Document:

Exhibit 10.1

 

Annex

 

PROJECT SAINT

 

SALE AND PURCHASE AGREEMENT REGARDING THE 
 ENTIRE SHARE CAPITAL OF

 

CERAMTEC GMBH

CERAMTEC NORTH AMERICA CORPORATION

PST PRESS + SINTERTECHNIK SP. Z O.O.

AND

PRESS AND SINTER TECHNICS DE MEXICO, S.A. DE C.V.

 

 

TABLE OF CONTENTS

 

	
PREAMBLE
    	
4
    
	
 
    	
 
    	
 
    
	
1.
    	
DEFINITIONS
    	
6
    
	
 
    	
 
    	
 
    
	
2.
    	
SALE AND ASSIGNMENT; TRANSFER OF SHARES
    	
11
    
	
 
    	
 
    	
 
    
	
3.
    	
PURCHASE PRICE / PURCHASE PRICE ADJUSTMENT
    	
13
    
	
 
    	
 
    	
 
    
	
4.
    	
DETERMINATION OF FINAL PURCHASE PRICE
    	
16
    
	
 
    	
 
    	
 
    
	
5.
    	
SELLERS’ REPRESENTATIONS AND WARRANTIES
    	
18
    
	
 
    	
 
    	
 
    
	
6.
    	
INDEMNIFICATION BY SELLERS
    	
26
    
	
 
    	
 
    	
 
    
	
7.
    	
PURCHASER’S REPRESENTATIONS AND WARRANTIES
    	
34
    
	
 
    	
 
    	
 
    
	
8.
    	
INDEMNIFICATION BY PURCHASER
    	
36
    
	
 
    	
 
    	
 
    
	
9.
    	
COVENANTS
    	
36
    
	
 
    	
 
    	
 
    
	
10.
    	
NON-COMPETE COVENANT
    	
48
    
	
 
    	
 
    	
 
    
	
11.
    	
TAX MATTERS
    	
49
    
	
 
    	
 
    	
 
    
	
12.
    	
RESCISSION
    	
59
    
	
 
    	
 
    	
 
    
	
13.
    	
CONFIDENTIALITY
    	
60
    
	
 
    	
 
    	
 
    
	
14.
    	
PURCHASER NOMINEE
    	
61
    
	
 
    	
 
    	
 
    
	
15.
    	
MISCELLANEOUS
    	
61
    
	
 
    	
 
    	
 
    
	
TABLE OF EXHIBITS AND   SCHEDULES
    	
66
    

 

2

 

SALE AND PURCHASE AGREEMENT

 

between

 

1.                                      Rockwood Specialties Group GmbH with registered business address at Königsberger Str. 1, 60487 Frankfurt am Main, Germany, registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main under HRB 57924

 

(hereinafter referred to as “RSGG”)

 

2.                                      RSGG GmbH& Co. KG with registered business address at Königsberger Str. 1, 60487 Frankfurt am Main, Germany, registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main under HRA 47508

 

(hereinafter referred to as “RSKG”)

 

3.                                      Rockwood Specialties Group, Inc. with registered business address at 100 Overlook Center, Princeton NJ, 08540, USA, registered under registration no. 3304314

 

(hereinafter referred to as “RSGI”)

 

4.                                      Knight Lux 2 S.à r.l. with registered business address at 61, Rue de Rollingergrund,2440 Luxembourg, Grand Duchy of Luxembourg, registered with the Luxembourg Register of Commerce and Companies under B 100.494

 

(hereinafter referred to as “KL 2”)

 

(RSKG, RSGI and KL 2 hereinafter also referred to individually as “Seller” and collectively as “Sellers”)

 

and

 

5.                                      Dido Achte Vermögensverwaltungs-GmbH (in the process of being renamed Faenza Acquisition GmbH), with registered business address at Mainzer Landstraße 46, 60325 Frankfurt am Main, Germany, and registered in Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main under HRB 96693

 

(hereinafter referred to as “Purchaser”)

 

(RSGG, Sellers and Purchaser hereinafter referred to collectively as “Parties” and individually as a “Party”).

 

3

 

PREAMBLE

 

(A)                               RSKG is the sole shareholder of CeramTec GmbH, a German limited liability company with its business address at CeramTec-Platz 1-9, 73207 Plochingen and registered in the commercial register of the local court of Stuttgart under HRB 734826 (“CeramTec”). The total share capital of CeramTec amounts to EUR 30,000,000 (thirty million Euros), consisting of 600,000 shares in the nominal amount of EUR 50.00 each (together the “CeramTecShares”).

 

(B)                               RSGI is the sole shareholder of CeramTec North America Corporation, a stock corporation under the laws of Delaware, with its business address at One Technology Place, Highway 14, Laurens, SC 29360, U.S.A. and filed with the Division of Corporations of the State of Delaware under no. 2243538 (“CeramTec NA”). The total share capital of CeramTec NA amounts to USD 10,000 (ten thousand U.S. Dollars), consisting of 100 shares in the nominal amount of USD 100.00 each (together the “CeramTec NA Shares”).

 

(C)                               KL 2 is the sole shareholder of PST Press + Sintertechnik Sp.z o.o., a limited liability company under the laws of Poland, with its business address at Odlewników 52 Street, 39-432 Gorzyce and registered in the National Court Register kept by the District Court for Rzeszów, XII Commercial Division of the National Court Register, under registration number 0000264791 (“PST Poland”). The total share capital of PST Poland amounts to PLN 50,000 (fifty thousand Polish Złoty), consisting of 100 shares in the nominal amount of PLN 500 each (together the “PST Poland Shares”).

 

(D)                               RSGG and KL 2 are currently the sole shareholders of Press and Sinter Technics de Mexico, S.A. de C.V., a sociedad anónima de capital variable with business address at Resurección oriente 10, Puebla, Mexico and registered in the Public Registry of Commerce of Puebla under no. 39515*2 (“PST Mexico”). The total share capital of PST Mexico amounts to MXN$ 7,848,501.00, consisting of 7,848,501 shares in the nominal amount of MXN$ 1.00 each. RSGG owns one share in PST Mexico (equalling approx. 0.000013% of the share capital) and KL 2 owns 7,848,500 PST Mexico Shares (approx. 99.999987% of the share capital, the shares owned by KL 2 the “PST Mexico Shares”). RSGG will transfer its shares in PST Mexico to RSKG prior to the Closing Date.

 

(E)                                RSGI and KL 2 (but no other Seller or Seller’s Affiliate that is not a Group Company) have granted certain loans to the Group Companies, all of which are set out and defined in Schedule (E) (nos. 1 to 6) and the resulting repayment receivables (unpaid principal and accrued but unpaid interest) of RSGI and KL2 collectively the “Loans”).

 

4

 

(F)                                 The Sellers intend to sell and transfer all of their CeramTec Shares, CeramTec NA Shares, PST Poland Shares and shares in PST Mexico (collectively the “Shares”) and the Loans and, having carried out a comprehensive due diligence review of CeramTec, CeramTec NA, PST Poland and PST Mexico (the “Companies”) and their respective Subsidiaries, the Purchaser intends to acquire all such Shares and Loans pursuant to the terms and conditions set out in this agreement (the “Agreement”).

 

5

 

1.                                     DEFINITIONS

 

“Accounting Firm”shall have the meaning set forth in Clause 4.4.1;

 

“Accounting Principles” shall have the meaning set forth in Clause 5.3.1;

 

“Affiliates” shall mean any entity controlled by, or controlling, or under the common control of another entity or person or group of persons (in each case, including indirect control, regardless of whether or not linked through any participation), and the term “control” shall have the meaning set forth in Section 15 Stock Corporation Act and Sections 290 (2) and (3) of the Commercial Code, it being understood that in relation to the Purchaser only, other portfolio companies of the funds indirectly investingin it or of funds under common management with those funds shall be deemed not to be an Affiliate of Purchaser;

 

“Agreement”shall have the meaning set forth in Preamble (F);

 

“AktG” shall mean the German Stock Corporation Act (Aktiengesetz);

 

“Balancing Payment” shall have the meaning set forth in Clause 4.5;

 

“Bank Financing” shall have the meaning set forth in Clause 9.7.2; 

 

“BGB” shall mean the German Civil Code (Bürgerliches Gesetzbuch); 

 

“Breach” shall have the meaning set forth in Clause6.1.1;

 

“Business Day” shall mean any day other than a Saturday, Sunday or public holiday in New York, London or Frankfurt am Main on which the banks in New York, London, and Frankfurt am Main are open to transact normal commercial business;

 

“Cash” shall have the meaning set forth in Clause 3.1.2(a);

 

“Cash Pool Agreements”shall have the meaning set forth in Clause9.4.1;

 

“CeramTec” shall have the meaning set forth in the Preamble (A);

 

“CeramTec Malaysia” means CeramTec Innovative Ceramik Engineering (M) Sdn. Bhd;

 

“CeramTec Shares” shall have the meaning set forth in the Preamble (A);

 

“CeramTec NA” shall have the meaning set forth set forth in Preamble (B);

 

“CeramTec NA Shares” shall have the meaning set forth in Preamble (B);

 

“CeramTec Profit Pooling Accounts” shall have the meaning set forth in Clause 9.3.1;

 

“CeramTec Suzhou” means CeramTec Suzhou Ltd.;

 

“Cerasiv” means Cerasiv GmbH Innovatives Keramik-Engineering;

 

6

 

“Claim Addressee” shall have the meaning set forth in Clause 6.10; 

 

“Closing” shall have the meaning set forth in Clause 3.3; 

 

“Closing Date” shall have the meaning set forth in Clause 3.3;

 

“Closing Financial Statements” shall have the meaning set forth in Clause 4.1;

 

“Closing Memorandum” shall have the meaning set forth in Clause 3.6;

 

“Code” means the Internal Revenue Code of 1986, as amended;

 

“Combined Financial Statements and MD&A” shall have the meaning set forth in Clause 5.3.1;

 

“Companies” shall have the meaning set forth in Preamble (F);

 

“Competition” shall have the meaning set forth in Clause 10.1;

 

“Conditions Precedent” shall have the meaning set forth in Clause 2.3;

 

“Continuing U.S. Employee” shall have the meaning set forth in Clause 9.9.1;

 

“Controlled VAT Members” shall have the meaning set forth in Clause 11.4.1;

 

“Data Room” means

 

(a)                                the virtual data room “Saint” hosted by Merrill Corporation, which was prepared by the Group and was available to Purchaser from May 6, 2013 to June 11, 2013, 24:00 h CEST;

 

(b)                                the physical data room made available at the offices of Willkie Farr & Gallagher LLP, Frankfurt am Main, and its contents as made available to the Purchaser on May 16, 2013 (part 1) and on May 31, 2013 (part 2).

 

“Deferred Purchase Price Amount”shall have the meaning set forth in Clause 3.4.1;

 

“Disclosed Information” shall mean

 

(a)                                this Agreement and all of its schedules and exhibits;

 

(b)                                any information contained in the Data Room including any answers provided through the Q&A process; as well as

 

(c)                                 any document, written information, including e-mails, and all other information that was made available to Purchaser, any of its Affiliates, or each of Purchaser’s or its Affiliates’ directors, officers, employees, advisors, experts, bankers or financing sources or any other representatives in relation to the transaction contemplated by this Agreement; as well as

 

7

 

(d)                                any information previously known to the Purchaser;

 

“Dispute Notice” shall have the meaning set forth in Clause 4.2;

 

“Enterprise Agreements” shall have the meaning set forth in Clause 5.2.7;

 

“Enterprise Value” shall have the meaning set forth in Clause 3.1.1;

 

“Environmental Contamination” shall have the meaning set forth in Clause 5.9.2;

 

“Equity Syndication” shall have the meaning set forth in Clause 9.7.2;

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended;

 

“Escrow Account” shall have the meaning set forth in Clause 3.4.1;

 

“Financial Indebtedness” shall have the meaning set forth in Clause 3.1.2(b);

 

“Financing” shall have the meaning set forth in Clause9.7.2; 

 

“Group” shall mean the Companies and their Subsidiaries as of the Signing Date;

 

“Group Company” shall refer to any member of the Group;

 

“Hazardous Materials” shall have the meaning set forth in Clause 5.9.2;

 

“High Yield Financing” shall have the meaning set forth in Clause 9.7.2; 

 

“HGB” shall mean the German Commercial Code (Handelsgesetzbuch);

 

“Intellectual Property Rights” are all rights arising from or acquired through registration, disclosure or use (including patents, utility models, design rights, trademarks and business name rights), rights to inventions, know-how, copyrights as well as internet domains excluding rights to software and data bases;

 

“KL 2” shall have the meaning set forth in the introduction;

 

“KL 2 Loan” shall have the meaning set forth in Schedule (E);

 

“Loans” shall have the meaning set forth in Preamble (E);

 

“Long Stop Date” shall have the meaning set forth in Clause 12.1.1;

 

“Losses” shall have the meaning set forth in Clause 6.2;

 

“Material Company” shall have the meaning set forth in Clause 5.7.2;

 

“Material IP” shall be such Intellectual Property Rights that are material to the business of any Group Company using or relying on such Intellectual Property Rights. For the avoidance of doubt, the combined (taken as a whole) Intellectual Property Rights underlying the DeltaMotion and Biolox products shall constitute Material IP;

 

“Net Working Capital” shall have the meaning set forth in Clause 3.1.2(c);

 

“P&L Agreement” shall have the meaning set forth in Clause 5.2.7;

 

8

 

“Party” or “Parties” shall have the meaning set forth in the introduction;

 

“Preliminary Purchase Price” shall have the meaning set forth in Clause 3.2;

 

“PST Mexico” shall have the meaning set forth in Preamble (D);

 

“PST Mexico Shares” shall have the meaning set forth in Preamble (D);

 

“PST Poland” shall have the meaning set forth in Preamble (C);

 

“PST Poland Shares” shall have the meaning set forth in Preamble (C);

 

“Purchase Price” shall have the meaning set forth in Clause 3.1;

 

“Purchaser” shall have the meaning set forth in the introduction;

 

“Purchaser’s Claim” shall have the meaning set forth in Clause 6.3;

 

“Purchaser’s Knowledge”shall have the meaning set forth in Clause 6.3.1;

 

“Purchaser Nominee” shall mean such one or more entities, irrespective of its or their corporate form or jurisdiction of incorporation, controlled by or under common control with the Purchaser which may be notified to the Sellers by the Purchaser without undue delay but no later than five (5) Business Days prior to the Closing Date to acquire all or any of the PST Poland Shares, the PST Mexico Shares and/or the CeramTec NA Shares, as may be specified in such notification; 

 

“Qualified Plan”shall have the meaning set forth in Clause 5.7.7;

 

“Reference Net Working Capital” shall have the meaning set forth in Clause 3.1.2(c);

 

“Regulatory Clearances” shall have the meaning set forth in Clause 2.4.1;

 

“Relevant Principles” shall have the meaning set forth in Clause 11.7.1;

 

“Relevant Tax Matter” shall have the meaning set forth in Clause 11.7.3;

 

“RSGG” shall have the meaning set forth in the introduction;

 

“RSGG Loan 1”shall have the meaning as defined in Schedule (E);

 

“RSGG Loan 2”shall have the meaning as defined in Schedule (E);

 

“RSGI” shall have the meaning set forth in the introduction;

 

“RSGI Loan 1” shall have the meaning as defined in Schedule (E);

 

“RSGI Loan 2” shall have the meaning as defined in Schedule (E);

 

“RSI Loan 1” shall have the meaning as defined in Schedule (E);

 

“RSI Loan 2” shall have the meaning as defined in Schedule (E);

 

“RSKG”shall have the meaning set forth in the introduction;

 

“Securities Act” shall have the meaning set forth in Clause 9.7.2; 

 

9

 

“Sellers” shall have the meaning set forth in the introduction; 

 

“Sellers’ Beneficiaries” shall have the meaning set forth in Clause 8.1;

 

“Shares” shall have the meaning set forth in Preamble (F);

 

“Signing Date” shall mean the date hereof;

 

“Subsidiary” shall mean any controlled direct or indirect subsidiary within the meaning of Section 16 AktG and “Subsidiaries” means all of them;

 

“Subsidiary Shares” shall have the meaning set forth in Clause 5.2.4;

 

“Target Closing Date” shall mean either August 31, 2013 or September 30, 2013 as agreed in good faith between RSKG and the Purchaser, provided that if no such agreement is reached before the beginning of the applicable ten (10) Business Day period set out in Clause 3.3, the “Target Closing Date” shall be the last calendar day of the calendar month in which Closing would fall pursuant to Clause 3.3;

 

“Taxes”shall have the meaning set forth in Clause 11.1.1;

 

“Tax Authority”shall have the meaning set forth in Clause 11.1.2;

 

“Tax Benefits” shall have the meaning set forth in Clause 11.2.4;

 

“Tax Indemnification Claim” shall have the meaning set forth in Clause 11.2.1;

 

“Tax Litigation” shall have the meaning set forth in Clause 11.7.5;

 

“Tax Refund” shall have the meaning set forth in Clause 11.3.1;

 

“Tax Returns” shall have the meaning set forth in Clause 11.7.1;

 

“Third Party Claim” shall have the meaning set forth in Clause 6.10;

 

“to Sellers’ Knowledge” shall mean the actual knowledge (positive Kenntnis) as of the date hereof of the persons specified in Schedule 1;

 

“U.S. Benefit Plan” shall have the meaning set forth in Clause 5.7.4;

 

“U.S. Companies” shall have the meaning set forth in Clause 5.7.4;

 

“U.S. Company Benefit Plans” shall have the meaning set forth in Clause 5.7.5;

 

“Working Capital Adjustment” shall have the meaning set forth in Clause 3.1.2(c).

 

10

 

2.                                     SALE AND ASSIGNMENT; TRANSFER OF SHARES

 

2.1                              Hereby, with effect in rem as of the Closing Date, 24:00 h CEST;

 

2.1.1                     RSKG sells and transfers

 

(a)                                the CeramTec Shares; and

 

(b)                                its shares in PST Mexicosubstantially in the form of the transfer agreement attached hereto as Schedule 2.1.3(b); and

 

2.1.2                     RSGI sells and transfers

 

(a)                                the CeramTec NA Shares;

 

(b)                                the RSI Loan;

 

(c)                                 the RSI Loan 2;

 

(d)                                the RSGI Loan 1;

 

(e)                                 the RSGI Loan 2; and

 

2.1.3                     KL 2 sells and transfers

 

(a)                                subject to Clause 9.8, the PST Poland Shares substantially in the form of the transfer agreement attached hereto as Schedule 2.1.3(a);

 

(b)                                its PST Mexico Shares substantially in the form of the transfer agreement attached hereto as Schedule 2.1.3(b); and

 

(c)                                 the KL 2 Loan

 

2.1.4                     RSGG sells and transfers

 

(a)                                the RSGG Loan 1; and

 

(b)                                the RSGG Loan 2

 

to the Purchaser; the Purchaser hereby accepts the sale and transfer of the Shares and the Loans.

 

2.2                              Each sale and transfer of the Shares specified in Clause 2.1 shall include all ancillary rights and benefits as well as, subject to this Agreement, obligations arising from those Shares, including dividend rights to all profits not yet distributed to the relevant Seller as of the Closing Date.

 

11

 

2.3                              If the Purchaser nominates one or morePurchaser Nominee(s), and subject to Clause 14:

 

2.3.1                     each Purchaser Nominee shall be deemed to be the purchaser in relation to thoseShares and Loans in respect of which it is nominated and those Shares and Loansshall then be sold and transferred to it under this Agreement; and

 

2.3.2                     the Purchaser shall procure that no later than at the Closing any Purchaser Nominee accedes to this Agreement (which the other Parties hereby consent to) and acceptsthe sale and transfer in respect of those Shares and Loans for which it is nominated on the terms of this Agreement.

 

2.4                              The transfers of the Shares and Loans pursuant to Clause 2.1 are subject only to the fulfillment of each of the following conditions precedent (aufschiebende Bedingungen) (the “Conditions Precedent”), except to the extent a Condition Precedent has been waived in accordance with Clauses 2.6 and 2.7 below:

 

2.4.1                     approval of the transaction by all relevant authorities in respect of the filings or approvals specified in Schedule 2.4.1, whether or not conditions or obligations are imposed which could affect the Purchaser, and/or all applicable waiting periods in connection therewith having expired or terminated (the “Regulatory Clearances”);

 

2.4.2                     registration of the change of CeramTec’s fiscal year in the relevant commercial register to end on the Target Closing Date;

 

2.4.3                     receipt of the full amount of the Preliminary Purchase Price less the Deferred Purchase Price Amount as specified in Clause 3.4.1 on the Escrow Account; and

 

2.4.4                     release or irrevocable agreement to release ofthe guarantees granted by, andall security interests over the shares and assets of, each of

 

(a)                                CeramTec NA; and

 

(b)                                Durawear Corporation;

 

in each case in a form reasonably satisfactory to Purchaser, effective at the latest upon receipt of the Preliminary Purchase Price pursuant to Clause 3.4.1.

 

2.5                              CeramTec has approved the transfer of the CeramTec Shares to the Purchaser pursuant to the declaration of consent, a true copy of which is attached as Exhibit 2.5.RSKG has approved the transfer of the CeramTec Shares to the Purchaser pursuant to the declaration of consent, a true copy of which is also attached as Exhibit 2.5.

 

12

 

2.6                              The Condition Precedent set out in Clause 2.4.3 may be waived fully or partially by the Sellers with effect for all Parties by giving written notice to the Purchaser.

 

2.7                              The Condition Precedent set out in Clause 2.4.4 may be waived fully or partially by the Purchaser by giving written notice to the Sellers.

 

3.                                     PURCHASE PRICE / PURCHASE PRICE ADJUSTMENT

 

3.1                              The Purchaser shall pay, as consideration for the transfer of the Shares and Loans, the aggregate of:

 

3.1.1                     an amount of EUR 1,490,000,000(one billion four hundred ninety million Euros) (“Enterprise Value”), which shall be attributed to the Shares sold by each Seller in accordance with Schedule 3.1.1;

 

3.1.2                     and as of the Closing Date, 24:00 h CEST on a combined basis for the Group

 

(a)                                plus the aggregate amount of cash as defined in Schedule 3.1.2(a) (“Cash”),

 

(b)                                less the aggregate amount of financial indebtedness as defined in Schedule 3.1.2(b) (“Financial Indebtedness”),

 

(c)                                 plus or less, as the case may be, any amount, by which the aggregate amount of net working capital as defined in Schedule 3.1.2(c)-1 (“Net Working Capital”) exceeds or falls short of the net working capital amount set out in Schedule 3.1.2(c)-2 (the “Reference Net Working Capital”) by more than EUR 1,000,000 (such amount, if any, the “Working Capital Adjustment”),

 

provided, that Cash, Financial Indebtedness and the Working Capital Adjustment shall be attributed to the Shares sold by each Seller as per Schedule 3.1.2(a), Schedule 3.1.2(b) and Schedule 3.1.2(c)-1 respectively, and

 

3.1.3                     plus an amount equal to the nominal value of the Loans (plus accrued interest) as of the Closing Date (as defined below) to each Loan (to the extent not repaid by the relevant Group Company as ator before Closing)

 

(the “Purchase Price”).

 

3.2                              At the latest ten (10) Business Days prior to the anticipated Closing Date, the Sellers shall notify the Purchaser of the estimated purchase price(the “Preliminary Purchase Price”) which must not exceed EUR 1,550,000,000 (one billion five hundred and fifty million Euros) together with (i) a good faith estimate of the Cashand Financial Indebtedness and Working Capital as of 24:00 h CEST on the Closing Date upon

 

13

 

which the calculation of the Preliminary Purchase Price was based, and (ii) the final amounts to be repaid by the Sellers pursuant to Clause 3.4.2. The Sellers shall discuss and review any comments or objections made by the Purchaser to the Preliminary Purchase Price or to any amount set out in or underlying such notification or calculation with the Purchaser in good faith. Absent any other agreement between the Seller and Purchaser or manifest errors the Preliminary Purchase Price as notified by the Sellers shall be binding upon the Parties. The final Purchase Price shall be determined in accordance with Clause 4.

 

3.3                              The Preliminary Purchase Price lessthe Deferred Purchase Price Amount shall be due and payable, and thereby the closing (Vollzug) of the assignment of the Shares and the Loans (the “Closing”) shall take place at 24:00 h CEST on the last day of the month, ending no earlier than the tenth (10th) Business Day after the Conditions Precedent set out in Clauses 2.4.1, 2.4.2 and2.4.4 above have been satisfied, but no earlier than August 31, 2013, or on such other day as may be agreed upon by the Parties in writing (message by facsimile to be sufficient) (the “Closing Date”).

 

3.4                              No later than on the Closing Date, but following receipt by the Purchaser of satisfactory documentation evidencing fulfilment of the Conditions Precedent set out in Clauses 2.4.1, 2.4.2 and2.4.4:

 

3.4.1                     the Purchaser shall pay the Preliminary Purchase Price less an amount of EUR 150,000,000 (one hundred fifty million Euros)(the “Deferred Purchase Price Amount”) into the account specified in the final escrow agreement referred to in Clause 3.5 or such other account as may be notified by the escrow agent no later than ten (10) Business Days prior to the Target Closing Date (the “Escrow Closing Account”) in full satisfaction of its obligations to the Sellers under Clause 3.3 (mit schuldbefreiender Wirkung) for value on the Closing Date;

 

3.4.2                     the Sellers shall pay to those persons entitled thereto, such amounts as may be required to effect the release contemplated pursuant to Clause 2.4.4 above.

 

3.5                              The Parties shall, without undue delay after the Signing Date, enter into the escrow agreement substantially in the formset out in Schedule 3.5 with an escrow agent to be mutually agreed among the Parties and governing the release of the Preliminary Purchase Price from the Purchaser to the Sellers.

 

3.6                             After performance of the obligations set out in Clauses 3.4 and 3.5, the Parties shall execute a Closing Memorandum substantially in the form set out in Schedule 3.6 (the “Closing Memorandum”), which shall record the actions taken at closing.

 

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3.7                              No later than on the third (3rd) Business Day after the Closing Date, Purchaser shall or shall procure that on its behalf, the Deferred Purchase Price Amount (for the avoidance of doubt without any interest thereon) is paidto the following bank account:

 

	
ACCOUNT NUMBER:
    	
 
    	
190 900 100
    
	
ACCOUNT HOLDER:
    	
 
    	
RSGG   GmbH & Co. KG
    
	
BANK:
    	
 
    	
Deutsche Bank AG, Köln
    
	
BANK CODE:
    	
 
    	
370 700 60
    
	
BIC:
    	
 
    	
DEUTDEDKXXX
    
	
IBAN:
    	
 
    	
DE95 3707 0060 0190 9001 00
    

 

or such other account notified to Purchaser in writing no later than ten (10) Business Days prior to Target Closing Date.

 

3.8                              All payments under or in connection with this Agreement shall be made by irrevocable wire transfer of immediately available Euro-denominated (or, where applicable in case of the Loans, US Dollar-denominated) funds, free of all taxes, bank charges and other deductions (except those of the recipient’s bank).

 

3.9                              If any payment under or in connection with this Agreement:

 

3.9.1                     falls due on a Saturday, Sunday or public holiday in New York, London or Frankfurt am Main such payment shall be payable on the next Business Day; or

 

3.9.2                     is not made in full when due, the outstanding amount shall bear interest at the higher rate of (i) 1100 bps per annum above the three (3) months EURIBOR (Reuters / Telerate, pages 248 and 249) for equivalent amounts (calculated on the basis of 360 days/year) or (ii) 12% per annum, each from and including the date the payment was due up to and including the date of actual payment.

 

3.10                       The Parties are of the opinion that the transactions contemplated by this Agreement do not constitute a sale of a going concern (keine Geschäftsveräußerung im Ganzen) and are not subject to German VATand the Parties agree not to take any measures to the effect that German VAT would become due.The Sellers undertake not to opt to treat the transactions contemplated hereunder as being subject to VAT (or other tax of a similar nature in any jurisdiction). To the extent that the transactions contemplated in this Agreement are subject to VAT (or any other tax of a similar nature in any jurisdiction), the Purchaser shall pay such VAT (or any other tax of a similar nature in any jurisdiction) in addition to the Purchase Price, but only to the extent such VAT (or such other tax) is not triggered by any of the Sellers or any of their Affiliates. VAT (or any other tax of a similar naturein any jurisdiction) is due for payment as soon as the Purchaser has received from the Sellers an invoice which complies with the provisions

 

15

 

of Section 14 of the German VAT Code (UStG) or applicable provisions in other jurisdictions. Any interest, penalties or similar charges levied on, or in connection with, VAT (or any other tax of a similar nature), if any, shall be borne by the Purchaser; sentence 2, 2nd half shall apply mutatis mutandis.

 

4.                                     DETERMINATION OF FINAL PURCHASE PRICE

 

4.1                              The Purchase Price shall be finally and irrevocably determined based on the combinedfinancial statements of the Group as of the Closing Date (“ClosingFinancial Statements”).

 

4.1.1                     The Closing Financial Statements shall consist of

 

(a)                                a combined balance sheet, a combined profit and loss statement and a statement of Cash, Financial Indebtedness (including nominal amounts and accrued but unpaid interest of the Loans) and Net Working Capital; as well as

 

(b)                                a statement of Purchase Price resulting therefrom pursuant to this Agreement and the deviation (if any) from the Preliminary Purchase Price,

 

4.1.2                     and, to the extent not otherwise defined in the definitions of Cash, Financial Indebtedness and Net Working Capital, shall be prepared applying (i) the Accounting Principles on a consistent basis, applying (to the extent in accordance with law) the same policies, procedures, practices and election rights as applied in the preparation of the Combined Financial Statements and MD&A (as defined below) and (ii) IFRS as in force as of the Closing Date. For the avoidance of doubt, to the extent of any inconsistency between them (i) shall take precedence over (ii).

 

4.1.3                     The Purchaser shall prepare the Closing Financial Statements after the Closing and shall have them reviewed by Deloitte & Touche GmbH, Stuttgart, and shall submit them to the Sellers as soon as reasonably possible, but not later than three (3) months after the Closing Date.

