such
Proprietary Rights by any other person, and Xtal and the Company
own (or possess adequate and enforceable licenses or other rights
to use) all Proprietary Rights now used in the operations of
their business, and neither Xtal, the Company nor either Algar
have received any notice of conflict with the asserted rights of
others with respect to the Proprietary Rights or any third
party's similar type of property.
d. Xtal and the Company are the sole and exclusive owner of all
right, title and interest in and to, or have the right and
authority to use, each of the Proprietary Rights in the manner
presently used, and, subject to obtaining consents of licensors
and licensees, to convey such right, title, interest and
authority free and clear of all Liens.
e. Xtal and the Company possess adequate and enforceable licenses or
other rights to use all other proprietary rights which are used
in and/or which are necessary to conduct the operations of their
business.
f. Xtal and the Company have not given any indemnification against
and/or has agreed to defend claims for infringement with respect
to the Proprietary Rights as to any equipment, materials,
products, services or supplies which the Xtal and the Company
produce, use, license and/or sell.
3.09 Contracts:
a. Annex 3.09(a) sets forth a list of all licenses, contracts,
documents, agreements and other commitments (whether written or
oral) relating to or in any way connected with Xtal's operation
of its business, including a list of all oral and/or written
leases for real and/or personal property with respect to the
same, involving, comprising or relating to an amount (in one
single transaction or in a series of related transactions)
exceeding R$ 50,000.00 (fifty thousand reais) or with a term
longer than 12 (twelve) months or with a undetermined term
(collectively, "Contracts").
b. All Contracts listed on Annex 3.09(a) are valid, subsisting and
enforceable in accordance with their terms and in full force and
effect. Algar and Xtal have provided to Investors a true and
complete copy of all Contracts, with all amendments and
modifications thereto. Neither Algar, Xtal and the Company and no
other party to any of the foregoing have violated or breached any
provision of, nor are Algar, Xtal and the Company or any other
party in default (nor, to the knowledge of the Seller, Xtal and
the Company, is any such default alleged to exist) in any respect
under the terms of, any of the Contracts. To the knowledge of the
Seller, Xtal and the Company, there exists no event or condition
which, with the giving of notice, the lapse of time, or both,
would become a default under any Contracts. Neither Xtal, the
Company nor Algar know of any event, happening, set of
circumstances, threat or fact which would lead any of them to
believe that any party to any of the Contracts will terminate its
contractual relationship with Xtal. Each of the Contracts
identified on Annex 3.09(a) were entered into by the Xtal in the
ordinary course of business and Xtal has not waived, or agreed to
waive, any right or rights under any of the same. None of Xtal's
interests under any of the Contracts are either encumbered or
subject to any term, condition or restriction except as stated in
the applicable Contract or as provided by law.
c. with the exception of what is stated in Annex 3.09(c) attached
hereto, the signature and compliance with this Agreement by the
parties shall not result in early maturity of any obligations
under any material agreement executed by the Xtal, nor shall it
entail Xtal's obligation to comply with such agreements on more
burdensome conditions or less favorable conditions, or the
creation of any lien, doubt, debt, encumbrance and/or charge of
any kind on Xtal's capital stock.
3.10 Compliance with Laws:
a. The Company and Xtal have complied with and are in compliance
with all federal, , state and local laws, statutes, executive
orders, licensing requirements, rules, regulations and judicial
and/or administrative decisions and/or ordinances applicable to
its business, the products manufactured and sold by Xtal and the
Company, the services which Xtal and the Company provide, the
Real Property and assets owned and leased by Xtal and the Company
and/or any combination of such activities. Neither Xtal, the
Company nor Algar have knowledge of any pending or threatened
investigation by any governmental body or agency with regard to
the operations of Xtal's and the Company's businesses.
b. Except as set forth in Annex 3.10(c) and Annex 3.17(a), Xtal and
the Company are and have been: (i) duly licensed, and possess all
franchises, easements, permits, licenses, approvals and other
authorizations (collectively, "Licenses") from all persons and
entities, including all governmental and regulatory authorities
under all applicable federal, state and local laws, that are
necessary to permit it to engage in their business and to own and
operate their assets in all applicable jurisdictions; and (ii) in
compliance with all Licenses. All Licenses are listed on Annex
3.10(b) and are valid, in full force and effect and not subject
to challenge. All reports, informational returns and updates
which Xtal and the Company are required to file under any
federal, state and local law, rule, regulation or order with
regard to the foregoing have been filed in a timely manner and
all fees relating to the same have been paid. Xtal and The
Company have not breached any provision of, are in default in any
respect under the terms of, nor have Xtal and the Company engaged
in any activity which would cause revocation or suspension of any
Licenses. No action, proceeding or investigation contemplating
the revocation or suspension of any License is pending,
threatened or likely to be instituted and neither the Xtal nor
the Company and nor the Algar have knowledge of any reason why
any License would not be renewed.
▇. ▇▇▇▇▇ hereby agrees to obtain all licenses, franchises,
easements, permits, approvals listed in Annex 3.11(c) within 60
(sixty) days from the Closing Date. Algar shall have full control
over, and shall bear all costs associated with, the process of
obtaining such licenses, franchises, easements, permits and
approvals. Algar shall prepare and file all required applications
and shall be the only party authorized to contact any
governmental agency or body responsible for issuing such
licenses, franchises, easements, permits and approvals. In the
event that, in the process of obtaining such licenses,
franchises, easements, permits and approvals, a visit to Xtal's
facilities is required, Algar shall be responsible for scheduling
and arranging such visit, and the visit may only take place in
the presence of a representative of Algar. The Investors, Xtal
and the Company shall fully cooperate with Algar, giving Algar
full access to the relevant documentation, files and records of
Xtal in possession of the Investors or Xtal and the right to
interview directors, officers and employees during any such
process.
