Exhibit 99.1

 

News Release

 

FOR IMMEDIATE RELEASE

 

Contact:		William M. Lowe, Jr.		Dean W. Dimke
		Executive Vice President and		Director of Corporate and
		Chief Financial Officer		Investor Communications
		williamlowe@kemet.com		deandimke@kemet.com
		864-963-6484		954-766-2806

 

KEMET SIGNS AGREEMENT TO ACQUIRE 34% INTEREST IN NEC TOKIN

OPTION TO ACQUIRE 100% OWNERSHIP

 

Greenville, South Carolina (March 12, 2012) — KEMET Corporation (NYSE: KEM), a leading manufacturer of tantalum, ceramic, aluminum, film, paper and electrolytic capacitors, announced today that it has signed an agreement to acquire a 34% economic interest with a 51% voting interest in NEC TOKIN Corporation (“NT”), a manufacturer of tantalum capacitors, electro-magnetic, electro-mechanical, access devices and piezoelectric ceramics from NEC Corporation of Japan. Revenue of NT for the twelve-month period ended March 31, 2011 was ¥64,770 million or approximately $755 million.

 

“Today’s announcement is certainly the most dramatic change in the history of our company, and possibly even in the Electronic Component Solutions industry. We are presenting a roadmap outlining an initial joint venture between NEC TOKIN and KEMET that will take us on a journey that will lead to a truly global enterprise and one of the most exciting component solutions companies in the world,” said Per Loof, Chief Executive Officer of KEMET.  “We are excited about what this venture means to both NEC TOKIN’s and KEMET’s customers and the strength that it brings in areas of manufacturing expertise, product development, and synergies across our product base.  The long-term opportunities for people and business growth have opened up immensely for all of our combined employees and the future opportunities for all other stakeholders, customers and investors, have moved to a new and higher plateau,” continued Loof.

 

KEMET will pay an initial purchase price of $50 million at the closing of this first transaction for a 34% economic interest and a 51% voting interest in NT.  KEMET will make a second $50M payment around August 31, 2014 in exchange for an additional economic interest of 15% resulting in an economic ownership of 49% while maintaining 51% of the voting common stock. The value of the third and final payment will depend upon the operating results of NT at the time based on a multiple of six times twelve months trailing EBITDA less the previous payments. The transaction is subject to customary closing conditions, including required regulatory filings.  The transaction is expected to close in early summer.

 

NT’s headquarters are currently located in Tokyo Japan.  It has manufacturing locations in Sendai, Shiroishi and Toyama Japan; Xiamen, China; Dong Nai, Vietnam; Calamba, Philippines; and Chachoengsao, Thailand. NT has a total of ten sales offices located in the U.S., Europe, and Asia.

 

P.O. Box 5928, Greenville, South Carolina 29606 U.S.A.

Tel: 864.963.6300  Fax: 864.963.6306

 

 

Per Loof, Chief Executive Officer and William M. Lowe, Executive Vice President and CFO will host a conference call from Tokyo beginning at 4:30 p.m. EDT  Monday, March 12, 2012 to provide additional information regarding this acquisition.  In addition, investors may view a video posted on the company’s website found on the home page for further information.

 

About KEMET

 

KEMET’s common stock is listed on the NYSE under the symbol “KEM.” At the Investor Relations section of our web site at http://ir.kemet.com/, users may subscribe to KEMET news releases and find additional information about our Company. KEMET applies world class service and quality to deliver industry leading, high performance capacitance solutions to its customers around the world and offers the world’s most complete line of surface mount and through-hole capacitor technologies across tantalum, ceramic, film, aluminum, electrolytic, and paper dielectrics. Additional information about KEMET can be found at http://www.kemet.com.

 

Cautionary Statement on Forward-Looking Statements

 

Certain statements included herein contain forward-looking statements within the meaning of federal securities laws about KEMET Corporation’s (the “Company”) financial condition and results of operations that are based on management’s current expectations, estimates and projections about the markets in which the Company operates, as well as management’s beliefs and assumptions. Words such as “expects,” “anticipates,” “believes,” “estimates,” variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s judgment only as of the date hereof. The Company undertakes no obligation to update publicly any of these forward-looking statements to reflect new information, future events or otherwise.