 

4.2                              The Purchase Price shall be deemed accepted by the Sellers and shall become binding upon the Parties unless Sellers, within twenty (20) Business Days following the receipt of the Closing Financial Statements from the Purchaser, object to Purchaser in writing, describing the deviations in fixed amounts and in detail the backgrounds and reasons for each of those items to which the Sellers object (the “Dispute Notice”). Sellers shall be deemed to have agreed with all items and amounts to which they do not object in the Dispute Notice, which items and amounts shall become binding between the Parties.

 

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4.3                              In the event the Sellers deliver a Dispute Notice within the time period set out in Clause 4.2, the Parties shall use reasonable good faith efforts to resolve the dispute within ten (10) Business Days after the delivery of the Dispute Notice.

 

4.4                              If the Sellers and the Purchaser are unable to resolve such dispute within such ten (10) Business Days, then:

 

4.4.1                     The items that are set out in the Dispute Notice and which have not been resolved may be submitted by either of them to KPMG (the “Accounting Firm”) with a scope of assignment to be agreed amongst the Parties in good faith between the date hereof and the Closing Date.

 

4.4.2                     If the Accounting Firm does not confirm that it will act as the accounting firm in accordance with the provisions set forth herein within ten (10) Business Days after the items in dispute have been submitted to it, the Frankfurt office of another nationally recognized firm of independent public accountants shall act as the Accounting Firm either as mutually agreed between the Sellers and the Purchaser or, if such an agreement is not reached within an additional ten (10) Business Days, as appointed, upon the request of either the Sellers or the Purchaser, by the German Institute of Public Auditors in Düsseldorf (Institut der Wirtschaftsprüfer in Deutschland e.V.) on terms reasonably acceptable to such Accounting Firm.

 

4.4.3                     The Purchaser, the Sellers and the Accounting Firm shall be given reasonable access to all relevant records of the Group Companies to calculate the Cash, the Financial Indebtedness and the Net Working Capital as of the Closing Date.

 

4.4.4                     The Sellers and the Purchaser will be afforded an opportunity to present to the Accounting Firm any material relating to the determination of the matters set forth in the Dispute Notice and to discuss such matters with the Accounting Firm.

 

4.4.5                     The Accounting Firm shall be instructed to promptly deliver to the other Parties copies of all documents and other data made available to the Accounting Firm by the Sellers or the Purchaser, as applicable.

 

4.4.6                     The Accounting Firm shall act as an expert (Schiedsgutachter, Section 317 BGB), and not as an arbitrator, to calculate, based solely on the written submissions by the Parties and not by independent investigation, the Cash, the Financial Indebtedness and/or the Net Working Capital as of the Closing Date and shall be instructed that its calculation (i) must be made in accordance with the standards and definitions in this Agreement, and (ii) with respect to each item in dispute, must be within the range of values established for such item by the Dispute Notice and the Closing Financial Statements as

 

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prepared by the Purchaser. The Accounting Firm shall submit such calculation to the Parties as soon as practicable, but in any event within thirty (30) Business Days after the remaining issues in dispute are submitted to the Accounting Firm. Absent manifest errors, the determination by the Accounting Firm of the Cash, the Financial Indebtedness and/or the Net Working Capital as set forth in a written notice delivered to the Sellers and the Purchaser by the Accounting Firm in accordance with this Agreement will be binding and conclusive on the Parties (Section 319 para. 1 and 2 BGB shall not apply) and shall not be subject to any appeal.

 

4.5                              Any difference between the Purchase Price and the Preliminary Purchase Price paid on the Closing Date shall be settled within ten (10) Business Days from the date upon which the determination of the final Purchase Price becomes binding in accordance with this Clause 4 and such difference shall be allocated to the Companies as set forth in Schedule 3.1.1. The Sellers shall repay to the Purchaser any payment made by the Purchaser in excess of the Purchase Price if applicable and, in the event the Purchase Price exceeds the Preliminary Purchase Price, the Purchaser shall pay to the Sellers an amount equivalent to the difference (a “Balancing Payment”). Any Balancing Payment shall be made into such account(s) as notified by the receiving Party together with interest thereon at a rate of 300 bps per annum above the three (3) months EURIBOR for equivalent amounts (as specified in and calculated according to Clause 3.9.2(i)) from and including the Closing Date up to and including the date of payment, such payment to be made no later than ten (10) Business Days from the date upon which the determination of the final Purchase Price becomes binding in accordance with this Clause 4.

 

5.                                     SELLERS’ REPRESENTATIONS AND WARRANTIES

 

5.1                              Nature of Representations and Warranties

 

5.1.1                     The Parties have discussed and negotiated if, and to what extent, the Sellers shall be liable for defects relating to the Shares and the Loans (provided that to the extent such Loans and/or Shares are sold and transferred by RSGG, RSGG shall be deemed to be a Seller for the purposes of the representations and warranties given under this Clause 5.1.1 and the related legal consequences), or the business of the Group and have decided to depart from the statutory warranties regarding sold goods (gesetzliche Kaufgewährleistung). They have agreed to replace the statutory system and provide for an independent catalogue of specific rights of the Purchaser individually agreed and set forth in this Clause 5.

 

5.1.2                     The Purchaser confirms that it has had access to detailed information from and about the Companies and has completed an in-depth due diligence review prior

 

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to the signing of this Agreement. Consequently, the representations and warranties given by the Sellers are limited solely to those expressly set out in Clauses 5.2 to 5.10 of this Agreement and no other representations, warranties, indemnities or guarantees are given, or any liability assumed, by any Seller whether expressly, implicitly or by law in relation to the business of the Group. Any liability of the Sellers arising hereunder shall be exclusively governed by this Agreement.

 

5.1.3                     The representations and warranties of the Sellers pursuant to Clause 5.2 to 5.10shall not constitute guarantees (Garantien) within the meaning of Section 444 BGB, but shall constitute separate, independent obligations of the Sellers. Subject to the limitations of liabilities (including certain deductibles and caps) and the explicit restrictions of certain legal rights, in particular (but not limited to) under Clause 6, which limitations and restrictions shall form an integral part of each warranty and representation, the Sellers represent and warrant to the Purchaser, as several debtorssubject to Clause 6.7, by way of an independent guarantee (selbständiges Garantieversprechen) pursuant to Section 311 para. 1 BGB, that the statements set out in Clause 5.2 to5.10 are true and correct as of the date hereof and, with respect to the statements pursuant to Clause 5.2.1through 5.2.8 only, the Closing Date, except in each case where such statement is made with respect to a specific point in time, in which case such statement shall only be made as of that specific point in time.

 

5.2                              Corporate

 

5.2.1                     Each Seller has the full corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby and such transactions have been duly authorised by all necessary corporate action on the part of each such Seller.

 

5.2.2                     The statements in Preamble (A) through (E) in respect of the Companies and the Loans are correctsave to the extent any variation is permitted under this Agreement.

 

5.2.3                     Each Seller is the sole owner of those Shares and Loans sold and transferred by it pursuant to Clause 2.1.

 

5.2.4                     The shares in each of the Subsidiaries are owned by the Group Companies as specified in Schedule 5.2.4 (the “Subsidiary Shares”).Each Group Company has been duly established and validly exists under the laws of the jurisdiction of its incorporation.

 

5.2.5                     The Shares and the Subsidiary Shares are validly issued, fully paid-in either in cash or in kind without any repayments of capital (excluding for the avoidance

 

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of doubt dividends or distributions of distributable profits) having been made and are non-assessable. No Seller or Group Company is under any obligation to grant or issue any shares or other equity securities or options or securities convertible into shares or equity securities.

 

5.2.6                     At the Closing, the Loans, the Shares and the Subsidiary Shares will, subject only to the fulfilment of the Condition Precedent set out in Clause 2.4.4, be unencumbered and free from any third parties’ rights, save only to the extent

 

(a)                                the survival or creation of third party rights is caused (in whole or in part) by Purchaser or its financing sources, in particular if Purchaser creates new third party rights; or

 

(b)                                such third party rights are only for the benefit of other Group Companies.

 

5.2.7                     Except for the profit and loss pooling agreement (Gewinnabführungsvertrag) dated as of June 16, 2004 (the “P&L Agreement”), and domination agreement (Beherrschungsvertrag) dated as of August 22, 2007, each between RSGG and CeramTec (collectively the “Enterprise Agreements”), there exist no control agreements, profit and loss transfer agreements or other enterprise agreements within the meaning of Section 291 AktG (or any comparable provision in any other jurisdiction in which a Group Company is incorporated) between any Seller or its Affiliates and any of the Group Companies.

 

5.2.8                     No Group Company is insolvent, in material payment default or over-indebted and no insolvency proceedings have been initiated or opened.There exist no circumstances pursuant to which any such procedures should have been or should be initiated or opened nor do any circumstances exist under any applicable bankruptcy or insolvency laws which would justify the avoidance of this Agreement and, to Sellers’ Knowledge, no third party has initiated or threatened to initiate such proceedings.

 

5.3                              Financial

 

5.3.1                     The “Combined Financial Statements and the Combined Management Discussion and Analysis of CeramTec-Group (Advanced Ceramics)” as per December 31, 2012 as prepared by CeramTec GmbH, Plochingen and audited by Deloitte & Touche GmbH, Stuttgart, copies of which have been delivered to the Purchaser prior to the date hereof (hereinafter referred to as “Combined Financial Statements and MD&A”),

 

(a)                                were prepared in accordance with the Accounting Principles; and

 

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(b)                                fairly present in all material respects

 

(i)                                    the consolidated financial position; and

 

(ii)                                 the result of operations

 

of the Group’s business (taken as a whole) with respect to the twelve-months period ending December 31, 2012.

 

“Accounting Principles” shall mean IFRS as applicable in the EU and the regulations under German commercial law as supplementary applicable pursuant to Section 315a (1) HGB with respect to the group of entities referred to in Section 1 of the notes to the Combined Financial Statements and MD&A.

 

5.3.2                     No Group Company has assumed any sureties (Bürgschaften), guarantees (Garantien) or similar obligations to secure any liabilities of the Sellers or their Affiliates (other than Group Companies) each exceeding an amount of EUR 250,000 (two hundred fifty thousand Euros), unless specified in Schedule 5.3.2.

 

5.3.3                     None of the Group Companies has any obligation to pay any brokerage, finder’s or other fees, or commission to any investment banker, broker, finder, agent or adviser, with respect to this Agreement and the preparation or consummation of the transactions contemplated herein, provided that this shall not prevent Sellers from charging fees to any Group Company under any service agreement existing as of the date hereof, including, for the avoidance of doubt, in relation with the preparation and audit of financial statements of the Group Companies including the ones mentioned under Clause 5.3.1 for the current fiscal year as well as for prior years.

 

5.3.4                     For the avoidance of doubt, Sellers do not assume any warranty in relation to the Loans, except as set out in Clause 5.2, and Sellers shall not, and shall procure that none of Sellers’ Affiliates shall, make any claim under such Loans after the Signing Date.

 

5.4                              Real Estate

 

5.4.1                     Schedule 5.4.1 contains a complete list of all material real estate owned by any Group Company. The real estate is free of any material charges and encumbrances, as well as material rights of third parties of any kind, except where

 

(a)                                these do not materially impair the Group Companies’ (taken as a whole) ability to conduct its business as presently conducted; or

 

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(b)                                as specified in Schedule 5.4.1 and except as registered in the respective land registers.

 

5.4.2                     Schedule 5.4.2 contains a complete list of all lease agreements regarding real estate leased by any Group Company involving an annual financial burden of more than EUR 500,000 (five hundred thousand Euros) in each individual case.

 

5.5                              Intellectual Property

 

5.5.1                     The list of Intellectual Property Rights in Schedule 5.5.1 comprises (among others) all registered Material IP.

 

5.5.2                     The Group Companies are the unrestricted legal and beneficial owners of the Material IP. The Group Companies can freely dispose over the Material IP and none of the Material IP is (i) encumbered with any rights of any third party or (ii) subject to any non-registered or other pending transfer or any other disposition, sale or other contractual arrangement creating an obligation to transfer or to create, change or abolish any encumbrances or third party rights, except as specified in Schedule5.5.1.

 

5.5.3                     The Material IP is in full force and effect and all maintenance and other fees have been duly paid.

 

5.5.4                     Any invention made by employees of one of the Group Companies which has been reported in compliance with the German employee inventors act (Arbeitnehmererfindungsgesetz) or any equivalent law or rule in any other jurisdiction in which the Group operates prior to the Closing Date has been duly claimed and any corresponding inventor remuneration due prior to the Closing Date has been paid in full as and when due.

 

5.5.5                     Except as listed in Schedule 5.5.5, to Sellers’ Knowledge, no third party has in writing challenged or threatened to challenge the Material IP and no prior or existing proceedings have or will have a material detrimental effect on the Material IP. To Sellers’ Knowledge, the Material IP does not infringe any rights of any third party nor is it infringed by any third party.

 

5.6                              Operations

 

5.6.1                     The Group Companies holdall material permits, licenses and approvals required under public law for the operation of its business and material for the business of the Group taken as a whole (conducted as of the date hereof); and the Group’s business is conducted in all material aspects in accordance with these material permits, licenses or approvals.

 

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5.6.2                     Schedule 5.6.2 contains a true and complete list of all public grants and subsidies, each exceeding an amount of EUR 1,000,000.00 (one million Euros) in each individual case, received by the Group Companies and that provide for any ongoing or contingent obligation of the Group Companies.

 

5.6.3                     Schedule 5.6.3 contains a list of the ten largest suppliers and of the ten largest customers of the Group for the fiscal year ended December 31, 2012. To Sellers’ Knowledge, none of these customers or suppliers has terminated any agreement with the Group Companies.

 

5.6.4                     The Group Companies own or are entitled to use all current and fixed assets (including Material IP) which are material for the business of the Group (taken as a whole) as conducted on the date hereof.

 

5.6.5                     To Sellers’ Knowledge, the assets referred to in Clause 5.6.4 are not encumbered with any liens, pledges or other rights in favor of any third party,except forthe following, and in each such case then only to the extent securing liabilities of Group Companies:

 

(a)                                retention of title rights, liens, pledges in favor of suppliers, mechanics, workmen, carriers, landlords and the like arising by operation of law;

 

(b)                                security rights granted to banks and other financial institutions over cash and other assets deposited with such banks and financial institutions;

 

(c)                                 encumbrances or rights of third parties created under applicable law including pledges and other security rights in favor of tax authorities or other governmental entities; and

 

(d)                                any such rights created under the agreements listed in Schedule 5.6.5(d).

 

5.6.6                     Except as set out in Schedule 5.6.6, since January 1, 2013, the business of each Material Company has in all material respects been conducted in the ordinary course of business consistent with past practice and in within the limits set out in Clauses 9.1.2 to 9.1.10.

 

5.7                              Employment and Benefits

 

5.7.1                     Except as specified in Schedule 5.7.1 and except as provided by law, no Group Company is a party to any material agreements regarding, or promises of, special rights (in particular special termination rights), payments or benefits to members of corporate organs of any Group Company, which they could exercise only as a result of the transactions contemplated under this Agreement.

 

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Neither the Sellers, nor RSGG nor any of their Affiliates have agreed to pay or paid any such or similar benefit to any members of the corporate organs of any Group Company except as previously disclosed to the Purchaser in writing.

 

5.7.2                     Schedule 5.7.2 contains a list of all effective works agreements, reconciliations of interests (Interessenausgleiche) and social plans (Sozialpläne) that apply at any of CeramTec, CeramTec NA, CeramTec Czech Republic s.r.o., CeramTec ETEC GmbH, Emil Müller GmbH, CeramTec Suzhou and CeramTec Malaysia (each and any of them a “Material Company”), in each case to the extent that these are material to the Group’s business taken as a whole and as conducted as of the date hereof.

 

5.7.3                     Schedule 5.7.3 contains a list of all material pension schemes (Zusagen auf und aus betrieblicher Altersversorgung) that, to Sellers’ Knowledge, exist at any Group Company.

 

5.7.4                     Schedule 5.7.4 contains a complete list of any material “employee benefit plan” as defined in Section 3(3) of ERISA (including any “multiemployer plan” as defined in Section 3(37) of ERISA) and each bonus, stock option, equity compensation or other incentive plan that is sponsored or maintained by any Group Company or any of their Affiliates or to which any Group Company or any of their Affiliates is required to make contributions, for the benefit of persons who are or were actively employed with CeramTec NA or Durawear Corporation (the “U.S. Companies”) (each a “U.S. Benefit Plan”).

 

5.7.5                     Schedule 5.7.4 further identifies those U.S. Benefit Plans that are sponsored or maintained solely by one or more of the U.S. Companies (“U.S. Company Benefit Plans”).

 

5.7.6                     To Sellers’ Knowledge, each U.S. Company Benefit Plan has been and is operated in compliance, in all material respects, with its terms and all applicable provisions of ERISA, the Code and all other applicable laws and regulations.

 

5.7.7                     Schedule 5.7.4 further identifies each U.S. Benefit Plan that is intended to be a “qualified plan” within the meaning of Section 401(a) of the Code (each a “Qualified Plan”). The Internal Revenue Service has issued a favorable determination letter with respect to each Qualified Plan.

 

5.7.8                     Except as set forth in Schedule 5.7.8, with respect to each U.S. Company Benefit Plan that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code, to Sellers’ Knowledge:

 

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(a)                                no U.S. Company Benefit Plan is considered an at-risk plan within the meaning of Section 430 of the Code or Section 303 of ERISA;

 

(b)                                there does not exist a failure to satisfy the minimum funding standards (within the meaning of Section 412 or 430 of the Code or Section 302 of ERISA), except where waived;

 

(c)                                 no reportable event within the meaning of Section 4043(c) of ERISA for which the 30-day notice requirement has not been waived has occurred within the preceding three (3) years;

 

(d)                                all premiums to the Pension Benefit Guaranty Corporation have been paid in full; and

 

(e)                                 the Pension Benefit Guaranty Corporation has not instituted proceedings to terminate any such U.S. Company Benefit Plan.

 

5.7.9                     To Sellers’ Knowledge, no Group Company is a party — be it as plaintiff, defendant or otherwise — to any material court or arbitration or public authority proceedings involving employees, managing directors, works councils, trade unions or other employees’ representations, except as specified in Schedule 5.7.9.

 

5.8                              Litigation

 

5.8.1                     No Group Company is a party — be it as plaintiff, defendant or otherwise — to any court or arbitration or public authority proceedings involving an amount in dispute of more than EUR 1,000,000 (one million Euros) in an individual case, except as specified in Schedule 5.8.1, and no such litigation has, to Sellers’ Knowledge, been threatened to any of the Group Companies in writing.

 

5.8.2                     The Material Companies have conducted their business in compliance with all applicable laws in all material respects, except where such non-compliance has no material effect on the business as presently conducted by the Group (taken as a whole).

 

5.9                              Environmental

 

5.9.1                     To Sellers’ Knowledge and except as disclosed in the documents listed in Schedule 5.9.1, there is no Environmental Contamination at the real estate owned by Group Companies that would result in any claim, costs or fees of more than EUR 500,000 (five hundred thousand Euros) in respect of such Environmental Contamination.

 

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5.9.2                     “Environmental Contamination” means any pollutants, contaminants or other Hazardous Materials that are existing in the soil, ground- or surface water, in or on buildings, technical facilities or other man-made structures, or parts thereof, as well as waste or decommissioned sub-surface technical installations or parts thereof.”Hazardous Materials” means dangerous substances as defined in Article 2 para. (2) of the European Community Council Directive 67/548 EEC, as amended until the date hereof.

 

5.10                       Taxes

 

5.10.1              Each Group Company has duly and timely filed all returns, forms and other statements required to be filed for Taxes (taking into account general extensions of filing periods) by such Group Company.

 

5.10.2              No Group Company is currently subject to any audit, examination or similar proceedings by any Tax Authority, other than specified in Schedule 5.10.2.

 

5.10.3              Except as set out in Schedule 5.8.1, there are no pending Tax appeals, proceedings before a Tax court or any other Tax-related disputes of whatsoever nature involving CeramTec, Cerasiv, Emil Müller GmbH and CeramTec-ETEC GmbH or any of the other Group Companies.

 

5.10.4              There are no tax sharing agreements(Steuerumlageverträge) in place between either a Seller or a Seller’s Affiliate on the one hand and any Group Company on the other hand which will not terminate on or prior to the Closing.

 

5.10.5              Each Group Company has maintained and will have available on the Closing Date proper and accurate records for Taxes required to be kept by it.The representation under this Clause 5.10.5 shall not relate to transfer pricing documentation.

 

6.                                     INDEMNIFICATION BY SELLERS

 

6.1                              Subject to the provisions contained in this Clause 6, Sellers shall pay to Purchaser monetary compensation (Schadensersatz in Geld) for any Losses (as defined below) suffered by Purchaser as a direct result of

 

6.1.1                     any of the statements made by the Sellers in Clauses 5.2 to 5.10to above being incorrect in whole or in part (each a “Breach”);

 

6.1.2                     any other breach of covenant or agreement contained in this Agreement (but provided that for any such breach this Clause 6shall not apply except where explicit reference is made),

 

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provided that after receipt of a written notice of claim by the Purchaser describing the condition that constitutes a Breach, either (i) Sellers have not restored the position of the parties to what it would have been had the Breach not occurred (Naturalrestitution), within a reasonable period of time, but no later than three (3) months after receipt of a written notice of claim, or (ii) such restitution is impossible, or (iii) the Sellers refuse (ernsthaft und endgültig verweigern) to make such restitution.

 

6.2                              For the purposes of this Agreement, “Losses” shall mean allactual damages (tatsächliche Schäden) suffered by the Purchaser (or a Group Company), excluding, in particular, any potential or actual reduction (Minderung) in the value of the Shares sold by the Sellers,and shall in no event include any unforeseeable direct or indirect consequential damages (unvorhersehbare unmittelbare oder mittelbare Folgeschäden), loss of profits (entgangener Gewinn), multiple damages or damages/losses to goodwill, lost opportunities (entgangene Geschäftschancen) or frustrated expenses (vergebliche Aufwendungen).

 

6.3                              The Purchaser shall not be entitled to bring any claim for a Breachagainst the Sellers (a “Purchaser’s Claim”) and the Sellers shall not be liable for a Breach if and to the extent:

 

6.3.1                     the underlying facts, circumstances or events which could form the basis of a (potential) Purchaser’s Claim (anspruchsbegründende Umstände i.S.v. § 199 Abs 1 Nr. 2 BGB) or determining the amount of damages caused (haftungsausfüllende Kausalität),

 

(a)                                have been disclosed (in a manner enabling a prudent business person (ordentlicher Kaufmann) to assess the resulting risk) to; or

 

(b)                                were actually known (positive Kenntnis) to; or

 

(c)                                 could have been known, after making due enquiry with the representatives and advisers who have assisted the Purchaser in connection with its due diligence investigation and the negotiation and execution of this Agreement,

 

as of the date hereofby, any of the persons listed in Schedule 6.3.1, the Purchaser, its representatives or advisors (“Purchaser’s Knowledge”); and provided that without limiting the generality of this Clause 6.3.1, the Purchaser shall in particular be deemed to have knowledge of all facts, circumstances or events, which

 

(d)                                are fairly disclosed or described or referred to in the Disclosed Information and all matters arising thereof; or

 

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(e)                                 have been taken into account (wurden berücksichtigt)

 

(i)                                    specifically and individually in the Closing Financial Statements; or

 

(ii)                                 in any of those items listed in Schedule 6.3.1(e)(ii) for the purpose of determining the Preliminary Purchase Price or the final Purchase Price; or

 

6.3.2                     the Purchaser fails to

 

(a)                                inform the Sellers in writing without undue delay but in no event later than twenty (20) Business Days after becoming aware of any alleged Breach; or

 

(b)                                give the Sellers the opportunity to remedy the breach pursuant to Clause 6.1within the agreed three (3) month time period; or

 

(c)                                 comply with its obligations pursuant to Clause 6.10; or

 

6.3.3                     the Purchaser fails to mitigate its Losses (Section 254 BGB); or

 

6.3.4                     the damage giving rise to such claim is coveredby an insurance policy of any Group Company, the Purchaser or any of the Purchaser’s Affiliates or would have been covered by an insurance of any Group Company existing at Closing if such insurance had been continued after Closing; or

 

6.3.5                     the Purchaser or any Group Company has a claim for compensation of, or indemnification from, the damage against a third party; or

 

6.3.6                     in respect of any claim to the extent of any current or future offsetting benefits, savings or other quantifiable financial advantages accruing or attributable to the Purchaser or any Group Company on account of the matters or circumstances giving rise to such claim, including Tax Benefits (calculated pursuant to Clause 11.2.4).

 

6.4                              The Purchaser shall not be entitled to recover from the Sellers more than once in respect of the same damage suffered. In particular, without limitation, the foregoing shall apply where one and the same set of facts (Sachverhalt) qualifies under more than one provision entitling the Purchaser to a claim or remedy under or in connection with this Agreement.

 

6.5                              The liability of the Sellers under or in connection with this Agreement shall further be limited as follows:

 

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6.5.1                     Purchaser is entitled to bring a Purchaser’s Claim under or in connection with this Agreement only to the extent and in such amount in which

 

(a)                                any individual claim awarded exceeds EUR 100,000 (one hundred thousand Euros) or, in the case of a series of similar claims, these claims in the aggregate exceed EUR 250,000 (two hundred fifty thousand Euros), except, in each case where an individual representation or warranty provides for a higher threshold; and

 

(b)                                the sum of all such claims exceeds EUR 16,000,000 (sixteen million Euros);

 

6.5.2                     subject to Clause 6.5.3, for all claims under or in connection with this Agreement, the maximum aggregate liability of the Sellers is 7.5% (seven and a half per cent.) of the Purchase Price actually paid to the Sellers; and

 

6.5.3                     for claims

 

(a)                                based on a Breach under Clauses 5.2.2through 5.2.6 against a Seller in respect of the Shares sold by it under this Agreement, the maximum aggregate liability of the Sellers is the amount of the Purchase Price actually paid to the Sellers; and

 

(b)                                with respect to fraud or willful misconduct by any of the Sellers themselves (not including any other persons or entities acting on their behalf), the statutory rules shall apply.

 

6.6                              Unless explicitly provided otherwise in this Agreement, Sellers’ liability pursuant to and in connection with this Agreement shall be several and accordingly liability for any Breach or other breach of covenant or agreement shall rest solely with:

 

6.6.1                     RSKG in case and to the extent that the incorrect statement, under Clauses 5.2 through 5.9 above, relates to CeramTec or any of its Subsidiaries or the covenant or agreement was breached by RSKG;

 

6.6.2                     KL 2 in case and to the extent that the incorrect statement, under Clauses 5.2 through 5.9 above, relates to PST Poland or PST Mexico or the covenant or agreement was breached by KL 2; and

 

6.6.3                     RSGI in case and to the extent that the incorrect statement, under Clauses 5.2 through 5.9 above, relates to the U.S. Companies or the covenant or agreement was breached by RSGI.

 

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6.7                              Liability of RSGG

 

6.7.1                     Subject to Clause 6.7.2, RSGG shall only be liable to the extent it has assumed a direct obligation or covenant under this Agreement, provided that in such case the limitations of liability shall be applicable as if RSGG were a Seller under this Agreement and any liability by RSGG shall count towards the limits pursuant to Clause 6.5.

 

6.7.2                     RSGG shall have no liability in respect of the obligations of Sellers under this Agreement except thatit shall be jointly and severally liable for RSKG’s obligations (including in relation to RSKG’s joint and several obligations under the following sentence) if and when it ceases to be a general partner of RSKG (but RSKG shall not be jointly and severally liable for any obligation or liability of RSGG). RSKG shall be jointly and severally liable for the obligations of RSGI and KL2 under this Agreement.

 

6.8                              Statute of Limitations

 

6.8.1                     All claims by the Purchaser against the Sellers under or in connection with this Agreementshall be timebarred and lapse at midnight on the third anniversary of this Agreement, except for

 

(a)                                claims based on defect of title to the Shares pursuant to Clauses 5.2.3 through 5.2.6which shall be time barred and lapse at midnight on the fifth anniversary of this Agreement;

 

(b)                                claims pursuant to Clause 5.10 (Taxes) and Clause 11 (Tax Indemnification) which shall become timebarred in accordance with Clause11.8; and

 

(c)                                 other claims based on a Breach which shall become time-barred at midnight on last day of the eighteenth (18th) calendar month after the date of this Agreement.

 

6.8.2                     These limitation periods shall be suspended (gehemmt) only by the Purchaser instituting legal proceedings against the Sellers within the meaning of Section 204 para. 1 No. 1 BGB in respect thereof before the competent court. Section 203 BGB shall not apply.

 

6.9                              The provisions of this Clause 6, with the exception of Clause 6.4, Clause 6.5.2, Clause 6.5.3(b) and Clause 6.8.1(b), shall not apply to any claims under Clause 5.10 or Clause 11 (Tax Indemnification).

 

6.10                       In the event that any action, claim, demand or proceeding with respect to which the Sellers may be liable under this Agreement (a “Third Party Claim”) is asserted or

 

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announced by any third party (including any governmental authority but excluding Sellers’ Affiliates) against the Purchaser or any Group Company controlled by the Purchaser at that time (the “Claim Addressee”):

 

6.10.1              the Purchaser shall give, or cause to be given, the Sellers the opportunity to defend the Claim Addressee against the Third Party Claim. The Sellers shall have the right to defend the Claim Addressee by all actions and shall have, at any time during the proceedings, the sole power to direct and control such defense but taking into account the reasonable requests and business interests of Purchaser and the Group. In particular, the Sellers may participate in and direct all negotiations and correspondence with the third party, appoint and instruct counsel and request that the Third Party Claim be litigated or settled in accordance with the Sellers’ instructions. No action by the Sellers or their representatives in connection with the defense shall be construed as an acknowledgement (whether express or implied) of the Purchaser’s Claim under this Agreement or of any underlying facts related to such claim.

 

6.10.2              to the extent that the Sellers are in Breach, all costs and expenses incurred by the Sellers in defending the Third Party Claim shall be borne by the Sellers.If it turns out that the Sellers were not in Breach, any costs and expenses reasonably incurred by them in connection with the defense (including advisors’ fees but excluding internal overhead and costs of its staff) shall be borne by the Purchaser.