3.11 Litigation: Except as set forth on Annex 3.11 hereto, there is no
administrative, governmental or judicial suit, claim, action,
arbitration, proceeding or investigation (whether federal, state or
local) to which Xtal and the Company are parties, pending or
threatened, (i) which could relate to or affect Xtal and the Company or
(ii) against Algar for the purposes of challenging, enjoining or
preventing the execution or delivery of this Agreement, the performance
of the terms and conditions hereof or the consummation of the
transactions contemplated hereby. Neither Xtal, the Company nor Algar
know of any basis upon which any such suit, claim, action, arbitration,
proceeding or investigation could be brought or initiated. Xtal and the
Company are not bound by, subject to or in default under any order,
judgment, award, writ, injunction or other ruling of any court,
administrative or governmental authority. Annex 3.11 indicates which of
the matters listed thereon are covered by valid insurance and the
extent of such coverage.
3.12 No Undisclosed Liabilities: Except as otherwise set forth in this
Agreement or disclosed in any of the Annexes attached hereto (including
the Financial Statements, provided however, that any of the forthcoming
has been duly reflected and provisioned in the Financial Statements),
Xtal and the Company have no liabilities, claims, lawsuits or events
which could be the basis of a claim or lawsuit, loss, damage,
deficiency, indebtedness, responsibility or other obligation of any
nature or kind whatsoever whether known or unknown, fixed or unfixed,
liquidated or not, secured or unsecured, absolute, accrued, contingent
or otherwise and whether due or to become due. Except for instruments
endorsed for collection in the ordinary course of business, Xtal and
the Company are not liable under, a party to or an endorser, guarantor,
surety, co-▇▇▇▇▇▇, co-maker or indemnitor of any contract, agreement,
commitment or obligation of any person, corporation, firm or entity.
3.13 Tax Matters:
a. Except for such Taxes (as such term is defined in item "b" below)
which are listed in Annex 3.13 (a), Xtal and the Company have,
with respect to its operations: (i) timely filed, on or prior to
the Closing Date, all Tax (as such term is defined in item "b"
below) returns, reports, Exhibits, documents and declarations
required to be filed by any jurisdiction to which Xtal and the
Company are or have been subject; (ii) timely paid in full all
Taxes due and all Taxes claimed to be due by in each such
jurisdiction; (iii) made timely withholdings and timely payments
of any Taxes required to be deducted and withheld from the wages
or other amounts paid to employees of Xtal and the Company or to
others on or prior to the Closing Date and (iv) fully accrued in
the Financial Statements all Taxes, for any periods, not yet due.
All Tax Returns, Exhibits and declarations filed by Xtal and the
Company correctly reflect, in all respects, the matters required
to be reported therein including, where appropriate, income,
expenses, deductions, credits, loss carryovers and Taxes due, and
such returns, Exhibits and declarations have not been amended
except as set forth on Annex 3.13(a). Except as listed in Annex
3.13(a), there are no tax judicial or administrative proceedings,
controversies or claims pending or otherwise, that have been
asserted against Xtal and the Company or that Xtal and the
Company have reasonable basis to anticipate will be asserted
against it or which would result in Liens on any of the assets of
Xtal and the Company and/or the Investors' Shares or on
Investors' title to or use of such assets, or that would result
in any claim against Investors, with regard to Taxes.
b. "Tax" and "Taxes" shall mean any and all taxes, charges, fees,
levies or other like assessments (and all related interest and
additions to tax and penalties), including, but not limited to,
income, transfer, gains, gross receipts, excise, inventory,
property (real, personal or intangible), custom duty, sales, use,
license, withholding, payroll, employment, capital participation
and franchise taxes, imposed by Federal, State or Municipal
governments in Brazil or any agency thereof, whether computed on
a unitary, combined or any other basis; and (2) the term "Tax
Return" shall mean any report, return or other information filed
with any taxing authority with respect to Taxes imposed upon or
attributable to Algar, Xtal and/or the Company whether arising
before, after or on the Closing Date.
3.14 Benefit Plans:
a. Annex 3.14(a) sets forth a true and complete list of each and
every: (i) "employee pension benefit plan", "employee welfare
benefit plan" or "multi-employer plan"; (ii) profit sharing,
pension, retirement, deferred compensation, bonus, stock option,
stock purchase, cash or deferral arrangement, severance, health,
welfare, dependent care or incentive plan or agreement; (iii)
written plan or policy providing for "fringe benefits" to its
employees including, but not limited to, vacation, paid holidays,
personal leave, medical, hospitalization, dental, life insurance,
employee discount, educational benefit, automobile, severance or
similar programs; (iv) employment agreement; and (v) consulting
arrangement or agreement with an individual (individually, each
of the foregoing, a "Plan", and collectively the "Plans") to
which Xtal is a party with respect to the employees or individual
consultants working for Xtal's business.