 

Factors that may cause actual outcome and results to differ materially from those expressed in, or implied by, these forward-looking statements include, but are not necessarily limited to the following: (i) adverse economic conditions could impact the Company’s ability to realize operating plans if the demand for the Company’s products declines, and such conditions could adversely affect the Company’s liquidity and ability to continue to operate; (ii) adverse economic conditions could cause further reevaluation and the write down of long-lived assets; (iii) an increase in the cost or a decrease in the availability of the Company’s principal raw materials; (iv) changes in the competitive environment of the Company; (v) uncertainty of the timing of customer product qualifications in heavily regulated industries; (vi) economic, political, or regulatory changes in the countries in which the Company operates; (vii) difficulties, delays or unexpected costs in completing the Company’s restructuring plan; (viii) the inability to attract, train and retain effective employees and management; (ix) the inability to develop innovative products to maintain customer relationships and offset potential price erosion in older products; (x) exposure to claims alleging product defects; (xi) the impact of laws and regulations that apply to the Company’s business, including those relating to environmental matters; (xii) volatility of financial and credit markets affecting the Company’s access to capital; (xiii) the need to reduce the total costs of the Company’s products to remain competitive; (xiv) potential limitation on the use of net operating losses to offset possible future taxable income; (xv) restrictions in the Company’s debt agreements that limit the Company’s flexibility in operating its business;  (xvi) additional exercise of the warrant by K Equity, LLC which could potentially result in the existence of a significant stockholder who could seek to influence our corporate decisions; and (xvii) risks associated with current and future acquisitions and other strategic transactions, including the

 

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Company’s acquisitions of Niotan Incorporated and NEC Tokin Corporation.  Other risks and uncertainties may be described from time to time in the Company’s other reports and filings with the Securities and Exchange Commission.

 

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Exhibit 99.2

 

STOCK PURCHASE AGREEMENT

 

This STOCK PURCHASE AGREEMENT (this “ Agreement ”) is entered into as of March 12 , 201 2 , by and among NEC TOKIN Corporation , a Japanese corporation with its principal place of business at 7-1, Kohriyama 6-chome, Taihaku-ku, Sendai-shi, Miyagi 982-8510, Japan (the “ Company ”), NEC Corporation, a Japanese corporation with its principal place of business at 7-1, Shiba 5-chome, Minato-ku, Tokyo 108-8001, Japan (“ NEC Corporation ”), and KEMET Electronics Corporation, a Delaware corporation with its principal place of business at 2835 Kemet Way, Simpsonville, South Carolina 29681 (“ Purchaser ”).  The Company , NEC Corporation and Purchaser may hereafter be referred to collectively as the “ P arties ”, or individually as a “ P arty ”.

 

RECITALS :

 

WHEREAS, the Company and Purchaser desire to enter into a business collaboration and the Company desires to obtain funds to repay some of its indebtedness;

 

WHEREAS, in furtherance thereof, the Company desires to issue and sell to Purchaser new shares of its common stock, and Purchaser is willing to acquire such new shares , all on the terms and subject to the conditions set forth in this Agreement, such that after giving effect to such sale and purchase, Purchaser will hold 51 % of the outstanding shares of common stock of the Company ; and

 

WHEREAS, in connection herewith, the Company desires to issue to NEC Corporation and NECAP shares of its new non-voting convertible preferred stock, and NEC Corporation and NECAP are willing to acquire such shares of new preferred stock , all on the terms and subject to the conditions set forth in this Agreement, such that after giving effect to such sale and purchase and Purchaser’s purchase of the new shares of common stock, NEC Corporation and NECAP will hold 66.0% of the outstanding equity securities of the Company and Purchaser will hold 34.0% of the outstanding equity securities of the Company .