 

6.10.3              the Purchaser agrees, and shall cause the Claim Addressee,

 

(a)                                to fully cooperate with the Sellers in the defense of any Third Party Claim;

 

(b)                                to diligently conduct the defense (to the extent that the Sellers are not in control of the defense) in order to mitigate any damage (Section 254 BGB);

 

(c)                                 not to acknowledge or settle the Third Party Claim without the Sellers’ prior written consent;

 

(d)                                to provide the Sellers’ representatives access, upon reasonable advance notice and during normal business hours, to all relevant books and records, other information, premises and personnel of the Group Companies; and

 

(e)                                 any costs and expenses incurred by the Purchaser in connection with the cooperation or defense in accordance with this Clause 6.10.3 shall

 

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be borne by the Purchaser, except for any Losses to be indemnified by the Sellers under Clause 6.1.

 

6.10.4              the failure of any Claim Addressee to comply with any of its obligations under this Clause 6.10 shall release the Sellers from their obligations hereunderonly to the extent their liability was increased by such failure.

 

6.11                       Additional Restrictions regarding Environmental Contamination

 

6.11.1              The Parties agree that the rights under Clause 5.9 and the related remedies under this Clause 6 shall be the only rights and remedies of Purchaser in relation to any Environmental Contamination and all further claims shall be excluded to the fullest extent.

 

6.11.2              Any claim by the Purchaser in connection with a Breach of Clause 5.9.1 shall be excluded unless, but then not to the extent that, the Purchaser or the relevant Group Company are required to remedy the relevant matter

 

(a)                                pursuant to a final and binding or enforceable decision of a competent authority; or

 

(b)                                pursuant to an enforceable and unappealable court judgment resulting from a Third Party Claim; or

 

(c)                                 pursuant to a binding agreement with a competent authority or third party concluded prior to the date of this Agreement; or

 

(d)                                to prevent or mitigate criminal prosecution (not including administrative offense proceedings — Ordnungswidrigkeitsverfahren); or

 

(e)                                 because prompt remediation is required pursuant to applicable law due to an imminent material danger (Gefahr im Verzug); or

 

(f)                                  insofar as the Sellers have consented to it.

 

6.11.3              A claim for Breach of Clause 5.9.1 is further excluded if and to the extent the relevant liability or damage

 

(a)                                could have been avoided or mitigated by the Purchaser or the relevant Group Company had they continued to take the measures or applied the environmental, health and safety standards taken and applied prior to the Closing Date; or

 

(b)                                is a result of

 

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(i)                                    a non-compliance by any third party using or possessing a relevant property, plant or facility which was, as of the Closing Date, owned or operated by a Group Company and thereafter sold or leased or otherwise surrendered by such Group Company to such third party or to a predecessor of such third party with the requirements imposed on the Group Companies with respect to such property; or

 

(ii)                                 a complete shut-down or abandonment of a plant or of a facility; or

 

(iii)                              a change of use from industrial/commercial to another use, or a change of construction (other than normal repairs in the ordinary course of business), carried out by or on behalf of the Group Companies; or

 

(iv)                             facility expansion activities or other construction activities carried out by or on behalf of the Group Companies and higher environmental standards are triggered as a consequence of such activities; or

 

(v)                                a notification to the competent authority or investigation on the property by the Purchaser or a Group Company, which, in each case, did not have to be made under mandatory law.

 

6.12                       The Purchaser acknowledges and agrees that:

 

6.12.1              the Sellers make no warranty as to the accuracy of any forecasts, estimates, projections, statements of intent or statements of opinion (including the reasonableness of the assumptions underlying the same) contained in the Disclosed Information or otherwise provided to the Purchaser or its representatives;

 

6.12.2              the Purchaser has made its own evaluation of the adequacy and accuracy of such forecasts, estimates, projections, statements of intent or statements of opinion (including the reasonableness of the assumptions underlying the same);

 

6.12.3              none of the Purchaser, its Affiliates and their respective representatives is aware of any fact or circumstance which could constitute a Breach;

 

6.12.4              no representative of the Group is or was at any time authorized to act on behalf of, or as agent for, the Sellers in the performance of its duties as Seller or under this Agreement (Erfüllungsgehilfe).

 

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6.13                       Other than as set out in Clause 12, any right of the Purchaser or Sellersto rescind or withdraw from this Agreement shall be excluded. Any claims and rights of the Purchaserbeyond the representations and warranties provided for in Clause 5 and the covenants and agreements contained in this Agreement are hereby excluded, in particular, (i) claims based on defects, (ii) claims under Section 280 BGB which, according to former case law for breach of a representation or warranty, would have been considered claims based on breach of pre-contractual obligations (culpa in contrahendo) or positive breach of contractual obligations, (iii) rights of rescission due to an absence of essential qualities, (iv) any claims under Section 313 BGB (Wegfall der Geschäftsgrundlage) or (v) any claims based on Sections 123 and 826 BGB or on willful misconduct, to the extent such liability may be excluded pursuant to statutory law.

 

6.14                       The Parties agree that no provision of this Agreement, except as explicitly set forth herein, constitutes a contract for the benefit of a third party within the meaning of Section 328 BGB or otherwise (kein Vertrag zugunsten Dritter oder mit Schutzwirkung für Dritte).

 

6.15                       For documentary purposes, the DVDs containing the Data Room including the Q&A documentation (each as part of the Disclosed Information) have been delivered to the acting notary with the instruction to store the same for the purpose of evidence for a period of eighteen (18) months from the date hereof or until receipt of joint instructions by the Parties as to the further use thereof, whichever the earlier. The Parties shall each receive a copy of such DVDs. The acting notary shall preserve the DVDs in accordance with deposit instructions attached hereto as Schedule 6.15.

 

7.                                     PURCHASER’S REPRESENTATIONS AND WARRANTIES

 

7.1                              The Purchaser hereby guarantees to the Sellers by way of an independent promise of guarantee pursuant to Section 311 para. 1 BGB (selbständiges Garantieversprechen) that the statements set forth in this Clause 7 are true and correct as of the date hereof and as of Closing. The representations and warranties in Clause 7.2 through Clause 7.8 below shall not constitute guarantees (Garantien) within the meaning of Section 444 BGB, but shall constitute separate, independent obligations of the Purchaser and the scope and content of each representation and warranty and any liability arising hereunder shall be exclusively defined by the provisions of this Clause 7, which provisions form an integral part of such representations and warranties.

 

7.2                              The Purchaser has the full corporate power and authority to enter into this Agreement and all agreements and documents contemplated hereby, and to consummate the transactions contemplated hereby and thereby, and such transactions have been duly authorized by all necessary and requisite corporate action on the part of the

 

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Purchaser.This Agreement has been duly executed on behalf of the Purchaser and constitutes its binding obligations.

 

7.3                              There is no action, suit, investigation or proceeding pending against, or to Purchaser’s Knowledge threatened against or affecting the Purchaser before any court or arbitrator or any governmental body, agency, official or other third party which in any manner challenges or seeks to prevent the transactions contemplated hereby.

 

7.4                              The execution and performance by the Purchaser of this Agreement and the consummation of the transactions contemplated hereby require no prior approval by or filing with any governmental body, public agency or official or other third party, save only for the Regulatory Clearances.

 

7.5                              The Purchaser is neither insolvent nor over-indebted and no insolvency proceedings have been initiated or opened, or rejected because of a lack of assets, and no circumstances exist which would justify the initiation or opening of such insolvency proceedings.

 

7.6                              The Purchaser has access to sufficient unconditional and immediately available funds to meet its obligations hereunder under:

 

7.6.1                     the binding and irrevocable written commitment letters in favor of the Purchaser in the aggregate amount of EUR 1,054,100,000(one billion fifty-four million one hundred thousand Euros), copies of which are attached hereto as Exhibit 7.6.1;

 

7.6.2                     the written binding confirmation by the bank(s) being the lenders under the commitments referred to pursuant to Clause 7.6.1[(acting through their agent)], a copy of which is attached hereto as Exhibit 7.6.2 that certain documentary and further conditions precedent to their obligations to fund have been fulfilled; and

 

7.6.3                     a binding and irrevocable equity commitment letter from the Cinven Fifth Fund to the Purchaser of which a copy is attached hereto as Exhibit 7.6.3 in an amount of EUR 520,000,000 (five hundred twenty million Euros);

 

7.7                              The Purchaser has no obligation or liability to pay any fees or commissions to any broker or finder with respect to the transactions contemplated by this Agreement for which the Sellers or, if Closing does not occurby the Long Stop Date, the Group Companies could become liable.

 

7.8                              Schedule 7.8correctly sets out the ownership structure of the Purchaser at Closing.

 

7.9                              The Purchaser is not aware of any facts and circumstances that would require an amendment of Tax Returns filed by any of the German Group Companies relating to

 

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fiscal consolidation. In particular the Disclosed Information does not suggest any such amendment. For the avoidance of doubt, the Purchaser’s rights under Clause 11.2 shall neither be compromised nor restricted by this Clause 7.9.

 

8.                                     INDEMNIFICATION BY PURCHASER

 

8.1                              The Purchaser shall, and shall procure that as of Closing each Group Company will, indemnify and hold harmless (freistellen und schadlos halten) Sellers as well as any of their Affiliates (other than Group Companies), or any of the directors, officers, employees, advisors or other representatives of the foregoing parties (“Sellers’ Beneficiaries”) from any Losses asserted against, incurred or suffered by Sellers and Sellers’ Beneficiaries as a result of a breach of any representation, warranty, covenant or agreement by Purchaser contained in this Agreement.

 

8.2                              The Purchaser shall, and shall procure that as of Closing each Group Company (as long as they are controlled by the Purchaser) will, further indemnify and hold harmless Sellers and Sellers’ Beneficiaries, from any liability (save to the extent such indemnification would defeat Sellers’ liability as agreed herein) vis-à-vis any Group Company relating to Sellers’ direct or indirect shareholding or interest in, or any action taken as shareholder, Affiliate, director or officer of, any Group Company prior to the Closing Date unless such action was taken intentionally (vorsätzlich).

 

8.3                              The Purchaser shall, and shall procure that as of Closing each Group Company will, further indemnify and hold harmless Sellers and Sellers’ Beneficiaries, without any right of set-off or withholding or other limitation and subject only to the maximum limitation period which can be agreed upon or is permitted under applicable law from any liability, obligation, commitment, cost and expenses and all other damages and losses related to any Environmental Contamination, except and to the extent that Sellers have assumed such liability under Clauses 5.9 and 6unless such action was taken intentionally (vorsätzlich).

 

9.                                    COVENANTS

 

9.1                              The Sellers and RSGG undertake to use all reasonable efforts in their capacity as sole shareholders of the Companies (in particular by passing, without undue delay after the execution of this Agreement, instructing shareholders resolutions for all Group Companies) to ensure that, without the prior approval of the Purchaser (which approval shall not be unreasonably withheld or delayed) and so far as legally permissible, from the date hereof until the Closing Date the Group Companies shall, except as permitted in Schedule 9.1 or otherwise contemplated under this Agreement:

 

9.1.1                     conduct their business in all material respects in the ordinary course of business consistent with past practice on a going concern basis and in line with the existing business plan communicated to the Purchaser prior to the

 

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execution of this Agreement and not take any action which would require the consent of the Chairman of the Supervisory Board under the corporate governance of CeramTec in force at the Signing Date or any stricter rules imposed thereafter;

 

9.1.2                     not carry out or effect material investments in excess of EUR 500,000 (five hundred thousand Euros) in aggregate per calendar month other than any amounts either already approved in any relevant budget or respective capital expenditure plan of any Group Company contained in the Data Room or as disclosed in Schedule 9.1.2;

 

9.1.3                     not dispose of any fixed assets with a value exceeding EUR 500,000 (five hundred thousand Euros) other than in the ordinary course of business;

 

9.1.4                     maintain insurance protection material for the business of the Group Companies comparable to that existing at the date hereof in all material respects;

 

9.1.5                     not enter into, amend or terminate any agreement with a Seller or a Sellers’ Affiliate (other than another Group Company) unless agreed herein;

 

9.1.6                     not amend any of their constitutional documents, issue any shares, equity securities or securities convertible into shares or equity securities or agree upon such issuance or grant any option or encumbrance in respect of or over shares or any such securities;

 

9.1.7                     not amend any of the Loans or make or permit any re-payments (principal or interest) of the Loans in whole or in part except scheduled regular quarterly interest payments;

 

9.1.8                     not amend any of the Enterprise Agreements or terminate or enter into other enterprise agreements within the meaning of Section 291 AktG with any Group Company being a party to it;

 

9.1.9                     not alter or terminate any of theagreements listed in Schedule 5.6.3and not to approach or discuss the impact of the transactions contemplated hereunder with any counter-partytothem and to comply with the reasonable instructions of Purchaser in relation to any such correspondence or dealing with any such agreements and counter-parties;

 

9.1.10              settle, contribute or transfer, as the case may be, the balances of or claims under the Cash Pool Agreements, the Enterprise Agreements and the Loans exclusively in accordance with the principles set out inSchedule 9.1.10 no later than immediately prior to the delivery of the estimate of the Preliminary

 

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Purchase Price pursuant to Clause 3.2 and using (only) the actual balances as at the time of the respective settlement, contribution or transfer.

 

9.2                              The Purchaser hereby undertakes

 

9.2.1                     not to amend any provisions of, or waive any rights under, the loan agreement or the commitment pursuant to Clause 7.6.1, or the equity commitment letter pursuant to Clause 7.6.3 in a manner that would adversely affect its ability to pay the Preliminary Purchase Price, any Balancing Payment or any payment pursuant to Clause 12.4;

 

9.2.2                     to draw down at Closing such amounts under the loan agreement pursuant to Clause 7.6.1 and the equity commitment letter pursuant to Clause 7.6.3 as may be required to pay the Preliminary Purchase Price in full;

 

9.2.3                     save to the extent not required to make such payments, not to use any of the funds under the loan agreement pursuant to Clause 7.6.1 and the equity commitment letter pursuant to Clause 7.6.3 for any purpose other than for the financing of its obligations to pay the Preliminary Purchase Price, any Balancing Payment and any payment under Clause 12.4under this Agreement; and

 

9.2.4                     to procure that CeramTec notifies the Regional Government of Upper Franconia (Regierung von Oberfranken) as authority deciding upon the grant of a subsidy for the enlargement of the Marktredwitz facility promptly after Closing of the change in the shareholding in CeramTec.

 

9.3                              Enterprise Agreements

 

9.3.1                     The Sellers and RSGG shall ensure and evidence to the Purchaser that the Enterprise Agreements will be terminated with effect as of 24:00 h CEST on the Closing Date without any liability of any Group Company. RSGG and the Purchaser shall each procure that the P&L Agreement, will at all times be effectively implemented (tatsächlich durchgeführt). The results (i.e. profit or loss) of CeramTec until the termination of the P&L Agreement will be for the account of the Sellers. The Purchaser shall procure that the respective attributable profits (abzuführender Gewinn) of CeramTec for the last fiscal year ending prior to or on the Closing Date, if any, shall be paid from CeramTec to RSGG, and RSGG shall pay to CeramTec an amount equal to the attributable losses (zu übernehmender Verlust) for the same time period, if any. For purposes of the Purchase Price calculation and adjustment, an attributable profit, as the case may be, is to be treated as Financial Indebtedness and an attributable loss as Cash. The amount to be paid by CeramTec to RSGG or vice versa under the P&L Agreement shall be bindingly determined on the

 

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basis of the individual annual accounts of CeramTec as of the date of the termination of the P&L Agreement (the “CeramTec Profit Pooling Accounts”). The Purchaser shall ensure that the CeramTec Profit Pooling Accounts shall be prepared by CeramTec in conjunction with RSGG on a consistent basis, applying (to the extent in accordance with mandatory law) the same policies, procedures, practices and election rights as applied in the previous accounts.

 

9.3.2                     The CeramTec Profit Pooling Accounts shall be deemed accepted by RSGG and Purchaser and shall become binding upon the Parties unless the Purchaser or RSGG, within twenty (20) Business Days following the receipt of the CeramTec Profit Pooling Accounts from CeramTec, object to the other Party in writing, describing the deviations in fixed amounts and in detail the backgrounds and reasons for each of those items to which they object. The Parties shall be deemed to have agreed with all items and amounts to which they do not object in such notice, which items and amounts shall become binding between the Parties. If the Parties deliver such notice, Clauses 4.3 and 4.4 shall apply mutatis mutandis.

 

9.3.3                     The Purchaser shall procure that the CeramTec Profit Pooling Accounts are not amended, re-filed or otherwise modified without the prior written consent of RSGG; the Purchaser shall procure that upon RSGG’s written request (acting reasonably), the CeramTec Profit Pooling Accounts shall be amended in accordance with the written instructions of RSGG, if and to the extent required in order to achieve a due implementation of the P&L Agreement.

 

9.3.4                     In case of obligations resulting from a subsequent challenge of the amount of the profit transferred or the losses paid under the P&L Agreement with respect to any fiscal year, RSGG will and the Purchaser shall procure that CeramTec will fulfill any resulting obligation. Concurrently with any payment by RSGG to CeramTec, the Purchaser shall pay to RSGG an amount equal to such payment and, concurrently with any payment by CeramTec to RSGG, RSGG shall pay to the Purchaser an amount equal to such payment.

 

9.3.5                     The Purchaser shall and shall procure that CeramTec will, indemnify and hold harmless RSGG from any claims for the granting of collateral under Section 303 AktG by third parties.

 

9.4                              Cash Pools

 

9.4.1                     The Sellers and RSGG shall and shall procure, as the case may be, that at the latest ten (10) Business Days before Closing, the participation to or the cash pool agreements, as the case may be, which are listed in Schedule 9.4.1(which

 

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are all the cash pool agreements in which a Group Company on the one hand and any Seller or a Sellers’ Affiliate on the other hand is party or participates) (“Cash Pool Agreements”), shall be terminated.

 

9.4.2                     Without prejudice to Clause 9.1.10 which shall take precedence, the balances under the Cash Pool Agreements shall be (i) repaid, (ii) contributed into the free capital reserves of the respective company, or (iii) transferred as a shareholder loan or debt, as the case may be, to the Purchaser at nominal value including accrued interest at Closing, in which case (iii) the representations and warranties given in Clause 5.2.2 shall apply mutatis mutandis and be deducted from the Purchase Price as Financial Indebtedness or increase the Purchase Price as Cash (as the case may be pursuant to Clause 3.1.2). The Sellers will notify the Purchaser when the balances under the Cash Pooling Agreements have been settled pursuant to (i) or (ii), at the latest ten (10) Business Days before Closing.

 

9.4.3                     With effect as of Closing, the Sellers and RSGG hereby waive (and shall procure the waiver by all Sellers’ Affiliates and by all relevant banks of) any claim (known or unknown, actual or contingent) against any Group Company resulting from or in connection with the Cash Pool Agreements (save for the settlement and transfer of Loans as agreed herein).

 

9.5                              Resignation and Discharge

 

9.5.1                     At the Closing, the Sellers shall deliver to the Purchaser such resignation letters and resolutions or other declarations as may be necessary or appropriate such that the individuals listed in Schedule 9.5.1 shall cease to be members of the supervisory board or advisory board (Beirat) or to be directors or officers of the relevant Group Company as indicated in Schedule 9.5.1 and shall grant them full discharge (Entlastung) and a waiver of any claims against them, except for fraud or willful misconduct. Each of the Group Companies and the Purchaser hereby waives all claims it may have against them (now or in the future) and Purchaser shall procure that no Group Company conduct such a claim.

 

9.5.2                     Schedule 9.5.2 contains

 

(a)                                a waiver by all Group Companies for any claims for which the Sellers and Sellers’ Beneficiaries could be held liable for any existing or future (known or unknown, actual or contingent, accrued or not accrued) liability or obligation by any Group Company or any liability or obligation arising out of or in connection with the conduct of the

 

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business of any Group Company prior to the Closing Date, save to the extent settlement of such claims is provided for in this Agreement; and

 

(b)                                a waiver by all Sellers and Sellers’ Affiliates for all claims for which the Group Companies could be held liable for any existing or future (known or unknown, actual or contingent, accrued or not accrued) liability or obligation by any Seller or Sellers’ Affilate or any liability or obligation arising out of or in connection with their conduct of the business prior to the Closing Date, save to the extent settlement of such claims is provided for in this Agreement; and

 

(c)                                 the indemnifications by Group Companies referred to in Clauses 8, 9.3.5 and 15.7.

 

9.5.3                     The Purchaser shall

 

(a)                                immediately after Closing adopt a confirming shareholders’ resolution approving the waivers and indemnifications issued by the Group Companies pursuant to this Clause 9.5; and

 

(b)                                ensure that no Group Company raises or asserts any claim whatsoever relating to periods prior to the Closing Date against any of Sellers and Sellers’ Beneficiaries after Closing, and

 

RSGG and the Sellers shall not, and shall ensure that no Sellers’ Affiliate shall, raise or assert any claim whatsoever relating to periods prior to the Closing Date against any of the Group Companies after Closing other than in relation to the implementation of the Enterprise Agreements pursuant Clause 9.3.

 

9.6                              Pensionskasse Dynamit Nobel VVaG

 

9.6.1                     Schedule 9.6.1 contains copies of offers to conclude participation agreements between (i) CeramTec and (ii) Emil Müller GmbH under which these companies may continue to participate in the Pensionskasse Dynamit Nobel VVaG pension fund. These participation agreements have been counter-signed by RSGG and have been provided to each of CeramTec and Emil Müller GmbH as offers to conclude such agreements that are open for acceptance until the Closing Date.

 

9.6.2                     If Purchaser, until five (5) Business Days prior to the Closing Date, decides that both or one of CeramTec and Emil Müller GmbH should accept the offers to conclude these participation agreements, RSKG shall exert its shareholder and other rights, including by directing (anweisen) management of CeramTec (i) to conclude these participation agreements or (ii), as the case may be,

 

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absent such decision, not to conclude these participation agreements. Neither RSGG nor RSKG shall be liable for failure of CeramTec and Emil Müller to adhere to such directions. If Purchaser requests to unwind such participation agreement prior to the Closing Date, this Clause 9.6.2shall apply mutatis mutandis.

 

9.7                              Cooperation and Information Exchange

 

9.7.1                     The Sellers and RSGG agree that, prior to the Closing Date, the Purchaser shall, subject to the Sellers’ prior approval, not to be unreasonably withheld, delayed or conditioned, and each only to the extent permissible under all applicable laws, including any applicable antitrust and merger control laws and regulations, be entitled to receive such information on the businesses and operations of the Group Companies as it reasonably requests for the purpose of (i) preparing the Closing, (ii) preparing the integration of the Group Companies after the Closing Date and (iii) filing and obtaining Regulatory Clearances and such other filings and clearances as may reasonably berequested by the Purchaser. Any such information requests and any exchange of information shall take place during regular business hours and under reasonable circumstances without unreasonable interference with the business operations of the Group Companies and in full compliance with applicable law. Information requests shall be exclusively addressed to the individuals designated in Part A of Schedule 9.7.1and any discussions and other direct contacts with the Group Companies shall on the Purchaser’s side be pursued by the individuals designated in Part B of Schedule 9.7.1. The Sellers and RSGG shall reasonably cooperate, and shall cause the Group Companies to reasonably cooperate, therein.

 

9.7.2                     From the Signing Date until Closing the Sellers and RSGG shall use all reasonable efforts in their capacity as sole shareholders of the Companies (in particular by passing, without undue delay after the execution of this Agreement, instructing shareholders resolutions for all Group Companies) to ensure that the senior management of the Group provides the Purchaser, on a timely basis, with such cooperation as the Purchaser may reasonably request in order for the Purchaser to complete, as soon as practicable and in consultation with the financing banks (i) an offering of debt securities in a transaction exempt from the registration requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”), pursuant to Regulation S and Rule 144A under the Securities Act (the “High Yield Financing”), and (ii) bank financing (the “Bank Financing”) and (iii) any equity syndication proposed by the Purchaser or any of its direct or indirect shareholders (the “Equity Syndication”) and together with the High Yield Financing and the Bank Financing, the “Financing”), each in connection with the transactions

 

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contemplated hereby, including the refinancing of the existing indebtedness of the Group, including without limitation those matters specified in Schedule 9.7.2.

 

9.7.3                     The Purchaser shall use itsbest efforts to ensure that the Condition Precedent in Clause 2.4.1 is satisfied as soon as possible after the date hereof (in particular that the Regulatory Clearances are obtained without any conditions or obligations being attached thereto) and the Seller shall use its best efforts to ensure that the Condition Precedent in Clauses 2.4.2 and 2.4.4are satisfied as soon as possible after the date hereof. In particular:

 

(x)                                the Purchaser shall, at the latest on the tenth (10th) Business Day following the Signing Date submit or procure the submission of

 

(i)                                    the draft Notification to the European Commission under the EU Merger Regulation (Council Regulation (EC) 139/2004);

 

(ii)                                 the Filings required by the Committee on Foreign Investment in the United States;

 

(iii)                              the GermanForeign Investment Act;

 

in each case as identified in Schedule 2.4.1; and

 

(y)                                the Sellers shall, at the latest on the tenth (10th) Business Day following the Signing Date, submit or procure the submission of the filings related to the International Traffic in Arms Regulations in the United States.

 

The Purchaser (and the Sellers and RSGG in relation to (y) above) shall use all commercially reasonable efforts to promptly, correctly and fully satisfy any requests of the relevant authorities and shall keep each other promptly informed as to progress. In particular:

 

(a)                                the Sellers shall provide, and shall use all reasonable efforts in their capacity as sole shareholders of the Companies to procure that the Group Companies provide, to the Purchaser all information in their possession, which the Purchaser reasonably requests for this purpose; the Parties shall to the extent practicable and permitted under applicable law and subject to the redaction of commercially sensitive information:

 

(i)                                    provide to each other copies of all correspondence with the relevant authorities,

 

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(ii)                                 provide each other with the opportunity to participate in any meetings, conference calls or similar discussions with such authorities; and

 

(iii)                              not provide any information or otherwise communicate with any relevant authority without (i) first consulting with the other Party and taking into account their reasonable requirements and (ii) ensuring that the other Party can, if they so wish, attend or be represented in any such meeting, conference call or similar discussion.

 

(b)                                No information relating to any Party or to any companies, funds or entities associated or affiliated, controlled or managed by or under common control or management with them, or to their respective businesses shall be given to any relevant authority without the prior written consent of the relevant Party. No Party to this Agreement shall, and each Party shall procure that its ultimate parent entity shall not agree to, or take any other action which leads to, any voluntary extension or delay of any applicable waiting period in respect of a Regulatory Clearance (or other filing to be made by a Party) or the withdrawal of a notification or filing unless all parties give their prior written consent.

 

(c)                                 If any Party becomes aware that it is reasonably likely that the Condition Precedent in Clause 2.4.1 will not be satisfied or that conditions or obligations may be imposed which could affect the Sellers (or Purchaser) or hinder or delay the Closing, it shall promptly notify the other Parties in writing.

 

(d)                                Without limitation to RSGG and the Sellers’ right of rescission pursuant to Clause 12.1, the Purchaser’s obligation to use its best efforts as provided in this Clause 9.7.3 shall include its unconditional commitment to offer, consent, and comply with any obligations or conditions (Auflagen oder Bedingungen) as promptly as practical including committing to and effecting without undue delay the sale, divestiture or disposition of any of its assets, properties or businesses or of any assets, properties or businesses of the Group Companies, agreeing to change or modify any course of conduct regarding future operation of the Group or Purchaser’s affiliates, and entering into such other arrangements of any nature as are necessary or useful to avoid a material delay or a failure in obtaining the Regulatory Clearances or any other undertakings required by any competent merger control authority.

 

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(e)                                 With respect to any Regulatory Clearances, if the consummation of the Closing is prohibited by any governmental entity, upon aParty’s request, the Parties shall, without limitation to the Sellers’ right of rescission pursuant to Clause 12.1, contest such decision (including by way of litigation) and use their best efforts to ensure that the Closing may be consummated as contemplated by this Agreement and as timely as reasonably practicable.

 

(f)                                  The Purchaser may not request any adjustment or repayment of the Preliminary Purchase Price or other amendment of this Agreement as a result of any divestiture or other action pursuant to this Clause 9.7.3.

 

9.7.4                     At all times after the Closing the Purchaser will grant the Sellers and their advisors and representatives at their own expense reasonable access to the books, records and employees of the Group Companies, which the Sellers may properly require for auditing, tax and other regulatory purposes not related with any claim under or in connection with this Agreement. Clause 9.7.1, 2nd sentence shall apply mutatis mutandis. Any information to which the Sellers and their advisors have so had access shall be treated in strictest confidence, not used for any other than said purpose and there shall be no obligation of either the Purchaser or any Group Company to disclose or make available trade or business secrets, including intellectual property.

 

9.7.5                     Subject to the terms and conditions of this Agreement and, with respect to any cooperation of the Sellers and, as applicable, RSGG, subject to reimbursement of any related costs and expenses (other than internal overhead and staff costs) of the Sellers arising in connection with such cooperation (including upon request reasonable advances for such costs and expenses), each of the Parties hereto shall cooperate with the other Parties and use their respective commercially reasonable efforts to promptly (i) take, or cause to be taken, all actions, and do, or cause to be done, all things, necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated under this Agreement, including preparing and filing without undue delay and fully all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents (including any required or recommended filings under applicable antitrust laws), and (ii) obtain all governmental approvals or other approvals, consents, registrations, authorizations and other confirmations from any governmental entity or third party necessary, proper or advisable to consummate the transactions contemplated under this Agreement.

 

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9.7.6                     Notwithstanding any specific obligations contained herein, neither Party shall be required to make or agree to make any payments to obtain any of the foregoing, except for filing or similar fees.

 

9.8                              RSGG shall transfer its share in PST Mexico to RSKG prior to the Closing Date and, upon written request of the Purchaser to be made without undue delay but in no event later than five (5) Business Days prior to the Target Closing Date, KL2 shall transfer the PST Poland Shares to CeramTec, in each case prior to Closing, at fair market value and warranting their unencumbered ownership in the so transferred shares as set out in Clauses 5.2.4 to 5.2.6 and 5.2.8mutatis mutandis. KL 2 may, but no later than ten (10) Business Days prior to the Closing Date, sell and transfer or contribute all (but not some only) of the PST Mexico Shares to RSGG. In case of such sale and transfer or contribution RSGG shall become the Seller in respect of the PST Mexico Shares under and on the terms of this Agreement as if it had been specified as the Seller of such Shares on the Signing Date.