▇. ▇▇▇▇▇ have delivered to Investors a complete list of employees of
Xtal as well as each such employee's date of hire, current
compensation, including salary, bonuses, commissions and other
benefits of any kind and participation in each of the Plans. A
true, correct and complete copy of the employee work book
(Carteira de Trabalho) has been delivered to Investors as well as
a true, correct and complete copy of each written employment
contract and a description of each oral employment agreement with
any employee has been delivered to the Investors. Annex 3.14(b)
sets forth the names of, and current offices held by, the
directors and officers of Xtal.
▇. ▇▇▇▇▇ has furnished Investors with correct and complete copies of
the most current form of each Plan and related trust agreements,
including amendments thereto, as well as copies of the most
current form of all collective bargaining and pension agreements,
summary plan descriptions, summary of material modifications,
employee communications and other informational materials,
handbooks, beneficiary designation forms and communications to
employees.
3.15 Labor Relations:
a. Xtal and the Company are in compliance with each of its
obligations under all statutes, rules, regulations, executive
orders, judgments, orders, decrees and agreements governing its
employment practices and the employment relationships with its
employees.
b. Except as set forth on Annex 3.15(b): (i) Xtal has no collective
bargaining relationship nor are any of Xtal's employees subject
to any such relationship with any labor organization; (ii) no
employees of Xtal are represented by any labor organization or
group, (iii) no employees of Xtal have made a demand to Xtal for
recognition of a labor organization or group or filed a petition
with Xtal demanding such representation nor does Xtal and/or
Algar have knowledge of any employee attempting to organize a
labor organization or group; and (iv) there is no labor strike
pending or threatened and no labor dispute(s) exists between Xtal
and any labor organization or employee of Xtal .
c. Except as set forth on Annex 3.15(c), there are no pending or
threatened administrative or judicial labor litigation and/or
arbitration, related to any employee of Xtal.
d. Except as set forth on Annex 3.15(d), the employment by Xtal of
any person (whether or not there is a written employment
agreement) may be terminated for any reason whatsoever not
inconsistent with current law, without penalty or liability of
any kind other than statutory severance obligations.
3.16 Insurance: Annex 3.16 contains a correct and complete list of all
insurance policies, binders, self-insurance authorizations and bonds in
force in which Xtal is named as an insured party or beneficiary, which
covers the business, properties and assets of Xtal , or for which Xtal
has paid or contributed to the payment of any premiums. The name(s) of
each insurer, insured party and beneficiary and the type and amount of
coverage, deductible amounts, if any, as well as the expiration date(s)
and the premium amount(s) of each such policy or bond are set forth on
Annex 3.16. All such policies and/or bonds are currently in full force
and effect and neither Xtal nor Algar has received any notice of
cancellations with respect to any of the policies. All premiums due and
payable on such policies and/or bonds have been paid. Neither Xtal nor
Algar is a co-insurer under any term of any such insurance policy.
3.17 Environmental:
a. Except as set forth on Annex 3.17(a), Xtal has in full force and
effect all governmental permits, licenses, authorizations or
approvals necessary or required pursuant to and under all
statutes enacted by any federal, state and/or local governments
and authorities of Brazil and under any and all rules,
regulations, ordinances or requirements promulgated thereunder
and any other federal, state and/or local environmental laws
(codified or common law), executive orders, ordinances, rules and
regulations, (including, but not limited to, municipal sewage
authorities) relating to emissions, discharges, dissemination,
spills, leaks, dumping, escapes, releases or threatened release
of any kind of Hazardous Substances and/or Hazardous Wastes (as
such terms are defined in Section 3.17(h) below) into the air,
indoor and outdoor, surface water, ground water, water in pipes,
drains or other conduits, soil, land surface or subsurface,
buildings or facilities, structures above or below ground or
otherwise resulting from manufacturing, processing, distribution,
use, storage, treatment, disposal, transport or handling of
Hazardous Substances and/or Hazardous Waste (hereinafter
collectively referred to as "Environmental Laws"); and all such
permits, licenses, authorizations and approvals are in good
standing, and Xtal has made timely application for renewal of
such permits where necessary. Annex 3.17(a) lists all the
existent permits, authorizations and approvals and all the other
required permits, authorizations and approvals that will be
obtained by Algar, as per section 3.17(h).
b. Xtal and all products manufactured, distributed and/or sold by
Xtal are and have been in compliance with the Environmental Laws
and no proceeding is pending or, to the knowledge of Xtal or of
Algar, threatened to revoke, suspend and/or limit any such
permit, license, authorization or approval.
c. Except as set forth in Annex 3.17 (a) neither Xtal nor Algar have
been notified by any regulatory authority that Xtal was, may be
or is in violation of or has liability or potential liability
under the Environmental Laws.
d. Except as set forth on Annex 3.17(a), Xtal has timely filed and
maintains current all required data, reports, documentation and
records required under the Environmental Laws.
e. Xtal has not received any notification from any environmental
authority with respect or relating to the use of the Xtal's
property, facility, landfill, location or site for the
generation, treatment, storage, handling or disposal of Hazardous
Substances and/or Hazardous Wastes, generated, produced by or
related to its business not in compliance with the Environmental
Laws.
f. Xtal has not received any notification from any environmental
authority challenging Xtal of causing or permitting its assets or
properties to be used to generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce or
process Hazardous Substances and/or Hazardous Wastes not in
compliance with the Environmental Laws and all other applicable
federal, state local statutes, laws, rules and regulations.
g. Except as set forth on Annex 3.17(g), there are no claims,
notices of potential responsibility or violations, demand
letters, requests for information, actions, litigation,
proceedings or investigations (including, without limitation, any
of such which have been initiated by private parties), pending or
threatened, administrative, governmental or judicial, arising out
of, in connection with or resulting from a violation or alleged
violation of, or related to, the Environmental Laws.
h. For the purpose of this Agreement, the terms "Hazardous
Substances" and "Hazardous Wastes" shall include any and all
pollutants, minerals, metals, materials, contaminants, chemical
substances, dangerous substances, hazardous materials, hazardous
substances or hazardous wastes as such terms are defined pursuant
to or within the Environmental Laws, as now in effect.