 

9.9                              U.S. Employee Benefit Matters

 

9.9.1                     From and after the Closing Date until the eighteen (18) month anniversary thereof, the Purchaser shall, or shall cause the U.S. Companies to, provide (i) a base salary or base wages to each employee of the U.S. Companies whose employment continues following the Closing (each a “Continuing U.S. Employee”) at an annual rate that is no less than the annual rate of the base salary or base wages that was provided to such employee immediately prior to the Closing Date and (ii) employee benefits to the Continuing U.S. Employees that are substantially equivalent in the aggregate to the employee benefits provided to such employees immediately prior to the Closing Date.

 

9.9.2                     The Purchaser shall use commercially reasonable efforts to ensure that, at all times following the Closing, each Continuing U.S. Employee receives full credit for purposes of eligibility, vesting and benefit accruals (solely for purposes of determining vacation) for all service that was recognized by the U.S. Companies or any of their Affiliates under the U.S. Benefit Plans with respect to such employee under each of the comparable employee benefit plans, programs and policies of the Purchaser or its Affiliates (including the U.S. Companies) in which such employee becomes or may become a participant, provided that no such service recognition shall result in any duplication of benefits.

 

9.9.3                     Effective as of the Closing Date, the U.S. Companies shall withdraw from participation in all U.S. Benefit Plans other than U.S. Company Benefit Plans.

 

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9.9.4                     The Purchaser shall use commercially reasonable effort to, or to cause the U.S. Companies to, provide severance pay and benefit entitlements to any Continuing U.S. Employees whose employment is terminated by the Purchaser or its Affiliates (including the U.S. Companies), other than for cause, within eighteen (18) months after the Closing Date, in an amount no less favorable than the amount of severance pay and benefit entitlements determined in accordance with the severance policy applicable to such Continuing U.S. Employees as in effect in the twelve (12) months to the Closing.

 

9.9.5                     Effective as of the Closing, the Purchaser shall use commercially reasonable efforts to establish or maintain, or to cause to be established or maintained, one or more group health plans which shall cover all Continuing U.S. Employees and dependents who immediately prior to the Closing were covered under any group health plans maintained by any Group Company or any of their Affiliates. With respect to each health or welfare benefit plan maintained by the Purchaser or its Affiliates (including the U.S. Companies) for the benefit of the Continuing U.S. Employees, the Purchaser shall use commercially reasonable efforts to (i) cause to be waived any eligibility waiting periods, any evidence of insurability requirements and the application of any pre-existing condition limitations under such plan, to the extent waived under corresponding U.S. Benefit Plans in which the Continuing U.S. Employees participated immediately prior to the Closing, and use commercially reasonable efforts to (ii) cause each such employee to be given credit under such plan for all amounts paid by such employee under any similar U.S. Benefit Plans for the plan year that includes the Closing Date for purposes of applying deductibles, co-payments and out-of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the applicable plan maintained by the Purchaser or any of its Affiliates (including the U.S. Companies) for the plan year in which the Closing Date occurs.

 

9.9.6                     The Purchaser shall use commercially reasonable efforts to take all steps necessary to permit each Continuing U.S. Employee who has received an eligible rollover distribution (as defined in Section 402(c)(4) of the Code) from the Rockwood Retirement Plan to roll over such eligible rollover distributions, including any (to the extent permitted under the scheme) associated loans, as part of any lump sum cash distribution into account(s) under a 401(k) plan maintained by the Purchaser or its Affiliates (including the U.S. Companies).

 

9.9.7                     Nothing herein expressed or implied shall confer upon any of the employees of the Sellers, the Purchaser, the U.S. Companies or any of their Affiliates, any rights or remedies, including any right to benefits or employment, or continued benefits or employment, for any specified period, of any nature or kind whatsoever by reason of this Agreement.

 

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9.10                       Otherthan disclosed in Schedule9.10, there exists no agreement between the Sellers and/or Sellers’ Affiliates (excluding any Group Company) on the one hand and one or more Group Companies on the other hand; all such agreements will be terminated with effect as of Closing without any Group Company having any residual (actual or contingent) liability unless specified in Schedule9.10; Clause 9.5.2(b) remains unaffected.

 

9.11                       Schedule 9.11contains a copy of a proposal to conclude certain tail and other risk insurance cover for the Group Companies after Closing. Sellers and RSGG undertake to cooperate in good faith with the Purchaser to finalise appropriate arrangements without undue delay after the date hereof. If Purchaser decides until five (5) Business Days prior to the Closing Date that the proposal should be implemented and the Sellers and RSGG shall exercise their shareholder and other rights, including by directing (anweisen) management of CeramTec (i) to conclude the necessary agreements or (ii), as the case may be, absent such decision, not to conclude any such agreements.

 

9.12                       RSKG shall procure that prior to the Closing Date CeramTec shall pay an amount equal to the Deferred Purchase Price Amount to a separate bank account of CeramTec blocked at terms reasonably satisfactory to Purchaser.

 

10.                              NON-COMPETE COVENANT

 

10.1                       Sellers and RSGG undertake and shall procure that their Affiliates (other than the Group Companies following Closing), for a period of two years from the Closing Date, not to, either directly or indirectly, carryon or be engaged, concerned or interested in or assist or engage in Competition, or proactively promote Competition by third parties, with the business of the Group. “Competition” is any activity in the field of activity of the Group as of the Closing Date and in the twelve (12) month period prior thereto and in the same geographical area as of the Closing Date.

 

10.2                       Sellers shall be entitled to acquire and to hold an interest in the aggregate of up to 15% of the respective capital or voting rights in companies competing with CeramTec provided that such interest will be acquired and held by any Seller for investment purposes only. The foregoing non-compete covenant shall also not apply to (i) the acquisition of a controlling interest in an entity or group of entities if the average annual sales generated by such entity or group of entities with the competing activities in the last three full fiscal years preceding the acquisition do not exceed 20% of the average aggregate sales of such entity or group of entities in such three-year-period and (ii) any third party (and Affiliates thereof other than the Group) that acquires the Group or any member thereof.

 

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11.                              TAX MATTERS

 

11.1                       Definitions

 

11.1.1              “Tax” or “Taxes” means (i) all taxes in the sense of Section 3 par. 1 to 4 German General Tax Code (Abgabenordnung) or equivalent provisions of other jurisdictions, in each case including customs, duties, excise tax, stamp duty, civil law activities tax, (podatek od czynności cywilnoprawnych)property tax and environmental tax, (ii) any secondary liability for Taxes (Haftung für Steuern), (iii) social security contributions, (iv) any withholding tax and wage tax, (v) any Tax equivalent indebtedness based on contractual arrangements (e.g. under a Tax sharing agreement (Steuerumlagen), contractual tax guarantee or contractual tax indemnity or compensation payments for VAT under VAT fiscal unity), (vi) any charges for non-compliance with transfer pricing obligations, (vii) any de-grouping charges or similar charges based on law or contractual arrangements,and (viii) all penalties, charges, costs and interest relating thereto, with the exception of (a) investment grants or similar public investment subsidies (Investitionszuschüsse oder -zulagen) and (b) any deferred taxes (latente Steuern).

 

11.1.2              “Tax Authority” means any taxing or other authority competent to impose any liability in respect of Taxes or responsible for the administration and/or collection of Taxes or enforcement of any law in relation to Taxes.

 

11.2                       Tax Indemnity

 

11.2.1              Subject to the provisions of Clauses6.4, 6.5.2and Clauses 11.2.3 to 11.2.6, the Sellers shall indemnify the Purchaser against any liability for the payment of

 

(a)                                any Taxes which are payable by a Group Company (or its legal successor) to any Tax Authority for Tax periods ending on or prior to the Closing Date; and

 

(b)                                with respect to the U.S. Companies any liability for Taxes of any consolidated, combined or unitary group, for Tax purposes, imposed on the U.S. Companies with respect to Tax periods ending on or prior to the Closing Date as a result of the application of Treasury Regulation § 1.1502-6 or any similar provision of state, local or foreign law; and

 

(c)                                 any de-grouping charges or any claims raised by Sellers or a party related to the Sellers for compensation of Taxes as a result of any de-grouping or termination of a tax group; and

 

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(d)                                (any claims based on this Clause 11.2 the “Tax Indemnification Claim”).

 

11.2.2              For the avoidance of doubt, the Sellers shall not represent the existence of any tax attribute nor shall they be liable for the forfeiture of any tax attribute (including, but not limited to Tax losses, Tax loss carry forwards or Tax loss carry backs, interest carry forwards, EBITDA carry forwards as well as any other type of tax attribute that may be affected by a direct or indirect change in ownership) of the Group that may e.g. result from (i) the sale of the Shares contemplated by this Agreement (for example, as per Section 8c German Corporate Income Tax Act (Körperschaftsteuergesetz)) or (ii) a set-off against income relating to periods ending on or prior to the Closing Date.

 

11.2.3              The Sellers shall not be required to indemnify the Purchaser from any Taxes pursuant to this Clause 11.2 if and to the extent that such Taxes

 

(a)                                have been paid on or prior to the Closing Date;

 

(b)                                are shown in the Closing Financial Statements as Tax liabilities or Tax provisions and have increased the Financial Indebtedness or decreased the Net Working Capital;

 

(c)                                 can be raised as a claim for repayment or indemnification of the Purchaser or any Group Company against a third party and can be collected within twelve (12) weeks after it has been raised by Purchaser or a Group Company;if a claim for repayment or indemnification of the Purchaser or any Group Company against a third party cannot be collected within twelve (12) weeks after it has been raised by Purchaser or a Group Company, the Purchaser will or procure that the relevant Group Company will assign such claim to the Sellers pari passu with the relevant indemnity payment (Zug um Zug) and reasonably assists the Sellers to enforce and collect such claim against the third party;

 

(d)                                are the result of a reorganizationwith retroactive effect for legal and/or tax purposes or other measures initiated by the Purchaser or any of its Affiliates (or, after Closing, the Group), or their respective directors, officers, employees, agents or other representatives, including causing any Group Company to amend any Tax Returnsunless such measuresare mandatory under applicable law;

 

(e)                                 arise or are increased as a result of the failure or omission of the Purchaser or any of its Affiliates (or, after Closing, the Group Companies) to make any valid Tax election as reasonably requested by

 

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the Sellers in writing after the Closing Date, the making, giving or doing of which was taken into account in computing for Tax Provisions in the individual annual accounts or the Closing Financial Statements; or

 

(f)                                  arise as a result

 

(i)                                    of a breach of an obligation of the Purchaser as set forth in Clause 11.7 below. The burden of proof with respect to this Clause is with the Purchaser where the alleged breach arises as a result of (x) a deadline with respect to Taxes (in particular, but not limited to a deadline with respect to any remedy against a Tax assessment) was missed, (y) the Purchaser or any Group Company settled a Tax assessment, a Tax audit or a Tax litigation without consultation of the Sellers or (z) the Purchaser has not followed the explicit instruction of the Sellers which were given in accordance with Clauses 11.7.4 and11.7.5. In all other cases relating to this Clause 11.2.3(f)(i)the burden of proof is with the Sellers; or

 

(ii)                                 of breach of any tax covenant set forth in Clause11.5.

 

11.2.4              If and to the extent that any Group Company (or its legal successor), the Purchaser or a related party of the Purchaser is in periods starting after the Closing Date entitled to any benefits in respect of Taxes including, without limitation, benefits resulting from the lengthening of any amortization or depreciation periods, higher depreciation allowances, a step-up in the Tax basis of assets, the non-recognition of liabilities or provisions (Phasenverschiebung) as a result of an adjustment or payment giving rise to a Tax Indemnification Claim (collectively the “Tax Benefits”), the Tax Indemnification Claim shall be reduced by the value of any such Tax Benefit unless such Tax Benefit has already been compensated pursuant to Clause 11.3.1; it being understood that the value of the Tax Benefit shall reduce the Tax Indemnification Claim (x) in the full amount (plus any interest thereon pursuant to Section 233a German Fiscal Code (Abgabenordnung) or equivalent provisions under other jurisdictions actually paid by any Tax Authority in relation to the relevant Tax Benefit) if and to the extent the Tax Benefits are realized in periods prior to the day on which the relevant Tax Indemnification Claim becomes due, or (y) in the amount of the net present value of the Tax Benefits if and to the extent the Tax Benefits arise in periods after such date, whereby the net present value shall be calculated as of the day the Tax Indemnification Claims becomes due by discounting the Tax Benefit

 

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by 5.5% p.a. over a period of seven (7) years (or if shorter the residual life of the Tax Benefit).

 

11.2.5              Any obligation of the Sellers to indemnify the Purchaser pursuant to this Clause 11.2 shall apply, and be limited, to the percentage of such obligation which corresponds to the percentage of the direct or indirect capital interest of the respective Seller in the relevant Group Company.

 

11.2.6              Any Tax Indemnification Claim shall become due and payable to the Purchaser five (5) Business Days prior to the date at which the relevant Taxes become due and payable to the relevant Tax Authorities, but not earlier than five(5) Business Days after the Sellers have received the Purchaser’s notice pursuant to Clause 11.7.3 below.

 

11.3                       Tax Refunds and Reverse Indemnity

 

11.3.1              Subject to the provisions of this Clause 11.3, the Purchaser shall pay to the Sellersthe amount of any repayment of any Tax, whether in cash or by way of set-off (the “Tax Refund”), received after the Closing Date by a Group Company, the Purchaser (or its legal successor) or a related party of the Purchaser forany period ending on or before the Closing Date minus any Taxes levied on the Tax Refund which are payable by the Purchaser or a related party of the Purchaser or after the Closing Date by a Group Company (or any of its legal successors) unless such Tax Refund is shown in the Closing Financial Statements as an asset. A Tax Refund shall also be deemed to have occurred if and to the extent that the amount of any Tax liabilitiesor Tax provisions(including for the avoidance of doubt the accruals for real estate transfer tax) shown in the Closing Financial Statements and included in the Financial Indebtedness or the Net Working Capitalis found to be in excess of, or unnecessary in respect of, the matter for which such liability or provision has been recorded.

 

11.3.2              If and to the extent the income of a Group Company for the period ending on or before the Closing Date is increased after such date (e.g., by any Tax Authorities) and such increase of the income does not result in an actual Tax payment of the respective Group Company due to the fact that Taxes on the income of such Group Company are assessed directly against and paid in cash by the Sellers or any related party of the Seller due to the existence of a Tax group (Organschaft), the Purchaser shall compensate the Sellers by way of payment of an amount calculated in accordance with the principles set out in Clause 11.2.4 for any Tax Benefits of any Group Company, the Purchaser or any related party of the Purchaser (or the respective legal successor) resulting

 

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from a decrease of the taxable income of the Group Company (or their legal successor) in periods beginning after the Closing Date.

 

11.3.3              Any amount payable to the Sellers pursuant to this Clause 11.3 in respect of Taxes shall be due and payable within ten (10) Business Days after the Tax Refund pursuant to Clause 11.3.1 has been received (in whatever manner) or the Tax giving rise to the Tax Benefit pursuant to Clause 11.3.2 has been assessed.

 

11.4                       Settlement of VAT Fiscal Unity

 

11.4.1              With respect to the VAT fiscal unity (umsatzsteuerliche Organschaft) between RSGG as the common company (Organträger) and all German Group Companies as the controlled entities (Organgesellschaften, the controlled entities jointly referred to as the “Controlled VAT Members”),

 

(a)                                the respective Controlled VAT Member shall, and the Purchaser shallprocure that the respective Controlled VAT Member will reimburse RSGG for any output VAT (Umsatzsteuer), which (i) relates to supplies rendered or advance payments received by suchControlled VAT Member until and including the Closing Date and (ii) is paid or otherwise settled by RSGG in its capacity as the common parent, and

 

(b)                                RSGG shall reimburse the Controlled VAT Members for any input VAT (Vorsteuer), which

 

(i)                                    relates to supplies or advanced payments received by a Controlled VAT Member until and including the Closing Date; and

 

(ii)                                 credited to RSGG in its capacity as the common parent; and

 

(c)                                 RSGG shall reimburse each Controlled VAT Member for any special advance payment (Sondervorauszahlung) if and to the extent the respective Controlled VAT Member indemnified RSGG in respect of such special advance payment (Sondervorauszahlung).

 

11.4.2              The Controlled VAT Member shall not be required to reimburse RSGG pursuant to Clause 11.4.1(a), and RSGG shall not be required to reimburse the Controlled VAT Members pursuant to Clause 11.4.1(b) if, and to the extent that,the Controlled VAT Member effected payment of the respective output VAT amount to RSGG or received payment of the respective input VAT amount from RSGG, as the case may be, until and including the Closing Date.

 

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11.4.3              For the avoidance of doubt, Clause 11.2and Clause 11.3 remain unaffected.

 

11.5                       Tax Covenants by the Purchaser

 

11.5.1              After the Closing Date, the Purchaser shall not take, or permit a Group Company to take, any actionwith respect to tax filings or with (retroactive) legal effect for periods ending on or before the Closing Date (including any new Tax election or any change in the exercise of any Tax election right, the approval or implementation of any reorganization measure) that gives rise to, or results in any increase or acceleration of any Tax liability, any increase of taxable income or any reduction of Tax losses, in each case of the Sellers or related party of the Sellers or of the Group Companies with respect to periods ending on or before the Closing Date, in each case unless required by law or permitted, initiated or directed by the Sellers pursuant to this Clause 11or otherwise.

 

11.5.2              The Purchaser shall indemnify the Sellers and any related party of the Sellers from any Taxes relating to any period beginning after the Closing Date which are payable by the Sellers or any related party of the Sellers for the Group Companies.

 

11.5.3              If the Purchaser fails to comply with any covenant set forth in this Clause 11.5, the Purchaser shall indemnify and hold harmless the Sellers and any related party of the Sellers from and against any Taxes of the Sellers and any related party of the Sellers which are caused by such failure.

 

11.6                       Allocation of Taxes

 

11.6.1              For purposes of this Clause 11, Taxes allocable to the fiscal year, during which Closing occurs, shall be determined as if the fiscal year for Tax purposes ended on the Closing Date, irrespective of whether the fiscal year actually ends on the Closing Date; Tax allowances (Steuerfreibeträge) shall be allocated to the portion of the fiscal year prior to and after the Closing Date on a pro rata basis.

 

11.6.2              As far as complying with applicable law and accounting standards, all determinations necessary to give effect to the allocations under this Clause 11.6 shall be made in a manner consistent with past practice of the Group Companies.

 

11.6.3              For the avoidance of doubt, for the purpose of this Clause 11.6, a Tax shall also be attributable to a period ending on or prior to the Closing Date, if such Tax relates to incorrect Tax balance sheets for periods ending on or prior to the Closing Date which have been corrected (Bilanzberichtigung) with effect to

 

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Tax periods ending after the Closing Date due to expiration of statute of limitation.

 

11.7                       Cooperation in Tax Matters; Tax Audits and Proceedings

 

11.7.1              Except as provided in Clause 11.7.2, after the Closing Date, the Purchaser shall prepare and file (or cause the Group Companies to prepare and file), when due, all returns, declarations, reports, claims for refund, notices, forms or information relating to any Tax (the “Tax Returns”) required to be filed by or on behalf of the Group Companies with respect to periods ending on or before the Closing Date. Such Tax Returns shall be prepared on a consistent basis, applying (to the extent in accordance with mandatory law) the same policies, procedures, practices and election rights as applied in the preparation of the Tax Returns for previous Tax periods of the relevant Group Company, provided, however, that any claims for capital allowances and surrenders of group relief under Tax in the United Kingdom shall be made as directed by Sellers with respect to any time periods until the Closing Date (the “Relevant Principles”). The Purchaser shall provide, or cause to be provided, drafts of such Tax Returns other than monthly tax filings or equivalent regular Tax filings as timely prior to the relevant filing date as reasonably appropriate but in any event with respect to tax returns the filing of which is not due within fifty (50) Business Days from Closing not later than twenty-five (25) Business Days before the tax returns are due in order to enable Sellers to review such Tax returns and provide comments thereon to the Purchaser. All such Tax Returns and any amendments to all Tax Returns filed by the Group Companies which relate to periods ending on or before the Closing Date shall require the prior written consent of the Sellers and shall, if the Sellers and the Purchaser fail to reach an agreement thereon, be prepared and filed in accordance with Sellers’ instructions, except if and to the extent these instructions do not comply with mandatory law or the Relevant Principles. The consent of the Sellers is deemed to be granted if the Sellers do not provide the Purchaser within fifteen(15) Business Days after having received the draft Tax Return with reasonably detailed, written instructions in respect of the filing of Tax Return. If a Group Company forms two short financial years (Rumpfwirtschaftsjahre) in the calendar year, in which the Closing Date falls, and if further the income or other tax items attributable to these two short fiscal years are reported in one Tax assessment period, it is being understood that the provisions of this Clause 11.7.1 shall apply only to the first short fiscal year ending on or prior to the Closing Date.

 

11.7.2              Sellers shall prepare and file, or cause to be prepared and filed, when due:

 

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(a)                                all United States consolidated federal Income Tax Returns which include the U.S. Companies and any other member of the Rockwood group with respect to periods ending on or prior to the Closing Date;

 

(b)                                any other consolidated, combined or unitary Tax Return which includes the U.S. Companies and RSGI or any other member of the Rockwood group with respect to periods ending on or prior to the Closing Date;

 

(c)                                 any other state or local income or franchise Tax Returns for the U.S. Companies with respect to periods ending on or prior to the Closing Date; and

 

(d)                                any United Kingdom corporation Tax Returns for any Group Company or any Subsidiary with respect to periods ending on or prior to the Closing Date.

 

Clause 11.7.1 sentences 2, 3, 4 and 5 shall apply mutatis mutandis to all such returns and filings.

 

11.7.3              After the Closing Date, the Purchaser shall within ten (10) Business Days after receipt provide (and cause the Group Companies to provide) the Sellers with copies of all tax assessment notices (Steuerbescheide), other written decisions and written notices of any Tax audit, proceeding or investigation and any other written communication received by any Group Company, the Purchaser or any related party of the Purchaser from any Tax Authority, court or other third party and relating to Taxes of the periods ending on or before the Closing Date that could reasonably be expected to give rise to a Tax Indemnification Claim (the “Relevant Tax Matter”). Such notice may be made available to Sellers in electronic form and shall upon reasonable request of the Sellers be accompanied by evidence necessary to determine the relevant facts and amounts.

 

11.7.4              With respect to any Relevant Tax Matter, the Purchaser shall procure that (i) Sellers and Sellers’ advisors are granted the right to participate in meetings and correspondence with the relevant Tax Authorities, including in connection with any Tax audits, (ii) all written questions or information requests by the Tax Authorities, including Tax auditors, are forwarded to the Sellers as soon as reasonably practical for evaluation and comments and (iii) such comments are duly incorporated by the relevant Group Company in its statement to the Tax Authority as far as such comments comply with mandatory law. The Purchaser shall procure that the Tax Authorities conducting the Tax audit shall be asked to raise their questions and information requests in writing and that the Seller is informed of the ongoing process of the Tax audits. The Purchaser

 

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shall not (and shall ensure that the Group Companies will not) settle, concede or give their consent to the findings of any Tax audit relating to any Relevant Tax Matter without the prior written consent of the Sellers. Upon the request of the Sellers, the Purchaser shall procure that, notwithstanding any other provision of this Clause 11.7, but without prejudice to Purchaser’s rights to co-operation and information under Clause 11, the Sellers or Sellers’ advisors may represent the Group members in any German and US tax audits or similar proceedings relating to Taxes allocable to periods until and including the Closing Date vis-à-vis the Tax Authorities and shall lead such audits or other proceedings vis-à-vis the Tax Authorities.

 

11.7.5              The Purchaser shall procure that, upon the request of the Sellers and at the Sellers’ expense, objections are filed and legal proceedings are instituted and conducted against any Tax assessments or other decisions of the Tax Authorities with respect to Relevant Tax Matters (herein collectively “Tax Litigation”) in accordance with the Sellers’ directions. The Sellers shall have the right to lead any Tax Litigation and the Purchaser shall cooperate and follow the Sellers’reasonable instructions and shall cause the Group Companies or their respective successors to cooperate and follow the Sellers’reasonable instructions in each phase of such Tax Litigation. The Purchaser shall provide, or procure that the Group Companies provide at Sellers’ expense, all documentation and information reasonably requested by the Seller as soon as reasonably practicable after the receipt of such request. The Purchaser shall not settle, and shall ensure that the Group Companies will not settle, any Tax Litigation without prior written consent of the Sellers.

 

11.7.6              After the Closing Date, the Parties shall, without prejudice to the other provisions of Clause 11, fully cooperate, and shall cause the Group Companies and their representatives to fully cooperate, in all other respects in connection with all Relevant Tax Matters, including the preparation and filing of any Tax Return or the conducting of any audit, investigation, dispute or appeal or any other communication with any Tax Authority. Following Closing and upon written request of the Purchaser, the Sellers shall and shall ensure that their Affiliates, make available to the Purchaser and the Group such reasonably requested tax related documentation concerning the Group that is available at the Sellers and Sellers’ Affiliates.The Purchaser agrees to cause the Group Companies to give the Sellers reasonable notice prior to discarding or destroying any books and records relating to Relevant Tax Matters and, if the Sellers so requests, to allow the Sellers to take possession of such books and records to be otherwise destroyed or discarded.

 

11.7.7              If the Closing Date falls on a date other than the date, at which the fiscal year of the relevant Group Company ends, the obligations of the Parties pursuant to

 

57

 

this Clause 11.7 shall apply to all matters, events, proceedings or similar circumstances relating to the time period (Zeitraum) beginning at the first date of the Group Company’s fiscal year and ending at (and including) the Closing Date. To the extent permitted by applicable law, Purchaser and Sellers shall cooperate in making any elections or taking any other action that will have an effect in taxable periods of the Group Companies that begin prior to the Closing Date and end on or prior to the Closing Date.

 

11.8                       Limitation Periods

 

Any claims of the Parties pursuant to Clause 5.10 and thisClause 11 shall be subject to a limitation period expiring as follows:

 

With respect to Tax, on the later of (i) six (6) months after the Tax assessment for the relevant Tax and the relevant period has become final and binding and cannot be amended to the detriment of a Group Company or (ii) the expiration of the statute of limitations applicable to Tax assessments for the relevant period or (iii) with respect to Tax which is not subject to assessment (e.g. Tax equivalents under tax sharing agreements) six (6) months after the respective Tax claim has been raisedor (iv) with respect to Tax refunds not later than six (6) months after the Sellers have been informed about such Tax refund.

 

11.9                       Real Estate Transfer Taxes and other Transfer Taxes and Notifications

 

11.9.1              Subject to Clause 3.10, the Purchaser shall bear any and all real estate transfer Taxes or other transfer Taxes incurred in connection with the purchase of the Shares in the Group Companies under the Tax laws of Germany or any other jurisdiction. The Sellers shall provide all information necessary for real estate transfer tax filings.

 

11.9.2              The Parties shall fully cooperate in keeping any transaction taxes low. Sellers shall make any filings and reporting’s in the People’s Republic of China necessary under Circular 698.The Sellers shall be responsible for any taxes with regard to the transfer of the shares in PST Mexico and shall timely provide all evidence and documentation as requested by Purchaser which Purchaser or a Group Company may require to avoid joint and several liability for taxes payable by Sellers upon the sale of the shares in PST Mexico, in particular evidence relating to the appointment of a legal representative (in notarised form affixed with a local apostille), a certificate of residence and copies of applicable tax return and tax attest report (Dictamen Fiscal sobre Enajenación de Acciones). At the direction of the Purchaser, the Seller, the Purchaser and their respective Affiliates shall elect to treat the purchase and sale of shares of CeramTec NA as a sale of assetsas provided in Section

 

58

 

338(h)(10) of the Code (and shall elect to apply any similar provision of state or local Tax law).

 

11.10                Treatment of Payments

 

Sellers and Purchaser, the U.S. Companies and their respective Affiliates shall treat any and all payments under this Clause 11 as well as any other claims under this Agreement, including any compensation for Breach and any payment pursuant to Clause 9.3.4 as an adjustment to the final Purchase Price unless they are required to treat such payments otherwise by applicable Tax laws.

 

12.                              RESCISSION

 

12.1                       The Sellers and RSGG collectively but not individually shall be entitled to rescind this Agreement at any time by written declaration hereof to the Purchaser, if they have complied fully (except if such non-compliance is not related to the triggering of the condition under Clause 12.1.1, 12.1.2 or 12.1.3 as the case may be) with their obligations under Clause 9.7of this Agreement and if:

 

12.1.1              the Condition Precedent in Clause 2.4.1 has not been fulfilled within four (4) months from the date of this Agreement (the “Long Stop Date”); or

 

12.1.2              if Purchaser has not fulfilled its obligation to make those filings for the Regulatory Clearancesspecified in Clause 9.7.3 (x)within twenty (20) Business Days after the Signing Date; or

 

12.1.3              the payment of the Preliminary Purchase Price under Clause 3.4is not made in full when due and such failure to pay continues for more than ten (10) Business Days.

 

12.2                       The Purchaser shall be entitled to rescind this Agreement at any time by written declaration hereof to the Sellers and RSGG if:

 

12.2.1              the Closing Date does not occur on or beforeOctober 12, 2013, 18:00 hrs CEST; or

 

12.2.2              the filings required to be made by the Seller under Clause 9.7.3(y) have not been duly made within twenty (20) Business Days after the Signing Date.

 

12.3                       If the Sellers, RSGG or the Purchaser rescind this Agreement under Clause 12, this Agreement shall terminate and cease to be of effect immediately, save only for the provision of this Clause 12 (Rescission), Clauses 6 (Indemnification by Sellers), 11.9 (Real Estate Transfer Taxes and Other Transfer Taxes and Notifications), 13 (Confidentiality) and 14 (Miscellaneous) which shall continue in full force and effect.

 

59

 

12.4                       In the event the Sellers and RSGG validly rescind this Agreement in accordance with Clause 12.1.1 or Clause 12.1.3, the Purchaser shall pay to RSKG a contractual penalty of EUR 30,000,000 (thirty million Euros).

 

12.5                       Any claims by Seller in respect of prior Breach or otherwise under this Agreement shall remain unaffected by any rescission (or absence of such), but the payment pursuant to Clause 12.4 shall be offset (angerechnet) against any other damage or payment claim which shall be limited to Losses.

 

13.                              CONFIDENTIALITY

 

13.1                       The Sellers and RSGG undertake and shall procure that their Affiliates undertake, for a period of two (2) years from the Closing Date to keep confidential all information constituting trade secrets of the Group known to them and not to disclose such matters and secrets, directly or indirectly, to any third party.

 

13.2                       Except as agreed between the Sellers and RSGG and the Purchaser in writing, no Party will issue any press release or other public communication relating to this Agreement or the transactions contemplated hereby and/or will disclose any details regarding this transaction and the content of this Agreement to any third party (other than to its respective representatives, advisors and financing institutions in connection with the preparation, negotiation and the completion of this Agreement and the transactions stipulated herein (including, for the avoidance of doubt, the Financing)  in each case subject to appropriate confidentiality obligations), provided however, that no Party shall be prevented from making disclosures required by applicable law.

 

13.3                       The obligations of confidentiality in Clauses 13.1 and 13.2 shall not apply to confidential information, which was or is lawfully obtained by the Sellers or RSGG from other sources not being a Group Company or the Purchaser (before or after Closing), which was or is or becomes generally available to the public other than through a breach of this Agreement by the Sellers or Sellers’ Affiliates or representatives or advisers, or which ceases to be a trade secret, or which is required to be disclosed to a competent tribunal or government agency or other regulatory body (including pursuant to a subpoena, civil investigative demand (or similar process), order, statute, rule of other legal requirement promulgated or imposed by a court or by a judicial, regulatory, self-regulatory or legislative body, organization, agency or committee or otherwise in connection with any judicial or administrative proceeding (including, in response to oral questions, interrogatories or requests for information or documents).

 

13.4                       Without prejudice to Clause 13.1 and notwithstanding Clause 13.2, the Sellers and RSGG shall be entitled to provide information, the disclosure of which would otherwise be prevented by Clause 13.2, to their partners, advisers, directors, officers

 

60

 

or employees and their affiliates (on a need to know basis), provided they are notified of the confidential nature prior to any disclosure to them and agree to keep such information properly confidential.

 

13.5                       Sellers and RSGG hereby waive any claim they may have resulting from or out of the execution of the non-disclosure agreement entered into with Cinven Partners LLP dated 28 February 2013 and irrevocably offer for the benefit of (echter Vertrag zu Gunsten Dritter) Cinven Partners LLP(i) to terminate such agreement with immediate effect and Sellers (ii) to assign to Purchaser all benefit rights and claims under any non-disclosure or similar agreement entered into by any of them or any of Sellers’ Affiliates with any other potential purchaser or finance provider in connection with the transactions contemplated in this Agreement. The same shall apply mutatis mutandis for any claim resulting from or in connection with any rules applying to the Data Room.

 

14.                             PURCHASER NOMINEE

 

14.1                       If the Purchaser timely notifies that one or more Purchaser Nominees are to become purchasers, each Purchaser Nominee shall owe and pay any purchase price (preliminary purchase price and balancing amount, if any) payable hereunder in respect of the Shares and Loans (if any) to be acquired by it.

 

14.2                       Each Purchaser Nominee shall be deemed to have givenmutatis mutandis the representations and warranties in relation to itself as set out in Clause 7 on a several basis (but not jointly and severally with the Purchaser or any other Purchaser Nominee), provided, however, that the Purchaser shall remain jointly and severally liable for any of the obligations then applicable to each of the Purchaser Nominees.

 

15.                              MISCELLANEOUS

 

15.1                       All notarial fees, transfer taxes, stamp duties and other public levies (but subject to Clause 3.10), as well as the costs of any merger control proceedings or other governmental approvals or filings connected with the execution and implementation of this Agreement, shall be borne by the Purchaser. Apart from the items set forth in this Clause 15.1, each Party shall bear its own costs and taxes and the costs of its advisors.

 

15.2                       This Agreement, including the Exhibits and Schedules, contains the entire agreement of the Parties with respect to the subject matter hereof. Any supplements or amendments to, or the termination of, this Agreement, as well as any declarations to be made hereunder, shall be valid only if made in writing, or if required by law, in due notarial form. This shall also apply to any change to, or cancellation of, this provision.

 

61

 

15.3                       Unless provided otherwise in this Agreement, all declarations (Willenserklärungen)to be made or notices to be given by the Parties under this Agreement shall be in writing in English. They may be made by facsimile, in which case they must simultaneously be sent by registered mail with recorded delivery, or in any other manner permitted by law.

 

15.4                       All declarations (Willenserklärungen) and notices under this Agreement or in consummation thereof shall be made, accepted or received with legally binding effect on behalf of a Party by the representative set out against its name below, and each Party so represented hereby fully grants the corresponding power of attorney to such representative:

 

15.4.1              As representative for the Sellers and RSGG:

 

	
Willkie Farr & Gallagher LLP
    
	
Attn: Georg Linde
    
	
An der Welle 4
    
	
60322 Frankfurt am Main, Germany
    
	
Email: glinde@willkie.com
    
	
Fax: + 49 69 79 302 222
    
	
 
    
	
with copies (which shall not be required to constitute notice) to:
    
	
 
    	
 
    
	
Rockwood   Holdings, Inc.
    	
 
    	
Rockwood   Specialties Group GmbH
    
	
Attn: Thomas J. Riordan
    	
 
    	
Attn: Udo Pinger
    
	
100 Overlook   Center
    	
 
    	
Königsberger   Straße 1
    
	
Princeton, NJ,   08540
    	
 
    	
60487 Frankfurt   am Main
    
	
United States
    	
 
    	
Germany
    
	
TRiordan@rocksp.com
    	
 
    	
udo.pinger@rocksp.de
    

 

15.4.2              As representative for the Purchaser:

 

	
Faenza   Acquisition GmbH
    
	
Attn: The   Managing Directors
    
	
Mainzer   Landstraße 46
    
	
60325 Frankfurt   am Main, Germany
    
	
Email: to be   notified
    
	
Fax: to be   notified
    
	
 
    
	
with copies (which shall not be required to constitute   notice) to:
    
	
 
    
	
Clifford Chance   Partnerschaftsgesellschaft
    
	
Attn: Christopher   Kellett
    
	
Az.: 41-40546525
    
	
Mainzer   Landstraße 46
    
	
60325 Frankfurt   am Main, Germany
    
	
Email: christopher.kellett@cliffordchance.com
    

 

62

 

	
Fax: +49 (0) 69 7199 4000
    

 

15.5                       Should a provision of this Agreement, or a provision included in this Agreement at a later point in time, be or become invalid or null and void as a whole or in part, or should a gap in this Agreement become evident, this does not affect the validity of the remaining provisions or parts thereof. The invalid or null and void provision shall be deemed replaced, or the gap shall be deemed filled, as the case may be, with effect ex tunc by such valid regulation which in legal and economic terms comes closest to what the Parties intended or would have intended in accordance with the purpose of this Agreement if they had considered the point at the time of conclusion of this Agreement.

 

15.6                       Unless expressly provided otherwise herein, the Purchaser shall not be entitled (i) to set off (aufrechnen) any rights and claims it may have against any rights or claims any other party may have under this Agreement or otherwise, or (ii) to refuse to perform any obligation it may have under this Agreement on the grounds that it has a right of retention (Zurückbehaltungsrecht) unless the rights or claims of the relevant party claiming a right to set off (Aufrechnung) or retention have been acknowledged (anerkannt) in writing by the relevant other party/parties or have been confirmed by final decision of a competent court (Gericht).

 

15.7                       The Purchaser acknowledges and agrees that none of Sellers’ Beneficiaries shall have any liability or obligation towards the Purchaser or any Group Company, arising out of, in connection with or resulting from the activities in connection with the preparation, negotiation and implementation of this Agreement and the transactions contemplated thereby (including but not limited to any information or advice given or supplied by the Sellers’ Beneficiaries) unless expressly agreed otherwise in writing between any of the Sellers’ Beneficiaries and the Purchaser.

 

15.8                       Subject to Closing,

 

15.8.1              the Purchaser hereby waives, and undertakes to not maintain, assert or enforce, any claims in existence at the Closing with respect to their grounds (dem Grunde nach bestehen) and not provided for in this Agreement against the Sellers and Sellers’ Beneficiaries, unless such claim is based on wilful misconduct (Vorsatz); and

 

15.8.2              the Sellers and RSGG shall waive and not enforce, and shall procure that the Sellers’ Affiliates shall waive and not enforce, any claim against any employee, officer or director of any Group Company, whatever the legal basis whether in connection with or arising out of the preparation, negotiation and implementation of the transactions contemplated by this Agreement or otherwise (in particular, but without limitation, in connection with any claim

 

63

 

of Purchaser or Purchaser Nominee against Seller and/or RSGG under or in connection with this Agreement), unless such claim is based on wilful misconduct (Vorsatz).

 

15.9                       If any payment or other performance is made by the Sellers or RSGG to the Purchaser (or at the Purchaser’s request to any Group Company) or by the Purchaser to the Sellers and/or RSGG in respect of any claim under or in connection with this Agreement, the payment or in case of a non-financial performance its financial value shall be treated as a correction of the consideration paid by the Purchaser for the Shares under this Agreement and such consideration shall be deemed to have been reduced or increased, as the case may be, by the amount of such payment.

 

15.10                Any obligation or liability of the Sellersor RSGG (other than for a Breach of Clauses 5.2.3 through 5.2.6, 5.10or for a claim under Clause 11) under, or arising from, this Agreement lapses in the event that after Closing (i) the ultimate controlling shareholder (or a group of shareholders acting jointly) of the Purchaser ceases to control (directly or indirectly) the majority of the voting rights or board seats or otherwise the management of the Purchaser, or (ii) the majority of voting rights or board seats or otherwise the management of the Purchaser becomes (directly or indirectly) controlled by a person or group of persons acting jointly who were not in control before.

 

15.11                The Purchaser shall not, in whole or in part, transact in rem (verfügen) any claims (including future or contingent claims) arising from or in connection with this Agreement by way of sale, transfer, agreement, covenant, assignment, encumbrance or otherwise without the prior written consent of the Sellers. This shall, without limitation, also apply to any disposal by way of a demerger pursuant to Section 123 Reorganisation Act (UmwG) unless the Purchaser’s claims arising from and in connection with this Agreement are by way of such demerger transferred together with all or substantially all other assets of the Purchaser to one and the same receiving entity. The transfer restrictions pursuant to this Clause 15.11 shall not apply in the event of an assignment to lenders or syndicatees (or their agent(s)) in connection with the financing of all or part of the Preliminary Purchase Price or final Purchase Price or the Group’s business.

 

64

 

15.12                The Sellers and RSGG hereby agree, that each of, RSKG and RSGI and the representative for the Sellers as set forth in Clause 15.4, each individually and exempted from the restrictions set forth in Section 181 BGB, are hereby authorized to represent the Sellers through any declaration or notice (in each case made or received) or action or any other legal measure in connection with or under this Agreement. If and to the extent the Sellers and RSGG are entitled to enforce a right or make a declaration, any such enforcement or declaration shall only be valid if made collectively for and by all the Sellers and RSGG.

 

15.13                This Agreement shall be governed by German law. The English language version shall be determinative (even if a translation is made), provided that where German expressions are used in parentheses, the German expression shall be determinative.

 

15.14                In this Agreement:

 

15.14.1       any German legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall, in respect of any jurisdiction other than Germany, be deemed to include what most nearly approximates in that jurisdiction to the German legal term and any reference to any German statute shall be construed so as to include equivalent or analogous laws of any other jurisdiction; and

 

15.14.2       the headings shall not affect the interpretation of this Agreement.

 

15.15                Any dispute arising from or in connection with this Agreement and its consummation shall be finally settled by three arbitrators in accordance with the arbitration rules of the International Chamber of Commerce as applicable from time to time without recourse to the courts of law. The venue of the arbitration shall be Frankfurt am Main, Germany. The language of the arbitral proceedings shall be English, provided however, that the Parties shall be entitled to submit written evidence in the German language. In the event mandatory applicable law requires any matter arising from or in connection with this Agreement and its consummation to be decided upon by a court of law, the competent courts in and for Frankfurt am Main, Germany, shall have the exclusive jurisdiction thereupon.

 

15.16                The Parties agree that Willkie Farr & Gallagher LLP shall not be prevented from representing the Sellers and their Affiliates (other than any Group Company), directors and officers in any matter in relation to this Agreement, including, but not limited to claims for Breach, claims for indemnification and rescission. The same shall apply mutatis mutandis in relation to Clifford Chance LLP (or any associated firm or entity) representing the Purchaser and/or its Affiliates, including any Group Company following Closing.

 

65

 

TABLE OF EXHIBITS AND SCHEDULES

 

	
Schedule (E)
    	
 
    	
Loans
    
	
 
    	
 
    	
 
    
	
Schedule 1
    	
 
    	
Sellers’ Knowledge
    
	
 
    	
 
    	
 
    
	
Schedule 2.1.3(a)
    	
 
    	
Polish Share Transfer Agreement
    
	
 
    	
 
    	
 
    
	
Schedule 2.1.3(b)
    	
 
    	
Mexican Share Transfer Agreement
    
	
 
    	
 
    	
 
    
	
Schedule 2.4.1
    	
 
    	
Regulatory Clearances
    
	
 
    	
 
    	
 
    
	
Exhibit 2.5
    	
 
    	
Consent by CeramTec and RSKG
    
	
 
    	
 
    	
 
    
	
Schedule 3.1.1
    	
 
    	
Allocation of Purchase Price
    
	
 
    	
 
    	
 
    
	
Schedule 3.1.2(a)
    	
 
    	
Cash
    
	
 
    	
 
    	
 
    
	
Schedule 3.1.2(b)
    	
 
    	
Financial Indebtedness
    
	
 
    	
 
    	
 
    
	
Schedule 3.1.2(c)-1
    	
 
    	
Definition of Net Working Capital
    
	
 
    	
 
    	
 
    
	
Schedule 3.1.2(c)-2
    	
 
    	
Reference Net Working Capital
    
	
 
    	
 
    	
 
    
	
Schedule 3.5
    	
 
    	
Escrow Agreement
    
	
 
    	
 
    	
 
    
	
Schedule 3.6
    	
 
    	
Closing Memorandum
    
	
 
    	
 
    	
 
    
	
Schedule 5.2.4
    	
 
    	
Subsidiary Shares
    
	
 
    	
 
    	
 
    
	
Schedule 5.3.2
    	
 
    	
Sureties, Guarantees
    
	
 
    	
 
    	
 
    
	
Schedule 5.4.1
    	
 
    	
Owned Real Estate
    
	
 
    	
 
    	
 
    
	
Schedule 5.4.2
    	
 
    	
Lease Agreements
    
	
 
    	
 
    	
 
    
	
Schedule 5.5.1
    	
 
    	
Intellectual Property Rights
    
	
 
    	
 
    	
 
    
	
Schedule 5.5.2
    	
 
    	
Challenges to Material IP
    
	
 
    	
 
    	
 
    
	
Schedule 5.6.2
    	
 
    	
Public Grants, Subsidies
    
	
 
    	
 
    	
 
    
	
Schedule 5.6.3
    	
 
    	
Suppliers, Customers
    
	
 
    	
 
    	
 
    
	
Schedule 5.6.5(d)
    	
 
    	
Encumbrances over Current and Fixed Assets
    

 

66

 

	
Schedule 5.6.6
    	
 
    	
Conduct of Business since January 1, 2013
    
	
 
    	
 
    	
 
    
	
Schedule 5.7.1
    	
 
    	
Special Rights for Management
    
	
 
    	
 
    	
 
    
	
Schedule 5.7.2
    	
 
    	
Works Agreements, Reconciliations of Interests, Social Plans
    
	
 
    	
 
    	
 
    
	
Schedule 5.7.3
    	
 
    	
Material Pension Schemes
    
	
 
    	
 
    	
 
    
	
Schedule 5.7.4
    	
 
    	
U.S. Benefit Plans
    
	
 
    	
 
    	
 
    
	
Schedule 5.7.8
    	
 
    	
Exceptions relating to U.S. Company Benefit Plans
    
	
 
    	
 
    	
 
    
	
Schedule 5.7.9
    	
 
    	
Labor Law Disputes
    
	
 
    	
 
    	
 
    
	
Schedule 5.8.1
    	
 
    	
Legal Proceedings
    
	
 
    	
 
    	
 
    
	
Schedule 5.9.1
    	
 
    	
Environmental Contamination of Real Estate
    
	
 
    	
 
    	
 
    
	
Schedule 5.10.2
    	
 
    	
Tax Audit Proceedings
    
	
 
    	
 
    	
 
    
	
Schedule 6.3.1
    	
 
    	
Purchaser’s Knowledge
    
	
 
    	
 
    	
 
    
	
Schedule 6.3.1(e)(ii)
    	
 
    	
Equity Bridge Items
    
	
 
    	
 
    	
 
    
	
Schedule 6.15
    	
 
    	
Deposit Instructions
    
	
 
    	
 
    	
 
    
	
Exhibit 7.6.1
    	
 
    	
Debt Commitment Letter
    
	
 
    	
 
    	
 
    
	
Exhibit 7.6.2
    	
 
    	
CP Satisfaction Letter
    
	
 
    	
 
    	
 
    
	
Exhibit 7.6.3
    	
 
    	
Equity Commitment Letter
    
	
 
    	
 
    	
 
    
	
Schedule 7.8
    	
 
    	
Ownership Structure of Purchaser
    
	
 
    	
 
    	
 
    
	
Schedule 9.1
    	
 
    	
Permitted Actions
    
	
 
    	
 
    	
 
    
	
Schedule 9.1.2
    	
 
    	
Material Investments
    
	
 
    	
 
    	
 
    
	
Schedule 9.1.10
    	
 
    	
Settlement of Inter-Group Accounts
    
	
 
    	
 
    	
 
    
	
Schedule 9.4.1
    	
 
    	
Cash Pool Agreements
    
	
 
    	
 
    	
 
    
	
Schedule 9.5.1
    	
 
    	
Resigning Directors
    
	
 
    	
 
    	
 
    
	
Schedule 9.5.2
    	
 
    	
Waiver and Indemnity
    

 

67

 

	
Schedule 9.6.1
    	
 
    	
DN Pensionskasse Participation Agreement
    
	
 
    	
 
    	
 
    
	
Schedule 9.7.1
    	
 
    	
Contact Persons
    
	
 
    	
 
    	
 
    
	
Schedule 9.7.2
    	
 
    	
Refinancing Matters
    
	
 
    	
 
    	
 
    
	
Schedule 9.10
    	
 
    	
Related Party Agreements
    
	
 
    	
 
    	
 
    
	
Schedule 9.11
    	
 
    	
Tail Cover Insurance Proposal
    

 

68Exhibit 4.18

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT is made and dated as of June 14, 2013, and is entered into by and between Rockwell Medical, Inc., a Michigan corporation (“Rockwell”), its wholly-owned subsidiary, Rockwell Transportation, Inc., a Michigan corporation, and each of their subsidiaries (each, a “Borrower,” and hereinafter collectively referred to as “Borrower”), and HERCULES TECHNOLOGY III, L.P., a Delaware limited partnership (“Lender”).

 

RECITALS

 

A.                                    Borrower has requested Lender to make available to Borrower a loan in an aggregate principal amount of up to Twenty Million Dollars ($20,000,000.00) (the “Term Loan”);

 

B.                                    Lender is willing to make the Term Loan on the terms and conditions set forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, Borrower and Lender agree as follows:

 

SECTION 1.  DEFINITIONS AND RULES OF CONSTRUCTION

 

1.1                               Unless otherwise defined herein, the following capitalized terms shall have the following meanings:

 

“Account Control Agreement(s)” means any agreement entered into by and among the Lender, a Borrower and a third party Bank or other institution (including a Securities Intermediary) in which such Borrower maintains a Deposit Account or an account holding Investment Property and which grants Lender a perfected first priority security interest in the subject account or accounts.

 

“ACH Authorization” means the ACH Debit Authorization Agreement in substantially the form of Exhibit I.

 

“Advance(s)” means a Term Loan Advance.

 

“Advance Date” means the funding date of any Advance.

 

“Advance Request” means a request for an Advance submitted by Borrower to Lender in substantially the form of Exhibit A.

 

“Agreement” means this Loan and Security Agreement, as amended from time to time.

 

“Assignee” has the meaning given to it in Section 11.13.

 

 

“Borrower Products” means all products, software, service offerings, technical data or technology currently being designed, manufactured or sold by Borrower or which Borrower intends to sell, license, or distribute in the future including any products or service offerings under development, collectively, together with all products, software, service offerings, technical data or technology that have been sold, licensed or distributed by Borrower since its incorporation.

 

“Cash” means all cash and liquid funds.

 

“Change in Control” means any (i) reorganization, recapitalization, consolidation or merger (or similar transaction or series of related transactions) of Rockwell or any Subsidiary, sale or exchange of outstanding shares (or similar transaction or series of related transactions) of Rockwell or any Subsidiary in which the holders of Rockwell or Subsidiary’s outstanding shares immediately before consummation of such transaction or series of related transactions do not, immediately after consummation of such transaction or series of related transactions, retain shares representing more than fifty percent (50%) of the voting power of the surviving entity of such transaction or series of related transactions (or the parent of such surviving entity if such surviving entity is wholly owned by such parent), in each case without regard to whether Rockwell or Subsidiary is the surviving entity, or (ii) sale or issuance by Rockwell of new shares of Preferred Stock of Rockwell to investors, none of whom are current investors in Rockwell, and such new shares of Preferred Stock are senior to all existing Preferred Stock and Common Stock with respect to liquidation preferences, and the aggregate liquidation preference of the new shares of Preferred Stock is more than fifty percent (50%) of the aggregate liquidation preference of all shares of Preferred Stock of Rockwell.

 

“Claims” has the meaning given to it in Section 11.10.

 

“Closing Date” means the date of this Agreement.

 

“Collateral” means the property described in Section 3.

 

“Commitment Fee” means $30,000.00, which fee is due to Lender on or prior to the Closing Date, and shall be deemed fully earned on such date regardless of the early termination of this Agreement.

 

“Confidential Information” has the meaning given to it in Section 11.12.

 

“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of

 

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business, or customary indemnification and reimbursement obligations incurred in connection with the incurrence of Indebtedness.  The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.

 

“Copyright License” means any written agreement granting any right to use any Copyright or Copyright registration, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.

 

“Copyrights” means all copyrights, whether registered or unregistered, held pursuant to the laws of the United States, any State thereof, or of any other country.

 

“Deposit Accounts” means any “deposit accounts,” as such term is defined in the UCC, and includes any checking account, savings account, or certificate of deposit.

 

“ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations.

 

“Event of Default” has the meaning given to it in Section 9.

 

“Excluded Property” means (a) all owned or leased real property, but specifically excluding any rental income derived by Borrower as lessor or sublessor of such owned or leased real property, to the extent such rental income has not been assigned to a real estate lender in connection with a mortgage or deed of trust, (b) any motor vehicles, (c) any property which is subject to a Permitted Lien pursuant to documents which prohibit other Liens in such property to the extent such prohibitions are enforceable by law, (d) pledges and security interests prohibited by law and permitted agreements, in each case, to the extent such prohibitions are enforceable under applicable law; and (e) assets to the extent a security interest in such assets would, in the good faith judgment of the Borrower, result in a material, adverse tax consequences to the Borrower or its Subsidiaries.

 

“Facility Charge” means $200,000, representing one percent (1.0%) of the amount of the Term Loan.

 

“Financial Statements” has the meaning given to it in Section 7.1.

 

“GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time.

 

“Indebtedness” means (a) all indebtedness for borrowed money or the deferred purchase price of property or services (excluding trade credit entered into in the ordinary course of business due within ninety (90) days), including reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations to the extent capitalized under

 

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GAAP, and (d) all Contingent Obligations in respect of primary obligations that are Indebtedness of the primary obligor.

 

“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

 

“Intellectual Property” means all of Borrower’s Copyrights; Trademarks; Patents; Licenses; trade secrets and inventions; design rights, mask works; Borrower’s applications therefor and reissues, extensions, or renewals thereof; and Borrower’s goodwill associated with any of the foregoing, together with Borrower’s rights to sue for past, present and future infringement of Intellectual Property and the goodwill associated therewith.

 

“Interest-Only Period” means the period beginning on the Closing Date and expiring on May 31, 2014, provided the Interest-Only Period shall be the period beginning on the Closing Date and expiring on August 31, 2014 if Borrower meets primary end points for both Phase 3 trials for SFP (Soluble Ferric Pyrophosphate) prior to December 15, 2013.

 

“Investment” means any beneficial ownership (including stock, partnership or limited liability company interests) of or in any Person, or any loan, advance or capital contribution to any Person or the acquisition of all, or substantially all, of the assets of another Person.  The outstanding amount of any Investment shall be deemed to equal the difference of (i) the aggregate initial amount of such Investment less (ii) all returns of principal thereof or capital with respect thereto and all dividends and other distributions of income received in respect thereof.

 

“Joinder Agreements” means for each Subsidiary, a completed and executed Joinder Agreement in substantially the form attached hereto as Exhibit G.

 

“Lender” has the meaning given to it in the preamble to this Agreement.

 

“License” means any Copyright License, Patent License, Trademark License or other license of rights or interests.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale or other title retention agreement, and any lease in the nature of a security interest.

 

“Loan” means the Advances made under this Agreement.

 

“Loan Documents” means this Agreement, the Notes (if any), the ACH Authorization, the Account Control Agreements, the Joinder Agreements, all UCC Financing Statements, and any other documents executed in connection with the Secured Obligations or the transactions contemplated hereby, as the same may from time to time be amended, modified, supplemented or restated.

 

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“Material Adverse Effect” means, in Lender’s good faith judgment, (i) a material adverse effect upon the business, operations, properties, assets or financial condition of Borrower, taken as a whole, other than in and of itself, the denial, delay or limitation of approval of, or taking of any other regulatory action by, the United States Food and Drug Administration or any other governmental entity with respect to any biologic or drug`; or (ii) a material impairment of the ability of Borrower, taken as a whole, to perform the Secured Obligations in accordance with the terms of the Loan Documents, or the ability of Lender to enforce any of its rights or remedies with respect to the Secured Obligations; (iii) a material adverse effect on (a) the Collateral which is not covered by insurance, or (b) the perfection or priority of the security interests granted to Lender under the Loan Documents.

 

“Maximum Rate” shall have the meaning assigned to such term in Section 2.2.

 

“Note” means a Term Note.

 

“Patent License” means any written agreement granting any right with respect to any invention on which a Patent is in existence or a Patent application is pending, in which agreement Borrower now holds or hereafter acquires any interest.

 

“Patents” means all letters patent of, or rights corresponding thereto, in the United States or in any other country, all registrations and recordings thereof, and all applications for letters patent of, or rights corresponding thereto, in the United States or any other country.

 

“Permitted Indebtedness” means: (i) Indebtedness of Borrower in favor of Lender arising under this Agreement or any other Loan Document; (ii) Indebtedness existing on the Closing Date which is disclosed in Schedule 1A; (iii) Indebtedness of up to $2,000,000 outstanding at any time secured by a lien described in clause (vii) of the defined term “Permitted Liens,” provided such Indebtedness does not exceed the lesser of the cost or fair market value of the Equipment financed with such Indebtedness, and further provided that Borrower may request that such $2,000,000 amount be increased to $4,500,000 to accommodate the financing of new manufacturing facilities, subject to Lender’s consent, which will not be unreasonably withheld delayed or conditioned; (iv) Indebtedness to trade creditors incurred in the ordinary course of business, including Indebtedness incurred in the ordinary course of business with corporate credit cards; (v) Indebtedness that also constitutes a Permitted Investment; (vi) Subordinated Indebtedness; (vii) reimbursement obligations in connection with letters of credit issued on behalf of the Borrower or a Subsidiary thereof in an amount not to exceed $250,000 at any time outstanding, (viii) other Indebtedness in an amount not to exceed $200,000 at any time outstanding, and (ix) extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the principal amount is not increased above the applicable limit for indebtedness of the relevant type or, if there is no such limit, the principal amount is not increased at all, or the terms modified to impose materially more burdensome terms upon Borrower or its Subsidiary, as the case may be.

 

“Permitted Investment” means: (i) Investments existing on the Closing Date which are disclosed in Schedule 1B; (ii) (a) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one year from the date of acquisition thereof, (b) commercial paper maturing no

 

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more than one year from the date of creation thereof and currently having a rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service, (c) certificates of deposit issued by any bank with assets of at least $500,000,000 maturing no more than one year from the date of investment therein, and (d) managed funds that invest solely in short-term debt with maturities within one year of the date of investment which is consistent with the investment policy approved by Borrower’s board of directors, and (e) money market accounts; (iii) repurchases of stock from former employees, directors, or consultants of Borrower under the terms of applicable repurchase agreements at the original issuance price of such securities in an aggregate amount not to exceed $250,000 in any fiscal year, provided that no Event of Default has occurred, is continuing or would exist after giving effect to the repurchases; (iv) Investments accepted in connection with Permitted Transfers; (v) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of Borrower’s business; (vi) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not affiliates, in the ordinary course of business, provided that this subparagraph (vi) shall not apply to Investments of Borrower in any Subsidiary; (vii) Investments consisting of loans not involving the net transfer on a substantially contemporaneous basis of cash proceeds to employees, officers or directors relating to the purchase of capital stock of Borrower pursuant to employee stock purchase plans or other similar agreements approved by Borrower’s Board of Directors; (viii) Investments consisting of travel advances in the ordinary course of business; (ix) Investments in newly-formed Subsidiaries organized in the United States, provided that such Subsidiaries enter into a Joinder Agreement promptly after their formation by  Borrower and execute such other documents as shall be reasonably requested by Lender; (x) Investments of up to $2,500,000 in the aggregate in subsidiaries organized outside of the United States plus other such Investmentsapproved in advance in writing by Lender; (xi) joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the nonexclusive licensing of technology, the development of technology or the providing of technical support, provided that any cash Investments by Borrower do not exceed $200,000 in the aggregate in any fiscal year; and (xii) additional Investments that do not exceed $250,000 in the aggregate outstanding at any time.