▇. ▇▇▇▇▇ hereby agrees to obtain all governmental permits, licenses,
authorizations and approvals listed in Annex 3.17(a) within 360
(three hundred and sixty) days from the Closing Date. Algar shall
have full control over, and shall bear all costs associated with,
the process of obtaining such governmental permits, licenses,
authorizations and approvals. Algar shall prepare and file all
required applications and shall be the only party authorized to
contact any governmental agency or body responsible for issuing
such governmental permits, licenses, authorizations and
approvals, into the extent that such is allowed by the respective
governmental authority. In the event that, in the process of
obtaining such governmental permits, licenses, authorizations and
approvals, a visit to Xtal's facilities is required, Algar shall
be responsible for scheduling and arranging such visit, as per
previous agreement with Investors and/or Xtal, and the visit may
only take place in the presence of a representative of Algar, to
the extent that such visit does not adversely impact the process
of obtaining the permits, licenses, authorizations and approvals.
The Investors, Xtal and the Company shall cooperate with Algar
giving Algar full access to the relevant documentation, files and
records of Xtal in possession of the Investors or Xtal and the
right to interview directors, officers and employees during any
such process. In the event that, as a condition for the issuance
of the governmental permits, licenses, authorizations and
approvals listed in Annex 3.17(a), the competent environmental
regulatory authorities require Xtal to implement cleanup
procedures, install anti-pollution equipment or correct disposal
procedures, the costs related to such requirement shall be paid
by Algar.
▇. ▇▇▇▇▇ hereby agrees to provide to Investors and/or Xtal progress
reports every 60 (sixty) days from the Closing Date informing of
the status of the process of obtaining the governmental permits,
licenses, authorizations and approvals listed in Annex 3.17(a),
as well as the process of solving the issues set forth in Annex
3.17(a). In the event Investors and/or Xtal are not satisfied
with such progress, based on technical advice from advisors
acceptable to Algar, Investors and/or Xtal will notify Algar
within 10 (ten)-business days after receiving the report. Then,
Algar shall have 30 (thirty) days to take additional measures
recommended by the technical advisor to accelerate the process of
solving the issues set forth in Annex 3.17(a) or, as the case may
be, to accelerate the process, as recommended by the technical
advisor, of obtaining the permits, licenses, authorizations and
approvals and advise the Investors and/or Xtal of such additional
measures. In the event that Investors and/or Xtal are still not
satisfied with Algar's measures, based on technical advice from
advisors acceptable to Algar, then, Investors and/or Xtal shall
have the right to assume control of the process of solving the
issues and obtaining the appropriate permits, licenses,
authorizations and approvals, and Algar shall then be responsible
for reimbursing the Investors and/or Xtal for reasonable costs
incurred by the Investors and/or Xtal in completing the process.
k. The parties hereby expressly agree to design and install
additional air emission control equipment to meet Brazilian
environmental emissions standards and Algar shall be responsible
for the costs incurred in such design and installation. Algar,
however, will not be required to incur costs for such design and
installation exceeding US$250,000.00 (two hundred fifty thousand
United States dollars). Costs for such design and installation
exceeding US$250,000.00 (two hundred fifty thousand United States
dollars) will be assumed by the Investors and/or Xtal.
3.18 Inventory: On the Closing Date, all items of Xtal's inventories of raw
materials, work in process, finished goods, packaging materials and
supplies, point of sale supplies, brochures, printed materials, signs
and displays, reflected in the Financial Statements or not, shall be
(i) in good condition; (ii) not obsolete and (iii) of a quality usable
and salable in the ordinary course of business.
3.19 Accounts Receivable: Algar has previously delivered to Investors an
aging schedule of Xtal's accounts receivable not more than five (5)
days prior to the date of this Agreement, which is attached as Annex
3.19 and which is true, correct and complete, of the accounts
receivables of Xtal as of that date. All accounts, accounts receivable,
notes, notes receivable, book debts and other debts of Xtal reflected
on the Financial Statements and all such accounts, notes and debts of
Xtal that have arisen since May 31, 2000 (except such accounts
receivable as have been collected since such dates) have arisen from
bona fide transactions in the ordinary course of business, are not
subject to any defenses, set-off or counter-claims and are good and
collectible in the aggregate recorded amounts thereof, less the
allowances for doubtful accounts reflected on the Financial Statements,
which allowances have been established in accordance with generally
accepted accounting principles applied on a basis consistent with that
of preceding periods.
3.20 Bankruptcy: No proceedings, whether voluntary or involuntary, are
pending or, threatened against Algar, Xtal and/or the Company, nor is
Algar, Xtal and/or the Company contemplating any such proceedings,
under the bankruptcy laws and/or receivership or similar laws of Brazil
or of any state.