 

“Permitted Liens” means any and all of the following: (i) Liens in favor of Lender; (ii) Liens existing on the Closing Date which are disclosed in Schedule 1C; (iii) Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings; provided, that Borrower maintains adequate reserves therefor in accordance with GAAP; (iv) Liens securing claims or demands of materialmen, artisans, mechanics, carriers, warehousemen, landlords and other like Persons arising in the ordinary course of Borrower’s business and imposed without action of such parties; provided, that the payment thereof is not yet required or being contested in good faith by appropriate proceedings; provided, that Borrower maintains adequate reserves therefor in accordance with GAAP; (v) Liens arising from judgments, decrees or attachments in circumstances which do not constitute an Event of Default hereunder; (vi) the following deposits, to the extent made in the ordinary course of business:  deposits under worker’s compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts

 

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(other than for the repayment of borrowed money) or to secure statutory obligations (other than liens arising under ERISA or environmental liens) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds; (vii) Liens on Equipment (including fixtures) or software or other intellectual property constituting purchase money liens and liens in connection with capital leases securing Indebtedness permitted in clause (iii) of “Permitted Indebtedness”;  (viii) Liens incurred in connection with Subordinated Indebtedness; (ix) leasehold interests in leases or subleases and licenses granted in the ordinary course of business and not interfering in any material respect with the business of the licensor; (x) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties that are promptly paid on or before the date they become due; (xi) Liens on insurance proceeds securing the payment of financed insurance premiums that are promptly paid on or before the date they become due (provided that such Liens extend only to such insurance proceeds and not to any other property or assets); (xii) statutory and common law rights of set-off and other similar rights as to deposits of cash and securities in favor of banks, other depository institutions and brokerage firms; (xiii) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business so long as they do not materially impair the value or marketability of the related property; (xiv) Liens on cash or cash equivalents securing reimbursement obligations permitted under clause (vii) of the definition of Permitted Indebtedness; and (xv) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (i) through (xi) above; provided, that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced (as may have been reduced by any payment thereon) does not increase.

 

“Permitted Transfers” means (i) sales of Inventory in the normal course of business, (ii) non-exclusive licenses and similar arrangements for the use of Intellectual Property in the ordinary course of business and licenses in the ordinary course of business that could not result in a legal transfer of title of the licensed property but that may be exclusive in certain respects, if appropriate in Borrower’s good faith business judgment, (iii) dispositions of worn-out, obsolete or surplus Equipment at fair market value in the ordinary course of business, (iv) Permitted Investments and Permitted Liens; (v) assignments of accounts in the ordinary course for collection, not to exceed an aggregate amount of $20,000 at any time, (vi) other Transfers of assets having a fair market value of not more than $250,000 in the aggregate in any fiscal year, and (vii) a sale or transfer of all or substantially all of the assets of Borrower’s concentrate production business as long as either (i) the transfer of such assets is a capital contribution, subject to the Lender’s security interests in such assets, to a domestic Subsidiary that assumes all of the Borrower’s obligations under this Agreement and the other Loan Documents, or (ii) the net, after-tax, proceeds from such sale are applied promptly upon receipt by the Borrower to reduce the Secured Obligations.

 

“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, other entity or government.

 

“Preferred Stock” means at any given time any equity security issued by Borrower that has any rights, preferences or privileges senior to Borrower’s common stock.

 

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“Receivables” means (i) all of Borrower’s Accounts, Instruments, Documents, Chattel Paper, Supporting Obligations, letters of credit, proceeds of any letter of credit, and Letter of Credit Rights, and (ii) all customer lists, software, and business records related thereto.

 

SBA” shall have the meaning assigned to such term in Section 7.14.

 

“SBIC” shall have the meaning assigned to such term in Section 7.14.

 

“SBIC Act” shall have the meaning assigned to such term in Section 7.14.

 

“Secured Obligations” means Borrower’s obligations under this Agreement and any Loan Document, including any obligation to pay any amount now owing or later arising.

 

“Subordinated Indebtedness” means Indebtedness subordinated to the Secured Obligations in amounts and on terms and conditions satisfactory to Lender in its sole discretion.

 

“Subsequent Financing” means the closing of any Borrower institutional equity offering (which would not include an offering to a strategic partner as part of a joint venture or other business arrangements) which becomes effective after the Closing Date.

 

“Subsidiary” means an entity, whether corporate, partnership, limited liability company, joint venture or otherwise, in which a Borrower owns or controls 50% or more of the outstanding voting securities, including each entity listed on Schedule 1 hereto.

 

“Term Loan Advance” means any Term Loan funds advanced under this Agreement.

 

“Term Loan Interest Rate” means for any day a per annum rate of interest equal to the greater of either (i) 12.50% plus the prime rate as reported in The Wall Street Journal minus 3.25%, or (ii) 12.50%.

 

“Term Loan Maturity Date” means December 1, 2016, provided Term Loan Maturity Date shall be March 1, 2017 if the Interest-Only Period is extended pursuant to Section 2.1.

 

“Term Note” means a Promissory Note in substantially the form of Exhibit B.

 

“Trademark License” means any written agreement granting any right to use any Trademark or Trademark registration, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.

 

“Trademarks” means all trademarks (registered, common law or otherwise) and any applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof.

 

“UCC” means the Uniform Commercial Code as the same is, from time to time, in effect in the State of California; provided, that in the event that, by reason of mandatory

 

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provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as the same is, from time to time, in effect in a jurisdiction other than the State of California, then the term “UCC” shall mean the Uniform Commercial Code as in effect, from time to time, in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

 

Unless otherwise specified, all references in this Agreement or any Annex or Schedule hereto to a “Section,” “subsection,” “Exhibit,” “Annex,” or “Schedule” shall refer to the corresponding Section, subsection, Exhibit, Annex, or Schedule in or to this Agreement.  Unless otherwise specifically provided herein, any accounting term used in this Agreement or the other Loan Documents shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance with GAAP, consistently applied. Unless otherwise defined herein or in the other Loan Documents, terms that are used herein or in the other Loan Documents and defined in the UCC shall have the meanings given to them in the UCC.

 

SECTION 2.  THE LOAN

 

2.1                               Term Loan.

 

(a)                                 Advances.  Subject to the terms and conditions of this Agreement, Lender will make, and Borrower agrees to draw, a Term Loan Advance of $20,000,000 on the Closing Date.

 

(b)                                 Advance Request.  To obtain the Term Loan Advance, Borrower shall complete, sign and deliver an Advance Request to Lender.  Lender shall fund the Term Loan Advance in the manner requested by the Advance Request provided that each of the conditions precedent to the Term Loan Advance is satisfied as of the requested Advance Date.

 

(c)                                  Interest.  The principal balance of the Term Loan Advance shall bear interest thereon from such Advance Date at the Term Loan Interest Rate based on a year consisting of 360 days, with interest computed daily based on the actual number of days elapsed.  The Term Loan Interest Rate will float and change on the day the Prime Rate changes from time to time.

 

(d)                                 Payment.  Borrower will pay interest on the Term Loan Advance on the first day of each month, beginning the month after the Advance Date and continuing during the Interest-Only Period.  Beginning on the first day of the month following the expiration of the Interest-Only Period, Borrower shall repay the aggregate Term Loan principal balance that is outstanding on such date in 30 equal monthly installments of principal and interest (mortgage style).  The entire Term Loan principal balance and all accrued but unpaid interest shall be due and payable on Term Loan Maturity Date.  Borrower shall make all payments under this Agreement without setoff, recoupment or deduction and regardless of any counterclaim or defense. Lender will initiate debit entries

 

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to Borrower’s account as authorized on the ACH Authorization on each payment date of all periodic obligations payable under this Agreement or the Term Note.

 

2.2                               Maximum Interest.  Notwithstanding any provision in this Agreement or any other Loan Document, it is the parties’ intent not to contract for, charge or receive interest at a rate that is greater than the maximum rate permissible by law that a court of competent jurisdiction shall deem applicable hereto (which under the laws of the State of California shall be deemed to be the laws relating to permissible rates of interest on commercial loans) (the “Maximum Rate”).  If a court of competent jurisdiction shall finally determine that Borrower has actually paid to Lender an amount of interest in excess of the amount that would have been payable if all of the Secured Obligations had at all times borne interest at the Maximum Rate, then such excess interest actually paid by Borrower shall be applied as follows:  first, to the payment of the Secured Obligations consisting of the outstanding principal; second, after all principal is repaid, to the payment of Lender’s accrued interest, costs, expenses, professional fees and any other Secured Obligations; and third, after all Secured Obligations are repaid, the excess (if any) shall be refunded to Borrower.

 

2.3                               Default Interest. In the event any payment is not paid on the scheduled payment date (excluding any failure to make a timely payment due solely to an administrative or operational error of Lender in auto-debiting Borrower’s account, or of any depositary institution that is crediting by ACH or wiring such payment, if Borrower had the funds to make the payment when due and makes the payment within three Business Days following Borrower’s knowledge of such failure to pay), an amount equal to three percent (3%) of the past due amount shall be payable on demand. In addition, upon the occurrence and during the continuation of an Event of Default hereunder, delinquent interest shall be added to the principal and the increased principal amount shall thereafter all bear interest at a rate per annum equal to the rate set forth in Section 2.1(c) plus five percent (5%) per annum.

 

2.4                               Prepayment.  No voluntary prepayment shall be allowed in the first twelve (12) months following the Closing Date.  After the first anniversary of the Closing Date, Borrower, at its option upon at least ten (10) business days’ notice, may prepay all but not less than all, of the outstanding Advances at any time, without any prepayment charge.  All other charges, including without limitation the end of term charge described in Section 2.5 below, are fully earned and due upon any prepayment.  Borrower shall prepay the outstanding amount of all principal and accrued interest through the prepayment date upon the occurrence of a Change in Control.

 

2.5                               End of Term Charge.  On the earliest to occur of (i) the Term Loan Maturity Date, (ii) the date that Borrower prepays the outstanding Secured Obligations, or (iii) the date that the Secured Obligations become due and payable, Borrower shall pay Lender a charge of $1,100,000.00.  Notwithstanding the required payment date of such charge, it shall be deemed earned by Lender as of the Closing Date.

 

2.6                               Notes.  If so requested by Lender by written notice to Borrower, then Borrower shall execute and deliver to Lender (and/or, if applicable and if so specified in such notice, to any person who is an assignee of Lender pursuant to Section 11.13)

 

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(promptly after the Borrower’s receipt of such notice) a Note or Notes to evidence Lender’s Loans.

 

SECTION 3.  SECURITY INTEREST

 

3.1                               As security for the prompt, complete and indefeasible payment when due (whether on the payment dates or otherwise) of all the Secured Obligations, Borrower grants to Lender a security interest in all of Borrower’s right, title, and interest in and to the following personal property whether now owned or hereafter acquired (collectively, the “Collateral”):  (a) Receivables; (b) Equipment; (c) Fixtures; (d) General Intangibles (other than Intellectual Property); (e) Inventory; (f) Investment Property (but excluding thirty-five percent (35%) of the capital stock of any foreign Subsidiary that constitutes a Permitted Investment); (g) Deposit Accounts; (h) Cash; (i) Goods; and all other tangible and intangible personal property of Borrower whether now or hereafter owned or existing, leased, consigned by or to, or acquired by, Borrower and wherever located, and any of Borrower’s property in the possession or under the control of Lender; and, to the extent not otherwise included, all Proceeds of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing; provided, however, that the Collateral shall not include Excluded Property, but shall include all Accounts and General Intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of all or any part, or rights in, the Intellectual Property (the “Rights to Payment”).  Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective as of the date of this Agreement, include the Intellectual Property to the extent necessary to permit perfection of Lender’s security interest in the Rights to Payment.  Lender authorizes Permitted Transfers of Collateral free and clear of Lender’s security interest.

 

SECTION 4.  CONDITIONS PRECEDENT TO LOAN

 

The obligations of Lender to make the Loan hereunder are subject to the satisfaction by Borrower of the following conditions:

 

4.1                               Initial Advance.  On or prior to the Closing Date, Borrower shall have delivered to Lender the following:

 

(a)                                 executed originals of the Loan Documents, Account Control Agreements, a legal opinion of Borrower’s counsel, and all other documents and instruments reasonably required by Lender to effectuate the transactions contemplated hereby or to create and perfect the Liens of Lender with respect to all Collateral, in all cases in form and substance reasonably acceptable to Lender;

 

(b)                                 certified copy of resolutions of Borrower’s Board of Directors evidencing approval of the Term Loan and other transactions evidenced by the Loan Documents;

 

(c)                                  certified copies of the Articles of Incorporation and the Bylaws, as amended through the Closing Date, of Borrower;

 

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(d)                                 a certificate of good standing for Borrower from its state of incorporation and similar certificates from all other United States jurisdictions in which it does business and where the failure to be qualified would have a Material Adverse Effect;

 

(e)                                  payment of the Facility Charge and reimbursement of Lender’s current expenses reimbursable pursuant to this Agreement, which amounts may be deducted from the initial Advance; and

 

(f)                                   such other documents as Lender may reasonably request.

 

4.2                               No Default.  As of the Closing Date, (i) no fact or condition exists that would (or would, with the passage of time, the giving of notice, or both) constitute an Event of Default and (ii) no event that has had or could reasonably be expected to have a Material Adverse Effect has occurred and is continuing.

 

SECTION 5.  REPRESENTATIONS AND WARRANTIES OF BORROWER

 

Borrower represents and warrants that:

 

5.1                               Corporate Status.  Borrower is a corporation duly organized, legally existing and in good standing under the laws of the State of Michigan, and is duly qualified as a foreign corporation in all jurisdictions in which the nature of its business or location of its properties require such qualifications and where the failure to be qualified could reasonably be expected to have a Material Adverse Effect.  Borrower’s present name, former names (if any), locations, place of formation, tax identification number, organizational identification number and other information are correctly set forth in Exhibit C, as may be updated by Borrower in a written notice (including any Compliance Certificate) provided to Lender after the Closing Date.

 

5.2                               Collateral.  Borrower owns the Collateral and the Intellectual Property, free of all Liens, except for Permitted Liens.  Borrower has the power and authority to grant to Lender a Lien in the Collateral as security for the Secured Obligations.

 

5.3                               Consents.  Borrower’s execution, delivery and performance of this Agreement and all other Loan Documents, (i) have been duly authorized by all necessary corporate action of Borrower, (ii) will not result in the creation or imposition of any Lien upon the Collateral, other than Permitted Liens and the Liens created by this Agreement and the other Loan Documents, (iii) do not violate any provisions of Borrower’s Certificate or Articles of Incorporation (as applicable), bylaws, or any, law, regulation, order, injunction, judgment, decree or writ to which Borrower is subject and (iv) except as described on Schedule 5.3, do not violate any contract or agreement or require the consent or approval of any other Person.  The individual or individuals executing the Loan Documents are duly authorized to do so.

 

5.4                               Material Adverse Effect.  Since December 31, 2012, no event that has had or could reasonably be expected to have a Material Adverse Effect has occurred and is

 

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continuing. Borrower is not aware of any event likely to occur that is reasonably expected to result in a Material Adverse Effect.

 

5.5                               Actions Before Governmental Authorities.  Except as described on Schedule 5.5, there are no actions, suits or proceedings at law or in equity or by or before any governmental authority now pending or, to the knowledge of Borrower, threatened against or affecting Borrower or its property.

 

5.6                               Laws.  Borrower is not in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any governmental authority, where such violation or default is reasonably expected to result in a Material Adverse Effect.  Borrower is not in default in any manner under any provision of any agreement or instrument evidencing indebtedness, or any other material agreement to which it is a party or by which it is bound.

 

5.7                               Information Correct and Current.  No information, report, Advance Request, financial statement, exhibit or schedule furnished, by or on behalf of Borrower to Lender in connection with any Loan Document or included therein or delivered pursuant thereto contained, contains or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading at the time such statement was made or deemed made. Additionally, any and all financial or business projections provided by Borrower to Lender shall be (i) provided in good faith and based on the most current data and information available to Borrower, and (ii) the most current of such projections provided to Borrower’s Board of Directors.

 

5.8                               Tax Matters.  Except as described on Schedule 5.8, (a) Borrower has filed all federal, state and local tax returns that it is required to file, (b) Borrower has duly paid or fully reserved for all taxes or installments thereof (including any interest or penalties) as and when due, which have or may become due pursuant to such returns, and (c) Borrower has paid or fully reserved for any tax assessment received by Borrower for the three (3) years preceding the Closing Date, if any (including any taxes being contested in good faith and by appropriate proceedings).

 

5.9                               Intellectual Property Claims.  Borrower is the sole owner of, or otherwise has the right to use, the Intellectual Property.  Except as described on Schedule 5.9, (i) each of the material Copyrights, Trademarks and Patents is valid and enforceable, (ii) no material part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and (iii) no claim has been made to Borrower that any material part of the Intellectual Property violates the rights of any third party. Exhibit D is a true, correct and complete list of each of Borrower’s Patents, registered Trademarks, registered Copyrights, and material agreements under which Borrower licenses Intellectual Property from third parties (other than shrink-wrap software licenses), together with application or registration numbers, as applicable, owned by Borrower or any Subsidiary, in each case as of the Closing Date. Borrower is not in material breach of, nor has Borrower failed to perform any material obligations under, any of the foregoing contracts, licenses or agreements and,

 

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to Borrower’s knowledge, no third party to any such contract, license or agreement is in material breach thereof or has failed to perform any material obligations thereunder.

 

5.10                        Intellectual Property.  Except as described on Schedule 5.10, Borrower has, or in the case of any proposed business, will have, all material rights with respect to Intellectual Property necessary in the operation or conduct of Borrower’s business as currently conducted and proposed to be conducted by Borrower.  Without limiting the generality of the foregoing, and in the case of Licenses, except for restrictions that are unenforceable under Division 9 of the UCC, Borrower has the right, to the extent required to operate Borrower’s business, to freely transfer, license or assign Intellectual Property without condition, restriction or payment of any kind (other than license payments in the ordinary course of business) to any third party, and Borrower owns or has the right to use, pursuant to valid licenses, all software development tools, library functions, compilers and all other third-party software and other items that are used in the design, development, promotion, sale, license, manufacture, import, export, use or distribution of Borrower Products.

 

5.11                        Borrower Products and Intellectual Property.  Except as described on Schedule 5.11, no Intellectual Property owned by Borrower or Borrower Product has been or is subject to any actual or, to the knowledge of Borrower, threatened litigation, proceeding (including any proceeding in the United States Patent and Trademark Office or any corresponding foreign office or agency) or outstanding decree, order, judgment, settlement agreement or stipulation that restricts in any manner Borrower’s use, transfer or licensing thereof or that may affect the validity, use or enforceability thereof. There is no decree, order, judgment, agreement, stipulation, arbitral award or other provision entered into in connection with any litigation or proceeding that obligates Borrower to grant licenses or ownership interest in any future Intellectual Property related to the operation or conduct of the business of Borrower or Borrower Products.  Borrower has not received any written notice or claim, or, to the knowledge of Borrower, oral notice or claim, challenging or questioning Borrower’s ownership in any Intellectual Property (or written notice of any claim challenging or questioning the ownership in any licensed Intellectual Property of the owner thereof) or suggesting that any third party has any claim of legal or beneficial ownership with respect thereto nor, to Borrower’s knowledge, is there a reasonable basis for any such claim.  Neither Borrower’s use of its Intellectual Property nor the production and sale of Borrower Products infringes the Intellectual Property or other rights of others.

 

5.12                        Financial Accounts.  Exhibit E, as may be updated by the Borrower in a written notice provided to Lender after the Closing Date, is a true, correct and complete list of (a) all banks and other financial institutions at which Borrower or any Subsidiary maintains Deposit Accounts and (b) all institutions at which Borrower or any Subsidiary maintains an account holding Investment Property, and such exhibit correctly identifies the name, address and telephone number of each bank or other institution, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor.

 

5.13                        Employee Loans.  Borrower has no outstanding loans to any employee, officer or director of the Borrower nor has Borrower guaranteed the payment of any loan

 

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made to an employee, officer or director of the Borrower by a third party, other than advances for expenses made in the ordinary course of business.

 

5.14                        Capitalization and Subsidiaries.  Borrower’s capitalization as of the Closing Date is set forth on Schedule 5.14 annexed hereto.  Borrower does not own any stock, partnership interest or other securities of any Person, except for Permitted Investments.  Attached as Schedule 5.14, as may be updated by Borrower in a written notice provided after the Closing Date, is a true, correct and complete list of each Subsidiary.

 

SECTION 6.  INSURANCE; INDEMNIFICATION

 

6.1                               Coverage.  Borrower shall cause to be carried and maintained commercial general liability insurance, on an occurrence form, against risks customarily insured against in Borrower’s line of business.  Such risks shall include the risks of bodily injury, including death, property damage, personal injury, advertising injury, and contractual liability per the terms of the indemnification agreement found in Section 6.3.  Borrower must maintain a minimum of $2,000,000 of commercial general liability insurance for each occurrence, which may be provided through a combination of primary and excess insurance policies.  Borrower has and agrees to maintain a minimum of $2,000,000 of directors and officers’ insurance for each occurrence and $5,000,000 in the aggregate.  So long as there are any Secured Obligations outstanding, Borrower shall also cause to be carried and maintained insurance upon the Collateral, insuring against all risks of physical loss or damage howsoever caused, in an amount not less than the full replacement cost of the Collateral, provided that such insurance may be subject to standard exceptions and deductibles.  Borrower shall also carry and maintain a fidelity (employee theft) insurance policy in an amount not less than $50,000.

 

6.2                               Certificates.  Borrower shall deliver to Lender certificates of insurance that evidence Borrower’s compliance with its insurance obligations in Section 6.1 and the obligations contained in this Section 6.2.  Borrower’s insurance certificate shall state Lender is an additional insured for commercial general liability, a loss payee for all risk property damage insurance, subject to the insurer’s approval, a loss payee for fidelity insurance, and a loss payee for property insurance and additional insured for commercial general liability insurance for any such future insurance that Borrower may acquire from such insurer.  Attached to the certificates of insurance will be additional insured endorsements for liability and lender’s loss payable endorsements for all risk property damage insurance and fidelity.  All certificates of insurance will provide for a minimum of thirty (30) days advance written notice to Lender of cancellation or any other diminishment in coverage.  Any failure of Lender to scrutinize such insurance certificates for compliance is not a waiver of any of Lender’s rights, all of which are reserved.

 

6.3                               Indemnity.  Borrower agrees to indemnify and hold Lender and its officers, directors, employees, agents, in-house attorneys, representatives and shareholders harmless from and against any and all claims, costs, expenses, damages and liabilities (including such claims, costs, expenses, damages and liabilities based on liability in tort, including strict liability in tort), including reasonable attorneys’ fees and disbursements and other costs of investigation or defense (including those incurred upon any appeal), that may be

 

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instituted or asserted against or incurred by Lender or any such Person as the result of credit having been extended under this Agreement and the other Loan Documents or the administration of such credit, or in connection with or arising out of the transactions contemplated hereunder and thereunder, or any actions or failures to act in connection therewith, or arising out of the disposition or utilization of the Collateral, excluding in all cases claims to the extent they result from Lender’s violation of any law, Lender’s breach of its obligations to Borrower, or Lender’s gross negligence or willful misconduct. Borrower agrees to pay, and to save Lender harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all excise, sales or other similar taxes (excluding income taxes and franchise taxes [including those imposed in lieu of income taxes] imposed on the Lender as a result of a present or former connection between the Lender and the jurisdiction of the governmental authority imposing such tax or any political subdivision or taxing authority thereof or therein) that may be payable or determined to be payable with respect to any of the Collateral or this Agreement.

 

SECTION 7.  COVENANTS OF BORROWER

 

Borrower agrees as follows:

 

7.1                               Financial Reports.  Borrower shall furnish to Lender the financial statements and reports listed hereinafter (the “Financial Statements”):

 

(a)                                 as soon as practicable (and in any event within 30 days) after the end of each month that is not also the end of a calendar quarter, unaudited interim and year-to-date financial statements as of the end of such month (prepared on a consolidated and consolidating basis, if applicable), including balance sheet and related statements of income and cash flows accompanied by a report detailing any material contingencies (including the commencement of any material litigation by or against Borrower) or any other occurrence that would reasonably be expected to have a Material Adverse Effect, all certified by Borrower’s Chief Executive Officer or Chief Financial Officer to the effect that they have been prepared in accordance with GAAP, except (i) for the absence of footnotes, (ii) that they are subject to normal year end adjustments, and (iii) they do not contain certain non-cash items that are customarily included in quarterly and annual financial statements;

 

(b)                                 as soon as practicable, concurrently with SEC filings made after the end of each calendar quarter, unaudited interim and year-to-date financial statements as of the end of such calendar quarter (prepared on a consolidated and consolidating basis, if applicable), including balance sheet and related statements of income and cash flows accompanied by a report detailing any material contingencies (including the commencement of any material litigation by or against Borrower) or any other occurrence that would reasonably be expected to have a Material Adverse Effect,  certified by Borrower’s Chief Executive Officer or Chief Financial Officer to the effect that they have been prepared in accordance with GAAP, except (i) for the absence of footnotes, and (ii) that they are subject to normal year end adjustments; provided, however, that such documents will be deemed to be delivered on the date that the SEC makes such documents publicly available;

 

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(c)                                  as soon as practicable (and in any event within one hundred fifty (150) days) after the end of each fiscal year, unqualified audited financial statements as of the end of such year (prepared on a consolidated and consolidating basis, if applicable), including balance sheet and related statements of income and cash flows, and setting forth in comparative form the corresponding figures for the preceding fiscal year, certified by a firm of independent certified public accountants selected by Borrower and reasonably acceptable to Lender, accompanied by any management report from such accountants, provided, however, that such documents will be deemed to be delivered on the date that the SEC makes such documents publicly available;

 

(d)                                 as soon as practicable (and in any event within 30 days, or 45 days for the last month of each calendar quarter) after the end of each month, a Compliance Certificate in the form of Exhibit F;

 

(e)                                  as part of the report to be provided pursuant to Section 7.1 (a) the Borrower will provide agings of accounts receivable and accounts payable;

 

(f)                                   promptly after the sending or filing thereof, as the case may be, copies of any proxy statements, financial statements or reports that Borrower has made available to holders of its Preferred Stock and copies of any regular, periodic and special reports or registration statements that Borrower files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or any national securities exchange, however, any such documents will be deemed to be delivered on the date that the SEC makes such documents publicly available; and

 

(g)                                  financial and business projections promptly following their approval by Borrower’s Board of Directors, as well as budgets, operating plans and other financial information reasonably requested by Lender.

 

Borrower shall not (without notifying Lender), make any change in its (a) accounting policies or reporting practices, except as required by GAAP or (b) fiscal years or fiscal quarters. The fiscal year of Borrower currently ends on December 31.

 

The executed Compliance Certificate may be sent via facsimile to Lender at (650) 473-9194 or via e-mail to cnorman@herculestech.com.  All Financial Statements required to be delivered pursuant to clauses (a), (b) and (c) shall be sent via e-mail to financialstatements@herculestech.com with a copy to cnnorman@herculestech.com provided, that if e-mail is not available or sending such Financial Statements via e-mail is not possible, they shall be sent via facsimile to Lender at: (866) 468-8916, attention Chief Credit Officer.

 

7.2                               Management Rights.  Borrower shall permit any representative that Lender authorizes, including its attorneys and accountants, to inspect the Collateral and examine and make copies and abstracts of the books of account and records of Borrower at reasonable times and upon reasonable notice during normal business hours.  In addition, any such representative shall have the right to meet with management and officers of Borrower to discuss such books of account and records.  In addition, Lender shall be entitled at reasonable times and intervals to consult with and advise the management and

 

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officers of Borrower concerning significant business issues affecting Borrower.  Such consultations shall not unreasonably interfere with Borrower’s business operations.  The parties intend that the rights granted Lender shall constitute “management rights” within the meaning of 29 C.F.R Section 2510.3-101(d)(3)(ii), but that any advice, recommendations or participation by Lender with respect to any business issues shall not be deemed to give Lender, nor be deemed an exercise by Lender of, control over Borrower’s management or policies.

 

7.3                               Further Assurances.  Borrower shall from time to time execute, deliver and file, alone or with Lender, any financing statements, security agreements, collateral assignments, notices, control agreements, or other documents to perfect or give the highest priority (subject to Permitted Liens) to Lender’s Lien on the Collateral.  Borrower shall from time to time procure any instruments or documents as may be requested by Lender, and take all further action that may be necessary, or that Lender may reasonably request, to perfect and protect the Liens granted hereby and thereby.  In addition, and for such purposes only, Borrower hereby authorizes Lender to execute and deliver on behalf of Borrower and to file such financing statements, collateral assignments, notices, control agreements, security agreements and other documents without the signature of Borrower either in Lender’s name or in the name of Lender as agent and attorney-in-fact for Borrower.  Borrower shall protect and defend Borrower’s title to the Collateral and Lender’s Lien thereon against all Persons claiming any interest adverse to Borrower or Lender other than Permitted Liens.

 

7.4                               Indebtedness.  Borrower shall not create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness, or prepay any Subordinated Indebtedness or take any actions which impose on Borrower an obligation to prepay any Subordinated Indebtedness, except for the conversion of Subordinated Indebtedness into equity securities and the payment of cash in lieu of fractional shares in connection with such conversion.

 

7.5                               Collateral.  Borrower shall at all times keep the Collateral, the Intellectual Property and all other property and assets used in Borrower’s business or in which Borrower now or hereafter holds any interest free and clear from any legal process or Liens whatsoever (except for Permitted Liens), and shall give Lender prompt written notice of any legal process affecting the Collateral, the Intellectual Property, such other property and assets, or any Liens thereon.  Borrower shall cause its Subsidiaries to protect and defend such Subsidiary’s title to its assets from and against all Persons claiming any interest adverse to such Subsidiary, and Borrower shall cause its Subsidiaries at all times to keep such Subsidiary’s property and assets free and clear from any legal process or Liens whatsoever (except for Permitted Liens), and shall give Lender prompt written notice of any legal process affecting such Subsidiary’s assets. Borrower shall not agree with any Person other than Lender not to encumber its Intellectual Property.

 

7.6                               Investments.  Borrower shall not directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries so to do, other than Permitted Investments.

 

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7.7                               Distributions.  Borrower shall not, and shall not allow any Subsidiary to, (a) repurchase or redeem any class of stock or other equity interest other than pursuant to employee, director or consultant repurchase plans, compensation plans or other similar agreements customary with past practices, , or (b) declare or pay any cash dividend or make a cash distribution on any class of stock or other equity interest, except that a Subsidiary may pay dividends or make distributions to Borrower, and Borrower may make in-kind dividends of its own equity interests, or (c) lend money to any employees, officers or directors or guarantee the payment of any such loans granted by a third party in excess of $100,000 in the aggregate or (d) waive, release or forgive any indebtedness owed by any employees, officers or directors in excess of $100,000 in the aggregate.

 

7.8                               Transfers.  Except for Permitted Transfers, Borrower shall not voluntarily or involuntarily transfer, sell, lease, license, lend or in any other manner convey any equitable, beneficial or legal interest in any material portion of its assets.

 

7.9                               Mergers or Acquisitions.  Borrower shall not (a) merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business organization other than mergers or consolidations of a Subsidiary into another Subsidiary or into Borrower, and mergers where the Borrower is the surviving entity and, after giving effect to such merger, no Event of Default will have occurred and be continuing), or (b) acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person, other than such acquisitions that constitute Permitted Investments and such acquisitions to which Lender consents.

 

7.10                        Taxes.  Borrower and its Subsidiaries shall pay when due all taxes, fees or other charges of any nature whatsoever (together with any related interest or penalties) now or hereafter imposed or assessed against Borrower, Lender or the Collateral or upon Borrower’s ownership, possession, use, operation or disposition thereof or upon Borrower’s rents, receipts or earnings arising therefrom.  Borrower shall file on or before the due date therefor all personal property tax returns in respect of the Collateral.  Notwithstanding the foregoing, Borrower may contest, in good faith and by appropriate proceedings, taxes for which Borrower maintains adequate reserves therefor in accordance with GAAP.

 

7.11                        Corporate Changes.  Neither Borrower nor any Subsidiary shall change its corporate name, legal form or jurisdiction of formation without twenty (20) days’ prior written notice to Lender.  Neither Borrower nor any Subsidiary shall relocate its chief executive office or its principal place of business unless: (i) it has provided prior written notice to Lender; and (ii) such relocation shall be within the continental United States.  Neither Borrower nor any Subsidiary shall relocate any item of Collateral (other than (x) sales of Inventory in the ordinary course of business or in connection with the making of a Permitted Investment, (y) relocations of Equipment having an aggregate value of up to $200,000 in any fiscal year, and (z) relocations of Collateral from a location described on Exhibit C to another location described on Exhibit C) unless (i) it has provided prompt written notice to Lender, (ii) such relocation is within the continental United States and, (iii) if such relocation is to a third party bailee, it has delivered a bailee agreement in form and substance reasonably acceptable to Lender.

 

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7.12                        Deposit Accounts.  Neither Borrower nor any Subsidiary shall maintain any Deposit Accounts, or accounts holding Investment Property, except with respect to which Lender has an Account Control Agreement.

 

7.13                        New Subsidiaries.  Borrower shall notify Lender of each Subsidiary formed subsequent to the Closing Date and, within 15 days of formation, shall cause any such Subsidiary organized under the laws of any State within the United States to execute and deliver to Lender a Joinder Agreement.  If any Borrower ceases to be a Subsidiary, it will no longer be, and no longer have any obligations as, a Borrower hereunder.

 

7.14                        SBA Requirements.  Lender has received a license from the U.S. Small Business Administration (“SBA”) to extend loans as a small business investment company (“SBIC”) pursuant to the Small Business Investment Act of 1958, as amended, and the associated regulations (collectively, the “SBIC Act”).  Portions of the loan to Borrower will be made under the SBA license and the SBIC Act.  Addendum 1 to this Agreement outlines various responsibilities of Lender and Borrower associated with an SBA loan, and such Addendum 1 is hereby incorporated in this Agreement.

 

7.15                        No Default.  As soon as possible and in any event within 5 calendar days after becoming aware of the occurrence or existence of an Event of Default hereunder, Borrower shall deliver a written notification to Lender setting forth details of the Event of Default, and the action which Borrower has taken or proposes to take with respect thereto.

 

SECTION 8.  RIGHT TO INVEST

 

8.1                               Subject to approval by Borrower’s Board of Directors at the time of a Subsequent Refinancing and only to the extent Borrower is able to exercise control over the investors therein, Lender shall have the right, in its discretion, to participate in the next Subsequent Financing in an amount of up to $1,000,000 on the same terms, conditions and pricing afforded to other ultimate purchasers (not including underwriters, brokers or placement agents) participating in any such Subsequent Financing.  Borrower is under no obligation to undertake a Subsequent Refinancing at any time.  Lender’s right to so participate may be exercised by Lender’s nominee as long as Lender is the sole beneficiary and may be assigned, but only to an assignee of the Loan and only to the same (pro rata) extent the Loan is assigned.  Upon the repayment in full of the Loan (at maturity or otherwise), the foregoing right to participate shall automatically terminate.

 

SECTION 9.  EVENTS OF DEFAULT

 

The occurrence of any one or more of the following events shall be an Event of Default:

 

9.1                               Payments.  Borrower fails to pay any amount due under this Agreement or any of the other Loan Documents on the due date; provided, however, that an Event of Default shall not occur on account of a failure to pay due solely to an administrative or operational error of Lender in auto-debiting Borrower’s account, or of any depositary institution that is crediting by ACH or wiring such payment if Borrower had the funds to make the payment when due and makes the payment within three (3) days following Borrower’s knowledge of such failure to pay; or

 

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9.2                               Covenants.  Borrower breaches or defaults in the performance of any covenant or Secured Obligation under this Agreement, or any of the other Loan Documents, and (a) with respect to a default other than under Sections 6.1, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9 and 7.14 of this Agreement, such default continues for more than ten (10) days after the earlier of the date on which (i) Lender has given notice of such default to Borrower and (ii) Borrower has actual knowledge of such default or (b) with respect to a default under any of Sections 6.1, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9 or 7.14 of this Agreement, the occurrence of such default; or

 

9.3                               Material Adverse Effect.  A Material Adverse Effect has occurred; or

 

9.4                               [Reserved.]

 

9.5                               Representations.  Any representation or warranty made by Borrower in any Loan Document shall have been false or misleading in any material respect when made; or

 

9.6                               Insolvency.  Borrower (A) (i) shall make an assignment for the benefit of creditors; or (ii) shall be unable to pay its debts as they become due, or be unable to pay or perform under the Loan Documents, or shall become insolvent; or (iii) shall file a voluntary petition in bankruptcy; or (iv) shall file any petition, answer, or document seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation pertinent to such circumstances; or (v) shall seek or consent to or acquiesce in the appointment of any trustee, receiver, or liquidator of Borrower or of all or any substantial part (i.e., 33-1/3% or more) of the assets or property of Borrower; or (vi) shall cease operations of its business as its business has normally been conducted, or terminate substantially all of its employees; or (vii) Borrower or its directors or majority shareholders shall take any action initiating any of the foregoing actions described in clauses (i) through (vi); or (B) either (i) sixty (60) days shall have expired after the commencement of an involuntary action against Borrower seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, without such action being dismissed or all orders or proceedings thereunder affecting the operations or the business of Borrower being stayed; or (ii) a stay of any such order or proceedings shall thereafter be set aside and the action setting it aside shall not be timely appealed; or (iii) Borrower shall file any answer admitting or not contesting the material allegations of a petition filed against Borrower in any such proceedings; or (iv) the court in which such proceedings are pending shall enter a decree or order granting the relief sought in any such proceedings; or (v) sixty (60) days shall have expired after the appointment, without the consent or acquiescence of Borrower, of any trustee, receiver or liquidator of Borrower or of all or any substantial part of the properties of Borrower without such appointment being vacated; or

 

9.7                               Attachments; Judgments.  Any portion of Borrower’s assets is attached or seized, or a levy is filed against any such assets, or a final, non-appealable judgment or judgments is/are entered for the payment of money, individually or in the aggregate, of at least $150,000, or Borrower is enjoined or in any way prevented by court order from conducting a substantial part of its business; or

 

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9.8                               Other Obligations.  The occurrence of any default under any agreement or obligation of Borrower involving any Indebtedness in excess of $75,000, or the occurrence of any default under any agreement  or obligation of Borrower that is reasonably expected to have a Material Adverse Effect.

 

SECTION 10.  REMEDIES

 

10.1                        General.  Upon and during the continuance of any one or more Events of Default, (i) Lender may, at its option, accelerate and demand payment of all or any part of the Secured Obligations and declare them to be immediately due and payable (provided, that upon the occurrence of an Event of Default of the type described in Section 9.6, all of the Secured Obligations shall automatically be accelerated and made due and payable, in each case without any further notice or act), and (ii) Lender may notify any of Borrower’s account debtors to make payment directly to Lender, compromise the amount of any such account on Borrower’s behalf and endorse Lender’s name without recourse on any such payment for deposit directly to Lender’s account.  Lender may exercise all rights and remedies with respect to the Collateral under the Loan Documents or otherwise available to it under the UCC and other applicable law, including the right to release, hold, sell, lease, liquidate, collect, realize upon, or otherwise dispose of all or any part of the Collateral and the right to occupy, utilize, process and commingle the Collateral.  All Lender’s rights and remedies shall be cumulative and not exclusive.

 

10.2                        Collection; Foreclosure.  Upon the occurrence and during the continuance of any Event of Default, Lender may, at any time or from time to time, apply, collect, liquidate, sell in one or more sales, lease or otherwise dispose of, any or all of the Collateral, in its then condition or following any commercially reasonable preparation or processing, in such order as Lender may elect.  Any such sale may be made either at public or private sale at its place of business or elsewhere.  Borrower agrees that any such public or private sale may occur upon ten (10) calendar days’ prior written notice to Borrower.  Lender may require Borrower to assemble the Collateral and make it available to Lender at a place designated by Lender that is reasonably convenient to Lender and Borrower.  The proceeds of any sale, disposition or other realization upon all or any part of the Collateral shall be applied by Lender in the following order of priorities:

 

First, to Lender in an amount sufficient to pay in full Lender’s costs and professionals’ and advisors’ fees and expenses as described in Section 11.11;

 

Second, to Lender in an amount equal to the then unpaid amount of the Secured Obligations (including principal, interest, and the Default Rate interest), in such order and priority as Lender may choose in its sole discretion; and

 

Finally, after the full, final, and indefeasible payment in Cash of all of the Secured Obligations, to any creditor holding a junior Lien on the Collateral, or to Borrower or its representatives or as a court of competent jurisdiction may direct.

 

Lender shall be deemed to have acted reasonably in the custody, preservation and disposition of any of the Collateral if it complies with the obligations of a secured party under the UCC.

 

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10.3                        No Waiver.  Lender shall be under no obligation to marshal any of the Collateral for the benefit of Borrower or any other Person, and Borrower expressly waives all rights, if any, to require Lender to marshal any Collateral.

 

10.4                        Cumulative Remedies.  The rights, powers and remedies of Lender hereunder shall be in addition to all rights, powers and remedies given by statute or rule of law and are cumulative.  The exercise of any one or more of the rights, powers and remedies provided herein shall not be construed as a waiver of or election of remedies with respect to any other rights, powers and remedies of Lender.

 

SECTION 11.  MISCELLANEOUS

 

11.1                        Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective only to the extent and duration of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

11.2                        Notice.  Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process or other communication (including the delivery of Financial Statements) that is required, contemplated, or permitted under the Loan Documents or with respect to the subject matter hereof shall be in writing, and shall be deemed to have been validly served, given, delivered, and received upon the earlier of: (i) the day of transmission by facsimile or hand delivery or delivery by an overnight express service or overnight mail delivery service; or (ii) the third calendar day after deposit in the United States mails, with proper first class postage prepaid, in each case addressed to the party to be notified as follows:

 

(a)                                 If to Lender:

 

HERCULES TECHNOLOGY III, L.P.

Legal Department

Attention:  Chief Legal Officer and Chad Norman

400 Hamilton Avenue, Suite 310

Palo Alto, CA  94301

Facsimile:  650-473-9194

Telephone:  650-289-3060

 

(b)                                 If to Borrower:

ROCKWELL MEDICAL, INC.

Attention:  Thomas Klema, Chief Financial Officer

30142 Wixom Road

Wixom, Michigan 48393

Facsimile:  (248) 960-9119

Telephone:  (248) 960-9009

 

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or to such other address as each party may designate for itself by like notice.

 

11.3                        Entire Agreement; Amendments.  This Agreement and the other Loan Documents constitute the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and thereof, and supersede and replace in their entirety any prior proposals, term sheets, non-disclosure or confidentiality agreements, letters, negotiations or other documents or agreements, whether written or oral, with respect to the subject matter hereof or thereof (including Lender’s proposal letter accepted by Borrower on May28, 2013).  None of the terms of this Agreement or any of the other Loan Documents may be amended except by an instrument executed by each of the parties hereto.  Borrower has advised Lender of prospective plans for its business which, under the terms of this Agreement, cannot be undertaken without some form of amendment or waiver.  Lender has advised Borrower that such plans are not sufficiently developed for Lender to determine what amendments or waivers, if any, would be appropriate, but Lender has agreed to consider any amendment or waiver requested by Borrower (other than one related to an Event of Default) in good faith.

 

11.4                        No Strict Construction.  The parties hereto have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

11.5                        No Waiver.  The powers conferred upon Lender by this Agreement are solely to protect its rights hereunder and under the other Loan Documents and its interest in the Collateral and shall not impose any duty upon Lender to exercise any such powers.  No omission or delay by Lender at any time to enforce any right or remedy reserved to it, or to require performance of any of the terms, covenants or provisions hereof by Borrower at any time designated, shall be a waiver of any such right or remedy to which Lender is entitled, nor shall it in any way affect the right of Lender to enforce such provisions thereafter.

 

11.6                        Survival.  All agreements, representations and warranties contained in this Agreement and the other Loan Documents or in any document delivered pursuant hereto or thereto shall be for the benefit of Lender and shall survive the execution and delivery of this Agreement and the expiration or other termination of this Agreement.

 

11.7                        Successors and Assigns.  The provisions of this Agreement and the other Loan Documents shall inure to the benefit of and be binding on Borrower and its permitted assigns (if any).  Borrower shall not assign its obligations under this Agreement or any of the other Loan Documents without Lender’s express prior written consent, and any such attempted assignment shall be void and of no effect.  Lender may assign, transfer, or endorse its rights hereunder and under the other Loan Documents without prior notice to Borrower, and all of such rights shall inure to the benefit of Lender’s successors and assigns.

 

11.8                        Governing Law.  This Agreement and the other Loan Documents have been negotiated and delivered to Lender in the State of California, and shall have been accepted by Lender in the State of California.  Payment to Lender by Borrower of the Secured

 

24

 

Obligations is due in the State of California.  This Agreement and the other Loan Documents shall be governed by, and construed and enforced in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.

 

11.9                        Consent to Jurisdiction and Venue.  All judicial proceedings (to the extent that the reference requirement of Section 11.10 is not applicable) arising in or under or related to this Agreement or any of the other Loan Documents may be brought in any state or federal court located in the State of California.  By execution and delivery of this Agreement, each party hereto generally and unconditionally: (a) consents to nonexclusive personal jurisdiction in Santa Clara County, State of California; (b) waives any objection as to jurisdiction or venue in Santa Clara County, State of California; (c) agrees not to assert any defense based on lack of jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement or the other Loan Documents.  Service of process on any party hereto in any action arising out of or relating to this Agreement shall be effective if given in accordance with the requirements for notice set forth in Section 11.2, and shall be deemed effective and received as set forth in Section 11.2.  Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of either party to bring proceedings in the courts of any other jurisdiction.

 

11.10                 Mutual Waiver of Jury Trial / Judicial Reference.

 

(a)                                 Because disputes arising in connection with complex financial transactions are most quickly and economically resolved by an experienced and expert person and the parties wish applicable state and federal laws to apply (rather than arbitration rules), the parties desire that their disputes be resolved by a judge applying such applicable laws.  EACH OF BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY BORROWER AGAINST LENDER OR ITS ASSIGNEE OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER.  This waiver extends to all such Claims, including Claims that involve Persons other than Borrower and Lender; Claims that arise out of or are in any way connected to the relationship between Borrower and Lender; and any Claims for damages, breach of contract, tort, specific performance, or any equitable or legal relief of any kind, arising out of this Agreement, any other Loan Document.

 

(b)                                 If the waiver of jury trial set forth in Section 11.10(a) is ineffective or unenforceable, the parties agree that all Claims shall be resolved by reference to a private judge sitting without a jury, pursuant to Code of Civil Procedure Section 638, before a mutually acceptable referee or, if the parties cannot agree, a referee selected by the Presiding Judge of the Santa Clara County, California.  Such proceeding shall be conducted in Santa Clara County, California, with California rules of evidence and discovery applicable to such proceeding.

 

25

 

(c)                                  In the event Claims are to be resolved by judicial reference, either party may seek from a court identified in Section 11.9, any prejudgment order, writ or other relief and have such prejudgment order, writ or other relief enforced to the fullest extent permitted by law notwithstanding that all Claims are otherwise subject to resolution by judicial reference.

 

11.11                 Professional Fees.  Borrower promises to pay Lender’s fees and expenses necessary to finalize the loan documentation, including but not limited to reasonable attorneys fees, UCC searches, filing costs, and other miscellaneous expenses. In addition, Borrower promises to pay any and all reasonable attorneys’ and other professionals’ fees and expenses (including fees and expenses of in-house counsel) incurred by Lender after the Closing Date in connection with or related to:  (a) the Loan; (b) the collection, or enforcement of the Loan; (c) the amendment or modification of the Loan Documents; (d) any waiver, consent, release, or termination under the Loan Documents; (e) the protection, preservation, sale, lease, liquidation, or disposition of Collateral or the exercise of remedies with respect to the Collateral; (f) subject to the provisions of Section 6.3 hereof, any legal, litigation, administrative, arbitration, or out of court proceeding in connection with or related to Borrower or the Collateral, and any appeal or review thereof; and (g) any bankruptcy, restructuring, reorganization, assignment for the benefit of creditors, workout, foreclosure, or other action related to Borrower, the Collateral, the Loan Documents, including representing Lender in any adversary proceeding or contested matter commenced or continued by or on behalf of Borrower’s estate, and any appeal or review thereof.

 

11.12                 Confidentiality.  Lender acknowledges that certain items of Collateral and information provided to Lender by Borrower are confidential and proprietary information of Borrower, if and to the extent such information either (x) is marked as confidential by Borrower at the time of disclosure, or (y) should reasonably be understood to be confidential (the “Confidential Information”).  Accordingly, Lender agrees that any Confidential Information it may obtain in the course of acquiring, administering, or perfecting Lender’s security interest in the Collateral shall not be disclosed to any other person or entity in any manner whatsoever, in whole or in part, without the prior written consent of Borrower, except that Lender may disclose any such information:  (a) to its own directors, officers, employees, accountants, counsel and other professional advisors and to its affiliates if Lender in its sole discretion determines that any such party should have access to such information in connection with such party’s responsibilities in connection with the Loan or this Agreement and, provided that such recipient of such Confidential Information either (i) agrees to be bound by the confidentiality provisions of this paragraph or (ii) is otherwise subject to confidentiality restrictions that reasonably protect against the disclosure of Confidential Information; (b) if such information is generally available to the public, other than as a result of disclosure by Lender or any of Lender’s directors, officers, employees, accountants, counsel, other professional advisors or affiliates; (c) to the extent required in any report, statement or testimony submitted to any governmental authority having or claiming to have jurisdiction over Lender; (d) to the extent required in response to any summons or subpoena or in connection with any litigation, to the extent required as advised by Lender’s counsel; (e) to comply with any legal requirement or law applicable to Lender; (f) to the extent reasonably necessary in connection with the exercise of any right

 

26

 

or remedy under any Loan Document, including Lender’s sale, lease, or other disposition of Collateral after default; (g) to any participant or assignee of Lender or any prospective participant or assignee; provided, that such participant or assignee or prospective participant or assignee agrees in writing to be bound by this Section prior to disclosure; or (h) otherwise with the prior consent of Borrower; provided, that any disclosure made in violation of this Agreement shall not affect the obligations of Borrower or any of its affiliates or any guarantor under this Agreement or the other Loan Documents.

 

11.13                 Assignment of Rights.  Borrower acknowledges and understands that Lender may sell and assign all or part of its interest hereunder and under the Loan Documents to any person or entity (an “Assignee”).  After such assignment the term “Lender” as used in the Loan Documents shall mean and include such Assignee, and such Assignee shall be vested with all rights, powers and remedies of Lender hereunder with respect to the interest so assigned; but with respect to any such interest not so transferred, Lender shall retain all rights, powers and remedies hereby given.  No such assignment by Lender shall relieve Borrower of any of its obligations hereunder.  Lender agrees that in the event of any transfer by it of the Note(s)(if any), it will endorse thereon a notation as to the portion of the principal of the Note(s), which shall have been paid at the time of such transfer and as to the date to which interest shall have been last paid thereon.

 

11.14                 Revival of Secured Obligations.  This Agreement and the Loan Documents shall remain in full force and effect and continue to be effective if any petition is filed by or against Borrower for liquidation or reorganization, if Borrower becomes insolvent or makes an assignment for the benefit of creditors, if a receiver or trustee is appointed for all or any significant part of Borrower’s assets, or if any payment or transfer of Collateral is recovered from Lender.  The Loan Documents and the Secured Obligations and Collateral security shall continue to be effective, or shall be revived or reinstated, as the case may be, if at any time payment and performance of the Secured Obligations or any transfer of Collateral to Lender, or any part thereof is rescinded, avoided or avoidable, reduced in amount, or must otherwise be restored or returned by, or is recovered from, Lender or by any obligee of the Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment, performance, or transfer of Collateral had not been made.  In the event that any payment, or any part thereof, is rescinded, reduced, avoided, avoidable, restored, returned, or recovered, the Loan Documents and the Secured Obligations shall be deemed, without any further action or documentation, to have been revived and reinstated except to the extent of the full, final, and indefeasible payment to Lender in Cash.

 

11.15                 Counterparts.  This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but all of which counterparts shall constitute but one and the same instrument.

 

11.16                 No Third Party Beneficiaries.  No provisions of the Loan Documents are intended, nor will be interpreted, to provide or create any third-party beneficiary rights or any other rights of any kind in any person other than Lender and Borrower unless

 

27

 

specifically provided otherwise herein, and, except as otherwise so provided, all provisions of the Loan Documents will be personal and solely between the Lender and the Borrower.

 

11.17                 Publicity.

 

(a)                                             Borrower consents to the publication and use by Lender and any of its member businesses and affiliates of (i) Borrower’s name (including a brief description of the relationship between Borrower and Lender) and logo and a hyperlink to Borrower’s web site, separately or together, in written and oral presentations, advertising, promotional and marketing materials, client lists, public relations materials or on its web site (together, the “Lender Publicity Materials”); (ii) the names of officers of Borrower in the Lender Publicity Materials; and (iii) Borrower’s name, trademarks or servicemarks in any news release concerning Lender.

 

(b)                                             Lender consents to the publication and use by Borrower of:  (i) Lender’s name (including a brief description of the relationship between Borrower and Lender), logo or hyperlink to Lender’s web site, separately or together, in written and oral presentations, advertising, promotional and marketing materials, client lists, public relations materials or on its web site (together, the “Borrower Publicity Materials”); (ii) the names of officers of Lender in the Borrower Publicity Materials; and (iii) Lender’s name, trademarks, servicemarks in any news release concerning Borrower.

 

(SIGNATURES TO FOLLOW)

 

28

 

IN WITNESS WHEREOF, Borrower and Lender have duly executed and delivered this Loan and Security Agreement as of the day and year first above written.

 

	
 
    	
BORROWER:
    
	
 
    	
 
    
	
 
    	
ROCKWELL   MEDICAL, INC., a Michigan corporation
    
	
 
    	
 
    
	
 
    	
Signature:
    	
/s/Robert   L. Chioini
    
	
 
    	
 
    	
 
    
	
 
    	
Print   Name:
    	
Robert   L. Chioini
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
CEO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ROCKWELL   TRANSPORTATION, INC., 
   a Michigan corporation
    
	
 
    	
 
    	
 
    
	
 
    	
Signature:
    	
/s/   Robert L. Chioini
    
	
 
    	
 
    	
 
    
	
 
    	
Print   Name:
    	
Robert   L. Chioini
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
CEO
    
	
 
    	
 
    
	
 
    	
 
    
	
Accepted in Palo Alto, California:
    	
 
    
	
 
    	
 
    
	
 
    	
LENDER:
    
	
 
    	
 
    
	
 
    	
HERCULES   TECHNOLOGY III, L.P.,
    
	
 
    	
a   Delaware limited partnership
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Hercules   Technology SBIC Management, LLC, its General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Hercules   Technology Growth Capital, Inc., its Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ K.   Nicholas Martitsch
    
	
 
    	
Name:
    	
K.   Nicholas Martitsch
    
	
 
    	
Its:
    	
Associate   General Counsel
    
				

 

29

 

Table of Addenda, Exhibits and Schedules

 

	
Addendum 1:
    	
SBA   Provisions
    
	
 
    	
 
    
	
Exhibit A:
    	
Advance   Request
    
	
 
    	
Attachment   to Advance Request
    
	
 
    	
 
    
	
Exhibit B:
    	
Term   Note
    
	
 
    	
 
    
	
Exhibit C:
    	
Name,   Locations, and Other Information for Borrower
    
	
 
    	
 
    
	
Exhibit D:
    	
Borrower’s   Patents, Trademarks, Copyrights and Licenses
    
	
 
    	
 
    
	
Exhibit E:
    	
Borrower’s   Deposit Accounts and Investment Accounts
    
	
 
    	
 
    
	
Exhibit F:
    	
Compliance   Certificate
    
	
 
    	
 
    
	
Exhibit G:
    	
Joinder   Agreement
    
	
 
    	
 
    
	
Exhibit H:
    	
ACH   Debit Authorization Agreement
    
	
 
    	
 
    
	
Schedule 1
    	
Subsidiaries
    
	
Schedule 1A
    	
Existing   Permitted Indebtedness
    
	
Schedule 1B
    	
Existing   Permitted Investments
    
	
Schedule 1C
    	
Existing   Permitted Liens
    
	
Schedule 5.3
    	
Consents,   Etc.
    
	
Schedule 5.5
    	
Actions   Before Governmental Authorities
    
	
Schedule 5.8
    	
Tax   Matters
    
	
Schedule 5.9
    	
Intellectual   Property Claims
    
	
Schedule 5.10
    	
Intellectual   Property
    
	
Schedule 5.11
    	
Borrower   Products
    
	
Schedule 5.14
    	
Capitalization
    

 

 

ADDENDUM 1 to LOAN AND SECURITY AGREEMENT

 

(a)                                 Borrower’s Business.  For purposes of this Addendum 1, Borrower shall be deemed to include its “affiliates” as defined in Title 13 Code of Federal Regulations Section 121.103.  Borrower represents and warrants to Lender as of the Closing Date and covenants to Lender for a period of one year after the Closing Date with respect to subsections 2, 3, 4, 5, 6 and 7 below, as follows:

 

1.                                      Size Status.  Borrower does not have tangible net worth in excess of $18 million or average net income after Federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years in excess of $6 million;

 

2.                                      No Relender.  Borrower’s primary business activity does not involve, directly or indirectly, providing funds to others, purchasing debt obligations, factoring, or long-term leasing of equipment with no provision for maintenance or repair;

 

3.                                      No Passive Business.  Borrower is engaged in a regular and continuous business operation (excluding the mere receipt of payments such as dividends, rents, lease payments, or royalties).  Borrower’s employees are carrying on the majority of day to day operations.  Borrower will not pass through substantially all of the proceeds of the Loan to another entity;

 

4.                                      No Real Estate Business.  Borrower is not classified under Major Group 65 (Real Estate) or Industry No. 1531 (Operative Builders) of the SIC Manual.  The proceeds of the Loan will not be used to acquire or refinance real property unless Borrower (x) is acquiring an existing property and will use at least 51 percent of the usable square footage for its business purposes; (y) is building or renovating a building and will use at least 67 percent of the usable square footage for its business purposes; or (z) occupies the subject property and uses at least 67 percent of the usable square footage for its business purposes.

 

5.                                      No Project Finance.  Borrower’s assets are not intended to be reduced or consumed, generally without replacement, as the life of its business progresses, and the nature of Borrower’s business does not require that a stream of cash payments be made to the business’s financing sources, on a basis associated with the continuing sale of assets (e.g., real estate development projects and oil and gas wells).  The primary purpose of the Loan is not to fund production of a single item or defined limited number of items,

 

1

 

generally over a defined production period, where such production will constitute the majority of the activities of Borrower (e.g., motion pictures and electric generating plants).

 

6.                                      No Farm Land Purchases.  Borrower will not use the proceeds of the Loan to acquire farm land which is or is intended to be used for agricultural or forestry purposes, such as the production of food, fiber, or wood, or is so taxed or zoned.

 

7.                                      No Foreign Investment.  The proceeds of the Loan will not be used substantially for a foreign operation.  At the time of the Loan, Borrower will not have more than 49 percent of its employees or tangible assets located outside the United States.  The representation in this subsection (7) is made only as of the date hereof and shall not continue for one year as contemplated in the first sentence of this Section 1.

 

(b)                                 Small Business Administration Documentation.  Lender acknowledges that Borrower completed, executed and delivered to Lender SBA Forms 480, 652 and 1031 (Parts A and B) together with a business plan showing Borrower’s financial projections (including balance sheets and income and cash flows statements) for the period described therein and a written statement (whether included in the purchase agreement or pursuant to a separate statement) from Lender regarding its intended use of proceeds from the sale of securities to Lender (the “Use of Proceeds Statement”).  Borrower represents and warrants to Lender that the information regarding Borrower and its affiliates set forth in the SBA Form 480, Form 652 and Form 1031 and the Use of Proceeds Statement delivered as of the Closing Date is accurate and complete.