3.21 Satisfactory Relationships: Xtal's relationships with customers,
vendors, suppliers, employees, governmental authorities, health care
organizations and others with whom Xtal has dealings are satisfactory
and have not suffered any adverse deterioration or threatened adverse
deterioration since December 31, 2000. Neither Xtal nor Algar have
knowledge of any proposed or contemplated termination or other changes
in such satisfactory relationships. Xtal is not required, in the
ordinary course of business, to provide any bonding or any other
financial security arrangements in connection with any transactions
with any customers or suppliers.
3.22 Products and Products' Warranties:
a. The products sold by Xtal conform to and meet or exceed the
standards required by all applicable laws, ordinances and
regulations now in effect and, to Algar's and Xtal's knowledge,
there is no pending legislation, ordinance or regulation which if
adopted or enacted would have a material adverse effect on the
manufacture of such products or Xtal's businesses.
b. Any and all costs or liabilities arising out of or in connection
with products sold by Xtal prior to or on the Closing Date and
returned to Xtal , for any reason whatsoever, shall be solely
borne by Algar.
3.23 Full Disclosure: No representation or warranty of Algar contained in
this Agreement, and no statements contained herein or in any Annex,
agreement, document, instrument or communication furnished to Investors
pursuant hereto, to Algar's, Xtal's or the Company best knowledge,
contains any untrue statement of fact, or omits to state a fact known
to Algar, Xtal or the Company, or which should be reasonably known to
Algar, Xtal or the Company, which is necessary in order to make the
statements contained herein or therein in light of the circumstances
under which they were made not misleading. There is no fact known to
Algar, Xtal or the Company, or which should be reasonably known to
Algar, Xtal or the Company, which is not disclosed herein which could
adversely affect the operations, properties or financial condition of
Xtal.
3.24 Agreements with related parties: Algar hereby represents and warrants
that on the Closing Date, there are no agreements, whether reduced to
written form or not, with any related party of Algar, Xtal or of the
Company, which includes, but are not limited to, relatives, affiliates,
subsidiaries, managers, employees and agents related, directly or
indirectly, to Algar, Xtal or the Company.
3.25 Implementation Costs: Algar hereby represents and warrants that any and
all Taxes, arising out of or, in any manner, connected with the
implementation of the transaction described in Sections I and II above,
shall be solely born by Algar, who shall hold Investors, Xtal and the
Company harmless from and against any and all liabilities in connection
with such implementation.
3.26 Guarantees to third parties: Except as may be listed on Annex 3.26,
Algar hereby represents and warrants that, until or on the Closing
Date, Xtal did not grant, for any reason, any kind of guarantee (i.e.
aval, surety bonds, pledges, mortgages, etc.) to any third party
whatsoever. With regard to the guarantees duly disclosed in Annex 3.26,
Algar hereby undertake to offer other guarantees in replacement for
those duly disclosed in Annex 3.26, within two (2) days as of the
Closing Date.
Section IV
Representations and Warranties of the Investors
The Investors hereby jointly and severally represent and warrant to
Algar, Xtal and the Company the following, each of which is material to
and is being relied upon by Algar, Xtal and the Company:
4.01 Organization, Good Standing and Authority of Investors: Each of the
Investors is a company duly organized, validly existing and in good
standing under the laws of the jurisdiction of their incorporation and
have full corporate power and authority to execute and deliver this
Agreement and to perform their obligations hereunder. The execution,
delivery and performance of this Agreement have been authorized by each
of the Investors and, which authorization constitutes all necessary
corporate action on the part of such Investor to execute, deliver and
perform this Agreement. This Agreement, and all documents required to
be executed and delivered by each of the Investors hereunder,
constitute or will constitute, legal, valid and binding obligations of
such Investor enforceable in accordance with their terms.
4.02 No Conflict: Neither the execution and delivery of this Agreement and
all documents required to be executed and delivered by the Investors
hereunder, nor the Investors' performance of the transactions
contemplated herein will (i) result in a violation or breach of any
provision of or constitute a default under the By-laws, charter or
other constitutive documents of any of the Investors or any subsequent
amendments thereto; (ii) conflict with, violate or result in a breach,
acceleration or termination of any provisions or constitute a default
under any term or provision of any Lien, shareholder agreement,
indenture, loan agreement, promissory note, credit agreement, security
agreement, lease, license, deed of trust, order, arbitration, award,
judgment, decree, rule, regulation, law, contract, instrument or other
agreement to which any of the Investors is a party or by which any of
the Investors is otherwise subject or bound; and/or (iii) violate or
conflict with any law, rule, regulation, decree or order, judicial or
otherwise, to which any of the Investors is subject or bound.
4.03 Compliance with Laws: The Investors have complied with and are in
compliance with all federal, state and local laws, statutes, executive
orders, licensing requirements, rules, regulations and judicial and/or
administrative decisions and/or ordinances applicable to its business,
the products manufactured and sold by the Investors, the services which
the Investors provide, the assets owned and leased by the Investors
and/or any combination of such activities. None of the Investors has
knowledge of any pending or threatened investigation by any
governmental body or agency with regard to the operations of the
Investors' businesses.
4.04 Litigation: There is no administrative, governmental or judicial suit,
claim, action, arbitration, proceeding or investigation (whether
federal, state or local) to which the Investors are parties, pending or
threatened, (i) which could relate to or affect the Investors or (ii)
against the Investors for the purposes of challenging, enjoining or
preventing the execution or delivery of this Agreement, the performance
of the terms and conditions hereof or the consummation of the
transactions contemplated hereby. None of the Investors knows of any
basis upon which any such suit, claim, action, arbitration, proceeding
or investigation could be brought or initiated. The Investors are not
bound by, subject to or in default under any order, judgment, award,
writ, injunction or other ruling of any court, administrative or
governmental authority.
4.05 Bankruptcy: No proceedings, whether voluntary or involuntary, are
pending or, , threatened against any of the Investors, nor are the
Investors contemplating any such proceedings, under the bankruptcy laws
and/or receivership or similar laws of their jurisdiction of
incorporation.
Section V
Indemnification by Algar; Survival Period
5.01 Algar' Indemnification Obligations: Algar hereby irrevocably and
unconditionally agrees to indemnify and hold the Investors, Xtal and/or
the Company (as the case may be) harmless from and against any and all
loss, damage or costs, including lost profits, associated with or
arising from:
a. any misrepresentation or breach of warranty or non-fulfillment of
or failure to perform any covenant or agreement contained in this
Agreement or in each Annex or Exhibit attached hereto;
b. the value of any asset(s) which is (are) accounted as an asset of
Xtal on the Closing Date and which are missing or are not located
by the Investors within 30 days after the Closing Date;
c. any costs or liabilities, including lost profits, disclosed or
undisclosed arising from acts, facts, conditions or omissions
which existed at or occurred on or before the Closing Date and
which have not been recorded in the Closing Balance Sheet or,
provided that, in the event that provisions have been made in the
Closing Balance Sheet in respect to such costs or liabilities,
the obligations of the Seller under this Section 5.01 shall be
limited to the amount of such cost or liability in excess of any
related provision.
5.02 Tax and Labor Indemnification Obligations: Any and all liabilities or
contingencies arising out of or in connection with any Tax or Labor
matters for acts, facts or omissions which existed at or occurred on or
before the Closing Date, not properly recorded and duly provisioned for
by Xtal until the Closing Date, disclosed or not to Investors, shall be
solely borne by Algar, which shall hold Investors, Xtal and/or the
Company harmless from and against any and all loss, damage or costs
related thereto, provided that, in the event that provisions have been
made in the Closing Balance Sheet in respect to such contingencies or
liabilities, the obligations of the Seller under this Section 5.02
shall be limited to the amount of such contingency or liability in
excess of any related provision.
5.03 Environmental Indemnification Obligations: Any and all liabilities or
contingencies arising out of or in connection with any Environmental
matters including but not limited to the existence of soil and/or water
contamination (surface or underground) in the property, for acts,
facts, conditions or omissions which existed at or occurred on or
before the Closing Date, disclosed or not to Investors, shall be solely
borne by Algar, which shall hold Investors, Xtal and/or the Company
harmless from and against any and all loss, damage, expenses,
penalties, indemnity payments or costs related thereto, including costs
of remediation and/or mitigation. For such purpose Investors and/or
Xtal commit to inform Algar within 10 (ten) business days about any
event that Investors believes would give rise to Algar's
Indemnification Obligations. Should Investors become a party in any
judicial or administrative suit regarding occasional environmental
liability existing in the property, Algar shall present the due defense
replacing Investors. Algar will be entirely responsible for all costs,
expenses and fees resulting from such suit. In the event that there is
imminent risk that Investors' and/or Xtal's operations will be
suspended, Investors and/or Xtal may, at their own discretion, take all
the applicable measures to avoid such fact, paying penalties and
celebrating settlements or commitment terms. Algar shall integrally
reimburse Investors and/or Xtal for the expended amounts, including
costs and expenses, regarding the measures adopted by Investors and/or
Xtal.
5.04 Indemnification Mechanisms: Algar' indemnification obligations under
this Section 5 ("Algar' Indemnification Obligations") are subject to
the following procedures:
a. In the event that the Investors, Xtal or the Company become aware
of any event that they believe would give rise to Algar'
Indemnification Obligations under this Section 5 (the "Claim"),
the Investors shall within fifteen (15) business days, notify
Algar, who shall have the right to defend, at their expense, all
such Claims. In such case, Investors, Xtal and the Company shall
fully cooperate with Algar giving Algar full access to the
relevant documentation, files and records of Xtal in possession
of Investors or Xtal and the right to interview directors,
officers and employees. It is expressly agreed and understood
that in the event of a third party claim Investors, Xtal or the
Company shall in no circumstance be required to defend Algar,
should Algar fail to do so. Notwithstanding the foregoing, in the
event of a third party claim, Algar shall, at all times and for
so long as the defense proceedings may last, keep Investors, Xtal
or the Company abreast on the developments of such defense,
providing Investors, Xtal and the Company, at the Investors',
Xtal's or the Company' request, with any and all information and
writings filed by Algar with the relevant court. Notwithstanding
the foregoing, in the event that the Claim is related to the
value of any asset(s) which is (are) accounted as an asset of
Xtal and/or the Company on the Closing Date and which are missing
or are not located by the Investors after the Closing Date, Algar
shall within fifteen (15) Business Days from receipt of the
Investors'notice reimburse the Investors for such value or
deliver a defense to Investors in respect of the Claim.