 

(c)                                  Inspection.  The following covenants contained in this Section (c) are intended to supplement and not to restrict the related provisions of the Loan Documents.  Subject to the preceding sentence, Borrower will permit, for so long as Lender holds any debt or equity securities of Borrower, Lender or its representative, at Lender’ expense, and examiners of the SBA to visit and inspect the properties and assets of Borrower, to examine its books of account and records, and to discuss Borrower’s affairs, finances and accounts with Borrower’s officers, senior management and accountants, all at such reasonable times as may be requested by Lender or the SBA.

 

(d)                                 Annual Assessment.  Promptly after the end of each calendar year (but in any event prior to February 28 of each year) and at such other times as may be reasonably requested by Lender, Borrower will deliver to Lender a written assessment of the economic impact of Lender’ investment in Borrower, specifying the full-time equivalent jobs created or retained in connection with the investment, the impact of the investment on the businesses of Borrower in terms of expanded revenue and taxes, other economic benefits resulting from the investment (such as technology development or commercialization, minority business development, or expansion of exports) and such other information as may be required regarding Borrower in connection with the filing of

 

2

 

Lender’s SBA Form 468.   Lender will assist Borrower with preparing such assessment.  In addition to any other rights granted hereunder, Borrower will grant Lender and the SBA access to Borrower’s books and records for the purpose of verifying the use of such proceeds.  Borrower also will furnish or cause to be furnished to Lender such other information regarding the business, affairs and condition of Borrower as Lender may from time to time reasonably request.

 

(e)                                  Use of Proceeds.  Borrower will use the proceeds from the Loan only for purposes set forth in Section 7.14.  Borrower will deliver to Lender from time to time promptly following Lender’s request, a written report, certified as correct by Borrower’s Chief Financial Officer, verifying the purposes and amounts for which proceeds from the Loan have been disbursed.  Borrower will supply to Lender such additional information and documents as Lender reasonably requests with respect to its use of proceeds and will permit Lender and the SBA to have access to any and all Borrower records and information and personnel as Lender deems necessary to verify how such proceeds have been or are being used, and to assure that the proceeds have been used for the purposes specified in Section 7.14.

 

(f)                                   Activities and Proceeds.  Neither Borrower nor any of its affiliates (if any) will engage in any activities or use directly or indirectly the proceeds from the Loan for any purpose for which a small business investment company is prohibited from providing funds by the SBIC Act, including 13 C.F.R. §107.720.  Without obtaining the prior written approval of Lender, Borrower will not change within 1 year of the date hereof, Borrower’s current business activity to a business activity which a licensee under the SBIC Act is prohibited from providing funds by the SBIC Act.

 

(g)                                  Compliance and Resolution.   Borrower agrees that a failure to comply with Borrower’s obligations under this Addendum, or any other set of facts or circumstances where it has been asserted by any governmental regulatory agency (or Lender believes that there is a substantial risk of such assertion) that Lender and its affiliates are not entitled to hold, or exercise any significant right with respect to, any securities issued to Lender by Borrower, will constitute a breach of the obligations of Borrower under the financing agreements between Borrower and Lender.  In the event of (i) a failure to comply with Borrower’s obligations under this Addendum; or (ii) an assertion by any governmental regulatory agency (or Lender believes that there is a substantial risk of such assertion) of a failure to comply with Borrower’s obligations under this Addendum, then (i) Lender and Borrower will meet and resolve any such issue in good faith to the satisfaction of Borrower, Lender, and any governmental regulatory agency, and (ii) upon request of Lender, Borrower will cooperate and assist with any assignment of the financing agreements from Hercules Technology III, L.P. to Hercules Technology Growth Capital, Inc.

 

3

 

EXHIBIT A

 

ADVANCE REQUEST

 

	
To:                             Lender:
    	
Date:
    	
June       ,   2013
    

 

Hercules Technology III, L.P.

400 Hamilton Avenue, Suite 310

Palo Alto, CA 94301

Facsimile:  650-473-9194

Attn:

 

Rockwell Medical, Inc. (“Borrower”) hereby requests from Hercules Technology III, L.P. (“Lender”) an Advance in the amount of Twenty Million Dollars ($20,000,000.00) on June 14, 2013 (the “Advance Date”) pursuant to the Loan and Security Agreement between Borrower and Lender (the “Agreement”). Capitalized words and other terms used but not otherwise defined herein are used with the same meanings as defined in the Agreement.

 

Please:

 

(a)                                 Issue a check payable to Borrower

 

or

 

(b)                                 Wire Funds to Borrower’s account

 

	
Bank:
    	
 
    
	
Address:
    	
 
    
	
 
    	
 
    
	
ABA   Number:
    	
 
    
	
Account   Number:
    	
 
    
	
Account   Name:
    	
 
    

 

Borrower represents that the conditions precedent to the Advance set forth in the Agreement are satisfied and shall be satisfied upon the making of such Advance, including but not limited to:  (i) that no event that has had or could reasonably be expected to have a Material Adverse Effect has occurred and is continuing; (ii) that the representations and warranties set forth in the Agreement are and shall be true and correct in all material respects on and as of the Advance Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date; (iii) that Borrower is in compliance with all the terms and provisions set forth in each Loan Document on its part to be observed or performed; and (iv) that as of the Advance Date, no fact or condition exists that would (or would, with the passage of time, the giving of notice, or both) constitute an Event of Default under the Loan Documents.  Borrower understands and acknowledges that Lender has the right to review the financial information supporting this representation and, based upon such review in its sole discretion, Lender may decline to fund the requested Advance.

 

1

 

Borrower hereby represents that Borrower’s corporate status and locations have not changed since the date of the Agreement or, if the Attachment to this Advance Request is completed, are as set forth in the Attachment to this Advance Request.

 

Borrower agrees to notify Lender promptly before the funding of the Loan if any of the matters which have been represented above shall not be true and correct on the Borrowing Date and if Lender has received no such notice before the Advance Date then the statements set forth above shall be deemed to have been made and shall be deemed to be true and correct as of the Advance Date.

 

Executed as of June     , 2013.

 

	
 
    	
BORROWER:   ROCKWELL MEDICAL, INC.
    
	
 
    	
 
    
	
 
    	
SIGNATURE:
    	
 
    
	
 
    	
TITLE:
    	
 
    
	
 
    	
PRINT   NAME:
    	
 
    
					

 

2

 

ATTACHMENT TO ADVANCE REQUEST

 

Dated:                                    

 

Borrower hereby represents and warrants to Lender that Borrower’s current name and organizational status is as follows:

 

	
Name:
    	
Rockwell   Medical, Inc.
    
	
 
    	
 
    
	
Type of   organization:
    	
Corporation
    
	
 
    	
 
    
	
State   of organization:
    	
Michigan
    
	
 
    	
 
    
	
Organization   file number:
    	
 
    

 

Borrower hereby represents and warrants to Lender that the street addresses, cities, states and postal codes of its current locations are as follows:

 

 

EXHIBIT B

 

SECURED TERM PROMISSORY NOTE

 

	
$[   ],000,000
    	
Advance   Date:            , 20[ ]
    
	
 
    	
Maturity   Date:                    , 20[ ]
    

 

FOR VALUE RECEIVED, [                                                     ], a [                 ] corporation, for itself and each of its Subsidiaries (the “Borrower”) hereby promises to pay to the order of Hercules Technology III, L.P., a Delaware limited partnership or the holder of this Note (the “Lender”) at 400 Hamilton Avenue, Suite 310, Palo Alto, CA 94301 or such other place of payment as the holder of this Secured Term Promissory Note (this “Promissory Note”) may specify from time to time in writing, in lawful money of the United States of America, the principal amount of Twenty Million Dollars ($20,000,000) or such other principal amount as Lender has advanced to Borrower, together with interest at a floating rate equal to the greater of either (i) 12.50% plus the prime rate as reported in The Wall Street Journal, and if not reported, then the prime rate next reported in the Wall Street Journal,  minus 3.25%, or (ii) 12.50%, with interest computed daily based on the actual number of days in each month.

 

This Promissory Note is the Note referred to in, and is executed and delivered in connection with, that certain Loan and Security Agreement dated [                  ], 20[  ], by and between Borrower and Lender (as the same may from time to time be amended, modified or supplemented in accordance with its terms, the “Loan Agreement”), and is entitled to the benefit and security of the Loan Agreement and the other Loan Documents (as defined in the Loan Agreement), to which reference is made for a statement of all of the terms and conditions thereof.  All payments shall be made in accordance with the Loan Agreement.  All terms defined in the Loan Agreement shall have the same definitions when used herein, unless otherwise defined herein.  An Event of Default under the Loan Agreement shall constitute a default under this Promissory Note.

 

Borrower waives presentment and demand for payment, notice of dishonor, protest and notice of protest under the UCC or any applicable law.   Borrower agrees to make all payments under this Promissory Note without setoff, recoupment or deduction and regardless of any counterclaim or defense.  This Promissory Note has been negotiated and delivered to Lender and is payable in the State of California.  This Promissory Note shall be governed by and construed and enforced in accordance with, the laws of the State of California, excluding any conflicts of law rules or principles that would cause the application of the laws of any other jurisdiction.

 

	
BORROWER   FOR ITSELF AND
    	
 
    
	
ON   BEHALF OF ITS SUBSIDIARIES:
    	
[                              ]
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
Title:
    

 

 

EXHIBIT C

 

NAME, LOCATIONS, AND OTHER INFORMATION FOR BORROWER

 

1.  Borrower represents and warrants to Lender that Borrower’s current name and organizational status as of the Closing Date is as follows:

 

	
Name:
    	
Rockwell Medical, Inc.
    
	
 
    	
 
    
	
Type of organization:
    	
Corporation
    
	
 
    	
 
    
	
State of organization:
    	
Michigan
    

 

Organization file number:

 

2.  Borrower represents and warrants to Lender that for five (5) years prior to the Closing Date, Borrower did not do business under any other name or organization or form except the following:

 

Name:

Used during dates of:

Type of Organization:

State of organization:

Organization file Number:

Borrower’s fiscal year ends on           

Borrower’s federal employer tax identification number is:

 

3.  Borrower represents and warrants to Lender that its chief executive office is located at                               .

 

 

EXHIBIT D

 

BORROWER’S PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES

 

See Schedule 5.10

 

 

EXHIBIT E

 

BORROWER’S DEPOSIT ACCOUNTS AND INVESTMENT ACCOUNTS

 

	
Institution Name and Address
    	
 
    	
Account Number
    	
 
    	
Average Balance in Account
    	
 
    	
Name of Account
   Owner
    
	
Bank of America
    	
 
    	
[omitted]
    	
 
    	
$
    	
[omitted]
    	
 
    	
Rockwell   Medical, Inc.
    
	
Morgan Stanley
    	
 
    	
[omitted]
    	
 
    	
$
    	
[omitted]
    	
 
    	
Rockwell   Medical, Inc.
    

 

 

 

EXHIBIT F

 

COMPLIANCE CERTIFICATE

 

Hercules Technology III, L.P.
 400 Hamilton Avenue, Suite 310
 Palo Alto, CA 94301

 

Reference is made to that certain Loan and Security Agreement dated June 14, 2013 and all ancillary documents entered into in connection with such Loan and Security Agreement all as may be amended from time to time, (hereinafter referred to collectively as the “Loan Agreement”) between Hercules Technology III, L.P. (“Hercules”) as Lender and Rockwell Medical, Inc. (the “Company”) as Borrower. All capitalized terms not defined herein shall have the same meaning as defined in the Loan Agreement.

 

The undersigned is an Officer of the Company, knowledgeable of all Company financial matters, and is authorized to provide certification of information regarding the Company; hereby certifies that in accordance with the terms and conditions of the Loan Agreement, the Company is in compliance for the period ending                        of all covenants, conditions and terms and hereby reaffirms that all representations and warranties contained therein are true and correct on and as of the date of this Compliance Certificate with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, or as disclosed in the schedule attached to this Compliance Certificate, after giving effect in all cases to any standard(s) of materiality contained in the Loan Agreement as to such representations and warranties.  Attached are the required documents supporting the above certification.  The undersigned further certifies that these are prepared in accordance with GAAP (except for the absence of footnotes with respect to unaudited financial statement and subject to normal year end adjustments) and are consistent from one period to the next except as explained below.

 

	
REPORTING   REQUIREMENT
    	
 
    	
REQUIRED
    	
CHECK   IF 

ATTACHED
    
	
 
    	
 
    	
 
    	
 
    
	
Interim   Financial Statements
    	
 
    	
Monthly   within 30 days
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Interim   Financial Statements
    	
 
    	
Quarterly   within 45 days
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Audited   Financial Statements
    	
 
    	
FYE   within 150 days
    	
 
    

 

	
 
    	
Very   Truly Yours,
    
	
 
    	
 
    
	
 
    	
ROCKWELL   MEDICAL, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Its:
    	
 
    

 

 

EXHIBIT G

 

FORM OF JOINDER AGREEMENT

 

This Joinder Agreement (the “Joinder Agreement”) is made and dated as of [            ], 20[  ], and is entered into by and between                                    ., a                        corporation (“Subsidiary”), and HERCULES TECHNOLOGY III, L.P., a Delaware limited partnership,  as a Lender.

 

RECITALS

 

A.  Subsidiary’s Affiliate, Rockwell Medical, Inc. (“Company”) has entered into that certain Loan and Security Agreement dated June 14, 2013, with Lender, as such agreement may be amended (the “Loan Agreement”), together with the other agreements executed  and delivered in connection therewith;

 

B.  Subsidiary acknowledges and agrees that it will benefit both directly and indirectly from Company’s execution of the Loan Agreement and the other agreements executed and delivered in connection therewith;

 

AGREEMENT

 

NOW THEREFORE, Subsidiary and Lender agree as follows:

 

1.              The recitals set forth above are incorporated into and made part of this Joinder Agreement.  Capitalized terms not defined herein shall have the meaning provided in the Loan Agreement.

 

2.              By signing this Joinder Agreement, Subsidiary shall be bound by the terms and conditions of the Loan Agreement the same as if it were the Borrower (as defined in the Loan Agreement) under the Loan Agreement, mutatis mutandis, provided however, that Lender shall have no duties, responsibilities or obligations to Subsidiary arising under or related to the Loan Agreement or the other agreements executed and delivered in connection therewith.  Rather, to the extent that Lender has any duties, responsibilities or obligations arising under or related to the Loan Agreement or the other agreements executed and delivered in connection therewith, those duties, responsibilities or obligations shall flow only to Company and not to Subsidiary or any other person or entity.  By way of example (and not an exclusive list): (a) Lender’s providing notice to Company in accordance with the Loan Agreement or as otherwise agreed between Company and Lender shall be deemed provided to Subsidiary; (b) a Lender’s providing an Advance to Company shall be deemed an Advance to Subsidiary; and (c) Subsidiary shall have no right to request an Advance or make any other demand on Lender.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

[SIGNATURE PAGE TO JOINDER AGREEMENT]

 

	
SUBSIDIARY:
    	
 
    
	
 
    	
 
    
	
 
    	
.
    

 

	
 
    	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Telephone:
    	
 
    	
 
    
	
 
    	
Facsimile:
    	
 
    	
 
    
					

 

	
HERCULES   TECHNOLOGY III, L.P.,
    	
 
    
	
a   Delaware limited partnership
    	
 
    
	
 
    	
 
    
	
By:
    	
Hercules   Technology SBIC Management, LLC,
    	
 
    
	
 
    	
its   General Partner
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
Hercules   Technology Growth Capital, Inc.,
    	
 
    
	
 
    	
its   Manager
    	
 
    

 

	
 
    	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
 
    
	
 
    	
400   Hamilton Ave., Suite 310
    	
 
    
	
 
    	
Palo   Alto, CA 94301
    	
 
    
	
 
    	
Facsimile:   650-473-9194
    	
 
    
	
 
    	
Telephone:   650-289-3060
    	
 
    

 

 

EXHIBIT H

 

ACH DEBIT AUTHORIZATION AGREEMENT

 

Hercules Technology III, L.P.
 400 Hamilton Avenue, Suite 310
 Palo Alto, CA  94301

 

Re:  Loan and Security Agreement dated June 14, 2013, between Rockwell Medical, Inc. (“Borrower”) and Hercules Technology III, L.P. (“Company”) (the “Agreement”)

 

In connection with the above referenced Agreement, the Borrower hereby authorizes the Company to initiate debit entries for the periodic payments due under the Agreement to the Borrower’s account indicated below.  The Borrower authorizes the depository institution named below to debit to such account.

 

	
Depository   Name
    	
Branch
    
	
 
    	
 
    
	
City
    	
State   and Zip Code
    
	
 
    	
 
    
	
Transit/ABA   Number
    	
Account   Number
    

 

This authority will remain in full force and effect so long as any amounts are due under the Agreement.

 

	
ROCKWELL   MEDICAL, INC.
    	
 
    
	
(Borrower)
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    

 

 

Schedule 1A—Existing Permitted Indebtedness

 

	
Name and Address of Lender
    	
 
    	
Original Principal
   Amount/ Principal
   Outstanding
    	
 
    	
Maturity Date
    	
 
    	
Secured/Unsecured (if
   secured, complete 6(b))
    
	
Canon   Financial Services 
   14904 Collections Center Dr., 
   Chicago, IL 60693
    	
 
    	
$8,688/$1,168
    	
 
    	
08/10/2013
    	
 
    	
Secured
    

 

 

Schedule 1C—Existing Permitted Liens

 

	
Name of Holder of
   Lien/Encumbrance
    	
 
    	
Description of Property
   Encumbered
    	
 
    	
Name of
   Company/Subsidiary
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Canon   Financial Services
    	
 
    	
Copier   in Texas
    	
 
    	
Rockwell   Medical, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Penske   Truck Leasing Co LP
    	
 
    	
Tractors &   Trailers
    	
 
    	
Rockwell   Transportation, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Ryder   Transportation Services
    	
 
    	
Tractors &   Trailers
    	
 
    	
Rockwell   Transportation, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
De Lage   Landen
    	
 
    	
Forklifts
    	
 
    	
Rockwell   Medical, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Crown   Credit Company
    	
 
    	
Forklifts
    	
 
    	
Rockwell   Medical, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Raymond   Leasing Corporation
    	
 
    	
Forklifts
    	
 
    	
Rockwell   Medical, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Toyota   Financial Services
    	
 
    	
Forklifts
    	
 
    	
Rockwell   Medical, Inc.
    

 

 

 

 

Schedule 5.10—Intellectual Property

 

Issued Patents Owned by Rockwell Medical, Inc.

 

	
MGB Matter No.
    	
 
    	
Title
    	
 
    	
Country
    	
 
    	
Appl’n No
    	
 
    	
Patent No
    	
 
    	
Filing Date
    	
 
    	
Issue Date
    
	
32053/47196   US
    	
 
    	
Method   and Apparatus for Preparing Liquid Dialysate
    	
 
    	
United   States
    	
 
    	
09/810,770
    	
 
    	
6,395,180
    	
 
    	
09/17/1999
    	
 
    	
05/28/2002
    
	
32053/47196   CA
    	
 
    	
Method   and Apparatus for Preparing Liquid Dialysate
    	
 
    	
Canada
    	
 
    	
2344548
    	
 
    	
2344548
    	
 
    	
09/17/1999
    	
 
    	
03/13/2007
    
	
32053/47197   US
    	
 
    	
Packaging   of Ferric

 

Pyrophosphate   for Dialysis
    	
 
    	
United   States
    	
 
    	
11/179376
    	
 
    	
7,857,977
    	
 
    	
07/12/2005
    	
 
    	
12/28/2010
    
	
32053/47198   US
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
United   States
    	
 
    	
12/138018
    	
 
    	
7,816,404
    	
 
    	
06/12/2008
    	
 
    	
10/19/2010
    
	
32053/47198   CA
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Canada
    	
 
    	
2638081
    	
 
    	
2,638,081
    	
 
    	
07/17/2008
    	
 
    	
07/10/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
European Patent Convention
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    

 

 

	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Austria
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Belgium
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Bulgaria
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    

 

 

	
MGB Matter No.
    	
 
    	
Title
    	
 
    	
Country
    	
 
    	
Appl’n No
    	
 
    	
Patent No
    	
 
    	
Filing Date
    	
 
    	
Issue Date
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Cyprus
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Czech   Republic
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate Compositions
    	
 
    	
Denmark
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Estonia
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Finland
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    

 

 

	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
France
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Germany
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Great   Britain
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    

 

 

	
MGB Matter No.
    	
 
    	
Title
    	
 
    	
Country
    	
 
    	
Appl’n No
    	
 
    	
Patent No
    	
 
    	
Filing Date
    	
 
    	
Issue Date
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Greece
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Hungary
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Iceland
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Ireland
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Italy
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    

 

 

	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Latvia
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Lithuania
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Luxembourg
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    

 

 

	
MGB Matter No.
    	
 
    	
Title
    	
 
    	
Country
    	
 
    	
Appl’n No
    	
 
    	
Patent No
    	
 
    	
Filing Date
    	
 
    	
Issue Date
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Monaco
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Netherlands
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Norway
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Poland
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Portugal
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    

 

 

	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Romania
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Spain
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Sweden
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    

 

 

	
MGB Matter No.
    	
 
    	
Title
    	
 
    	
Country
    	
 
    	
Appl’n No
    	
 
    	
Patent No
    	
 
    	
Filing Date
    	
 
    	
Issue Date
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Switzerland/Liec   htenstein
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    
	
32053/47198   EP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Turkey
    	
 
    	
08159949.0
    	
 
    	
EP2016940
    	
 
    	
07/08/2008
    	
 
    	
04/25/2012
    

 

Pending Applications Owned by Rockwell Medical, Inc.

 

	
MGB Matter No.
    	
 
    	
Title
    	
 
    	
Country
    	
 
    	
Appl’n No
    	
 
    	
Filing Date
    
	
32053/47198   JP
    	
 
    	
Methods   For The Preparation And Use Of Ferric Pyrophosphate Citrate Chelate   Compositions
    	
 
    	
Japan
    	
 
    	
2008-186771
    	
 
    	
07/18/2008
    

 

 

Issued Patents Licensed to Rockwell Medical, Inc.

 

	
MGB Matter No.
    	
 
    	
Title
    	
 
    	
Country
    	
 
    	
Appl’n No
    	
 
    	
Patent No
    	
 
    	
Filing Date
    	
 
    	
Issue Date
    
	
32050/47188   US
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
United   States
    	
 
    	
09/341,032
    	
 
    	
6,779,468
    	
 
    	
12/30/1997
    	
 
    	
8/24/2004
    
	
32050/47188   AU
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in
    	
 
    	
Australia
    	
 
    	
56172/98
    	
 
    	
736053
    	
 
    	
12/30/1997
    	
 
    	
11/8/2001
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Austria
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Belarus
    	
 
    	
9795298.7
    	
 
    	
002479
    	
 
    	
12/30/1997
    	
 
    	
6/27/2002
    
	
32050/47188EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Belgium
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   CA
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Canada
    	
 
    	
2276442
    	
 
    	
2276442
    	
 
    	
12/30/1997
    	
 
    	
1/17/2012
    

 

 

	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Denmark
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
European   
   Patent 
   Convention
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   EA
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Eurasia
    	
 
    	
199900609
    	
 
    	
002479
    	
 
    	
12/30/1997
    	
 
    	
6/27/2002
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and Peritoneal   Dialysis Patients
    	
 
    	
Finland
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
France
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   DE
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Germany
    	
 
    	
9795298.7
    	
 
    	
69734781.8
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    

 

 

	
MGB Matter No.
    	
 
    	
Title
    	
 
    	
Country
    	
 
    	
Appl’n No
    	
 
    	
Patent No
    	
 
    	
Filing Date
    	
 
    	
Issue Date
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Greece
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   HK
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Hong   Kong
    	
 
    	
9795298.7
    	
 
    	
HK1023350
    	
 
    	
4/26/2000
    	
 
    	
3/3/2006
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Ireland
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Italy
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   JP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Japan
    	
 
    	
10-230148
    	
 
    	
3955639
    	
 
    	
12/30/1997
    	
 
    	
5/11/2007
    
	
32050/47188   MX
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Mexico
    	
 
    	
A/1999/006187
    	
 
    	
249918
    	
 
    	
12/30/1997
    	
 
    	
10/5/2007
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Netherlands
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   NZ
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
New   Zealand
    	
 
    	
336319
    	
 
    	
336319
    	
 
    	
12/30/1997
    	
 
    	
4/5/2001
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Norway
    	
 
    	
9795298.7
    	
 
    	
317873
    	
 
    	
12/30/1997
    	
 
    	
12/27/2004
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Poland
    	
 
    	
9795298.7
    	
 
    	
191377
    	
 
    	
12/30/1997
    	
 
    	
11/24/2005
    

 

 

	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Portugal
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   RU
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Russian   
   Federation
    	
 
    	
1999900609
    	
 
    	
002479
    	
 
    	
12/30/1997
    	
 
    	
6/27/2002
    

 

	
MGB Matter No.
    	
 
    	
Title
    	
 
    	
Country
    	
 
    	
Appl’n No
    	
 
    	
Patent No
    	
 
    	
Filing Date
    	
 
    	
Issue Date
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Spain
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Sweden
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   EP
    	
 
    	
Method   and Pharmaceutical Composition for Iron Delivery in Hemodialysis and   Peritoneal Dialysis Patients
    	
 
    	
Switzerland
    	
 
    	
9795298.7
    	
 
    	
EP0951470
    	
 
    	
12/30/1997
    	
 
    	
11/30/2005
    
	
32050/47188   EP
    	
 
    	
Iron   Delivery in Hemodialysis and Peritoneal Dialysis Patients
    	
 
    	
Turkey
    	
 
    	
9795298.7
    	
 
    	
TR   199901518B
    	
 
    	
12/30/1997
    	
 
    	
12/22/2008
    
	
32050/47188A   JP
    	
 
    	
Method   And Pharmaceutical Composition For Iron Delivery In Hemodialysis And   Peritoneal Dialysis Patients
    	
 
    	
Japan
    	
 
    	
2007-004535
    	
 
    	
4753379
    	
 
    	
12/30/1997
    	
 
    	
6/3/2011
    
	
32050/47199   US
    	
 
    	
Method   and Pharmaceutical Composition for Replacing Iron Losses in Dialysis Patients
    	
 
    	
United   States
    	
 
    	
08/775,595
    	
 
    	
6,689,275
    	
 
    	
12/31/1996
    	
 
    	
2/10/2004
    
	
32050/47200   US
    	
 
    	
Dialysis   Solutions Containing Water Soluble Vitamins and Nutrients
    	
 
    	
United   States
    	
 
    	
09/367,629
    	
 
    	
6,537,976
    	
 
    	
08/06/1998
    	
 
    	
03/25/2003
    

 

 

Pending Applications Licensed to Rockwell Medical, Inc.

 

	
MGB Matter No.
    	
 
    	
Title
    	
 
    	
Country
    	
 
    	
Appl’n No
    	
 
    	
Filing Date
    
	
32050/47188   BR
    	
 
    	
Method   And Pharmaceutical Composition For Iron Delivery In Hemodialysis And   Peritoneal Dialysis Patients
    	
 
    	
Brazil
    	
 
    	
PI9713653-0
    	
 
    	
12/30/1997
    

 

Provisional Patent Application

 

	
MGB Matter No.
    	
 
    	
Title
    	
 
    	
Country
    	
 
    	
Appl’n No
    	
 
    	
Filing Date
    
	
32050/47201   US
    	
 
    	
Methods   of Treating Anemia
    	
 
    	
US
    	
 
    	
61/759,531
    	
 
    	
02/01/2013
    

 

Registered Trademarks Owned by Rockwell Medical, Inc.

 

	
Serial
   Number
    	
 
    	
Reg.
   Number
    	
 
    	
Word Mark
    	
 
    	
Check
   Status
    	
 
    	
Live/Dead
    
	
78885375
    	
 
    	
3851758
    	
 
    	
CITRAPURE
    	
 
    	
TSDR
    	
 
    	
LIVE
    
	
77155100
    	
 
    	
3361727
    	
 
    	
DRI-SATE
    	
 
    	
TSDR
    	
 
    	
LIVE
    
	
76539654
    	
 
    	
3029776
    	
 
    	
RENALPURE
    	
 
    	
TSDR
    	
 
    	
LIVE
    
	
75712099
    	
 
    	
2361989
    	
 
    	
A NEW ATTITUDE IN DIALYSIS
    	
 
    	
TSDR
    	
 
    	
LIVE
    
	
75712098
    	
 
    	
2361988
    	
 
    	
A LITTLE EXTRA EFFORT IS THE DIFFERENCE BETWEEN GOOD AND   GREAT
    	
 
    	
TSDR
    	
 
    	
LIVE
    
	
75462226
    	
 
    	
2705651
    	
 
    	
ROCKWELL
    	
 
    	
TSDR
    	
 
    	
LIVE
    
	
75463275
    	
 
    	
2560799
    	
 
    	
ROCKWELL MEDICAL TECHNOLOGIES, INC.
    	
 
    	
TSDR
    	
 
    	
LIVE
    
	
75462704
    	
 
    	
2554474
    	
 
    	
DRI-SATE
    	
 
    	
TSDR
    	
 
    	
LIVE
    
	
75488441
    	
 
    	
2351231
    	
 
    	
STERILYTE
    	
 
    	
TSDR
    	
 
    	
LIVE
    

 

 

Schedule 5.14 Capitalization

 

As of June 17, 2013, Rockwell Medical, Inc. authorized capital stock consists of 2,000,000 preferred shares, none of which were issued or outstanding,  1,416,664 shares of 8.5% non-voting cumulative redeemable Series A Preferred Shares, $1.00 par value, of which none were issued outstanding and 120,000,000 common shares, no par value per share, of which 39,578,359 shares were outstanding.

 

Rockwell Transportation, Inc. authorized capital stock consists of 60,000 Common Shares of which 1,000 shares are issued and outstanding as of June 17, 2013.

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