b. Defense by Algar against any Claim shall be made through such
attorneys as Algar may then indicate, provided that such
attorneys in the case of third party claims shall be reasonably
satisfactory to Investors, Xtal and the Company and Algar shall
bear any and all relevant attorneys' fees and all other related
costs and expenses. Any judicial deposit bonds or other
guarantees which may be necessary, or required by the relevant
court or governmental authority for the implementation of the
defense shall be provided by Algar. Should a favorable decision
be obtained, any such guarantees shall revert to the benefit of
Algar, as determined by the final decision in the defense
proceedings. Failure by Algar to assume the defense of any Claim
within 30 (thirty)-business days or within the applicable legal
period entitles the Investors or Xtal or the Company to
immediately claim indemnification from Algar under the provisions
of this Section.
c. To the extent that Algar' defense of any claim proves
unsuccessful, after all available rights of appeal have been
exhausted, the Algar shall pay the claim directly to the claimant
and provide to Investors or Xtal evidence of such payment or, as
the case may be, shall pay directly to Investors or Xtal the
amount of the claim. .
d. Notwithstanding the foregoing, the Investors or Xtal or the
Company will be entitled to mandate settlement by Algar of the
underlying obligation in lieu of recognizing Algar' right to
defend, should the Investors, after consultation with Algar and
based on legal advise from Tozzini, Freire or a counsel
acceptable to Algar, in good faith determine that defense by
Algar will prevent Xtal or the Company from continuing to do
business or operate an essential part of its activities; provided
that advisors for both Algar and the Investors determine that no
action can be taken to eliminate such effects to Xtal or the
Company. In such case, the Investors shall notify Algar in
writing indicating the disadvantageous impact of a defense over
the business and operations of Xtal or the Company.
e. It is hereby expressly agreed by the Investors and Algar that any
indemnity payments by Algar to the Investors or to Xtal or the
Company pursuant to this Section shall be made free and clear of
any penalties, costs, expenses and legal fees, which amounts
shall be borne by Algar.
f. In the event that provisions have been made in the Closing
Balance Sheet in respect of any of Algar's Indemnification
Obligations under this Section 5, and after the execution of the
procedures set forth herein, Algar is required to indemnify the
Investors, Xtal and/or the Company, the Investors, on a joint and
several basis, shall (i) reimburse to Algar the full amount of
such provision if the related indemnification is paid directly to
the claimant by Algar or (ii) reimburse to Algar the amount, if
any, by which the provision exceeds the related indemnification
if such indemnification is paid by Algar to the Investors, Xtal
and/or the Company.
g. Any amounts which fail to be paid by Algar as required by the
provisions of this Section on the date such amounts have to be
paid shall be subject to (i) indexation on the basis of the
Indice Geral de Precos - ▇▇▇▇▇▇▇-IGPM as disclosed by Fundacao
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (in accordance with the applicable legislation
then in force), and (ii) default interest at the rate of one
percent (1%) per month.
5.0.5 Pledge of Shares: In addition to the representations, warranties and
covenants described herein, Algar shall pledge to the Investors all of
the Company's shares that it continues to hold to this date, being
obliged to execute all the documents necessary for its enforcement,
including, but not limited to, any required registration in the
Company's appropriate corporate books.
5.06 Survival: Notwithstanding any investigation conducted or notice or
knowledge obtained by or on behalf of any party hereto, the
representations, warranties, agreements and obligations contained in
this Agreement, any Annex hereto or in any certificate delivered
thereunder shall survive the Closing Date for a period corresponding to
the applicable statute of limitations, which in any case should not
exceed for a term longer than five (5) years from the date hereof, with
the sole exception of environmental liabilities, liabilities relating
to real estate, income tax, social security and "Fundo de Garantia de
Tempo de Servico - FGTS" which will subsist for a period corresponding
to the applicable statute of limitations or ten (10) years, whichever
is greater.
Section VI
Miscellaneous
6.01 Notices: Any notices, requests, claims, demands, instructions and other
communications to be given hereunder to any party shall be in writing
and delivered in person, sent by certified mail, postage prepaid,
return receipt requested, or by facsimile transmission with a confirmed
telephonic transmission answer back, to the following addresses (or at
such other address or number as is given in writing by other party to
the other pursuant hereto):
If to FCI: FiberCore, Inc.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, U.S.A
Att: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇
If to FCI Brazil: FiberCore Ltda.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇, 19th floor
CEP 01095-900
Sao Paulo - SP
Brazil
Att: ▇▇▇▇▇▇ ▇. do ▇▇▇▇▇
If to Algar: ▇▇▇▇▇ ▇.▇. - Empreendimentos e Participacoes
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Att: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
If to Xtal: Xtal Fibras Opticas S.A.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ - Sala ▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Att: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇
If to Company: Mamore Participacoes S.A.
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇, cj. ▇▇, ▇▇▇▇ ▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Att: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇
6.02 Amendments: This Agreement may be amended only upon the mutual written
consent of the Parties hereto.
6.03 Entire Agreement: This Agreement, including the Annexes and Exhibits
hereto, constitutes the entire agreement between the Parties with
respect to the subject matter hereof and supersedes all prior
agreements and understandings between the parties. There are no
representations, warranties, undertakings or agreements between the
parties with respect to the subject matter of this Agreement except as
set forth herein.
6.04 Non-Competition: Algar agrees that until the third anniversary of the
Closing Date, neither they nor any of their relatives, affiliates,
subsidiaries or managers shall knowingly or intentionally engage or, in
any manner, participate, directly or indirectly, in the type business
conducted by Xtal or the Company, in any manner except on behalf of
Investor.
6.05 Non-Assignability: None of the parties hereto may assign its rights,
interests, obligations or liabilities under this Agreement or delegate
its duties without the prior written consent of the other party. This
Agreement and all of the provisions and Annexes hereof shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
6.06 Further Assurances: Consistent with the terms and conditions hereof,
each party hereto shall do and perform or cause to be done and
performed all such further acts and things and shall execute and
deliver all such other instruments, certificates, and other documents
as any other party hereto may reasonably require in order to carry out
the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
6.07 Third Party Beneficiaries: Except as specifically set forth or referred
to herein, nothing expressed or implied is intended or shall be
construed to confer upon any person, other than the parties hereto and
their successors and permitted assigns, any rights or remedies under or
by reason of this Agreement.
6.08 Headings: The headings contained in this Agreement are for convenience
of reference only and shall not affect the interpretation of this
Agreement.
6.09 Choice of Law: This Agreement shall be governed by, and construed in
accordance with, the laws of Brazil.
6.10 Dispute Resolution: Any controversy or claim arising out of or relating
to this Agreement, the agreements or instruments executed and delivered
in connection herewith, and the transactions contemplated hereby, or
the breach of any of the foregoing, shall be settled by arbitration.
The arbitration shall be conducted in accordance with the American
Arbitration Association ("AAA)" Rules, except as they may be modified
herein or by mutual agreement of the parties. The seat of the
arbitration shall be in the City of Sao Paulo, Brazil, and it shall be
conducted in Portuguese. The arbitration shall be conducted by three
arbitrators. The claimant shall appoint an arbitrator in its "Request
for Arbitration", and the respondent shall appoint an arbitrator in its
"Answer". If either party fails so to appoint its arbitrator, then that
arbitrator for such party shall be appointed by the AAA. The first two
arbitrators appointed in accordance with this provision shall appoint a
third arbitrator (i) within 30 days after the respondent has notified
claimant of the appointment of the respondent's arbitrator, or (ii) in
the event of a failure by either party to appoint an arbitrator, within
30 days after the AAA has notified the parties and any arbitrator
already appointed of the appointment of an arbitrator on behalf of the
party failing to appoint its arbitrator. If the first two arbitrators
appointed fail to appoint a third arbitrator within the time period
prescribed above, then the AAA shall appoint the third arbitrator. The
third arbitrator shall act as a chairperson of the tribunal. The
parties agree that either party may need to obtain interim injunctive
relief from a court. Therefore, a request for interim injunctive relief
by a party to a court, either before or after the arbitration
proceedings have been initiated in accordance with the AAA Rules, shall
not be deemed incompatible with, or a waiver of, any provisions of this
section. For such purpose, the parties elect the courts sitting in the
City of Sao Paulo, State of Sao Paulo, excluding any other, however
privileged it may be. In addition to the authority conferred in the
arbitration tribunal by the AAA Rules, the arbitration tribunal shall
have the authority to make such orders for interim relief, including
injunctive relief, as it may be deemed just and equitable. The
arbitration award shall be in writing, state the reasons for the award,
be final and binding on the parties, and be enforceable in accordance
with its terms. The parties agree that the award is to be considered as
a settlement of any dispute hereunder between them and shall accept it
as the true expression of their own determination in connection
therewith. The arbitration tribunal may award any relief available and
appropriate under the Law governing this Agreement, including specific
performance. The award may include an award of costs, including
reasonable attorney's fees and disbursements. Judgment upon the award
may be entered by any court having jurisdiction thereof or having
jurisdiction over the relevant party or its assets. The parties agree
and covenant not to use the arbitration procedure set forth herein if
on the date on which a dispute arises hereunder, the applicable laws
and the Brazilian prevailing case-law allow Brazilian courts to
reexamine the merits of a decision handed out by means of arbitration.
In this case, the disputes shall be settled by the courts sitting in
the City of Sao Paulo, State of Sao Paulo, Brazil.
6.11 Severability: In the event any term or provision of this Agreement
shall be deemed to be illegal, invalid or unenforceable for any reason,
such illegality, invalidity or unenforceability will not affect any
other term or provision of this Agreement and the parties shall
endeavor to replace the invalid or null and void provision(s) with such
which correspond best to the intentions of the parties hereto.
In witness whereof, the Parties have executed this Agreement in [five (5)]
counterparts of same tenor and content, on the date and in the place herein
before stated, in the presence of the two undersigned witnesses.
-----------------------------------
FiberCore, Inc.
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President - Chief Executive
Officer
-----------------------------------
▇▇▇▇▇ ▇.▇.
By: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Costa
Title: Chief Executive Officer
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
Title: Attorney-in-fact
-----------------------------------
Xtal Fibras Opticas S.A.
By: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Costa
Title: President
By: Antonio ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
-----------------------------------
Mamore Participacoes S.A.
By: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Costa
Title: Attorney-in-fact
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
Title: Attorney-in-fact
Witnesses:
1.
-----------------------------------
Name: Giseli ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇: 16.978.964
CPF: ▇▇▇.▇▇▇.▇▇▇-▇▇
2.
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mari
RG: 8.690.203
CPF: ▇▇▇.▇▇▇.▇▇▇-▇▇