 

AGREEMENT :

 

In consideration of the mutual promises, covenants and conditions hereinafter set forth, the Parties mutually agree as follows:

 

1.                                       Definitions .  For purposes of this Agreement, the following terms have the following meanings:

 

“ Additional Definitive Agreement ” has the meaning set forth in Section 10.4 .

 

“ Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person.

 

“ Antitrust Laws ” has the meaning set forth in Section 3.3(a)(i) .

 

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“ Audited Financial Statements ” has the meaning set forth in Section 4.6 .

 

“ Battery Claims ” means any third-party claims (or any third-party allegations of facts) alleging Losses, arising out of, or relating to (i) death, physical injury or damage, or the risk thereof, to any person or property caused when a product is used as intended or otherwise; or (ii) failure to comply with product warranties made in respect of all applicable contractual obligations, laws or regulations as in effect before the Closing, in each case with respect to clause (i) and (ii) for the battery products manufactured by the Company before the Closing .

 

“ Battery Claims Losses ” has the meaning set forth in Section 7.2(d) .

 

“ Closing ” means the sale and purchase of the New Common Shares under this Agreement.

 

“ Closing Date ” has the meaning set forth in Section 3.1 .

 

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

 

“ Common Stock ” means the common stock of the Company.

 

“ Company Financial Statements ” has the meaning set forth in Section 4.6 .

 

“ Contingent Obligation ” has the meaning set forth in Section 4.14 .

 

“ Disclosure Schedules ” has the meaning set forth in the preamble to Section 4 .

 

“ Employee Benefit Program ” and “ Employee Benefit Programs ” has the meaning set forth in Section 4.18(a) .

 

“ Environmental Laws ” has the meaning set forth in Section 4.21 .

 

“ FIEA ” means the Financial Instruments and Exchange Act of Japan, as amended.

 

“ Fundamental Representations ” has the meaning set forth in Section 7.1 .

 

“ Governmental Body ” means with respect to any nation (including, without limitation, Japan and the U.S.), state, city, locality or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

 

“ Hazardous Materials ” has the meaning set forth in Section 4.21 .

 

“ Indebtedness ” has the meaning set forth in Section 4.14 .

 

“ Indemnified Party ” has the meaning set forth in Section 7.5(a) .

 

“ Indemnifying Party ” has the meaning set forth in Section 7.5(a) .

 

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“ Insolvent ” has the meaning set forth in Section 4.9 .

 

“ Intellectual Property Rights ” has the meaning set forth in Section 4.20 .

 

“ Interim Financial Statements ” has the meaning set forth in Section 4.6 .

 

“ Japanese GAAP ” means Japanese generally accepted accounting principles, consistently applied.

 

“ Latest Balance Sheet ” has the meaning set forth in Section 4.6 .

 

“ LICA ” has the meaning set forth in Section 10.1 .

 

“ Losses ” means any loss, liability, damage or expense, including reasonably attorneys’ fees and expenses and amounts paid in investigation, defense or settlement thereof.

 

An event, violation or other matter will be deemed to have a “ Material Adverse Effect ” on the Company if such event, violation or other matter would be reasonably expected to be material in negative impact or amount to the Company’s business, intellectual property rights or condition, or, taken as a whole, its assets, liabilities, operations, or financial performance, or to the Company’s ability to perform its obligations under this Agreement; provided that, (i) changes in general economic conditions or changes affecting the industry in which the Company operates generally (as opposed to Company-specific changes) , (ii)  changes in the national or world economy or national or foreign financial credit or securities markets as a whole, (iii) changes in applicable l aw or applicable GAAP following the date hereof, (iv) any failure, in and of itself, by the Company to meet any internal or published projections, forecasts or revenue or earnings predictions for any period ending on or after the date hereof (provided that the underlying cause of any such failure shall not be excluded from this clause (iv)), (v) acts of war, sabotage or terrorism, or any escalation or worsening of such acts, or any earthquakes, hurricanes, tornados, and other wind storms, floods or other natural disasters and (vi) any reasonably foreseeable effect resulting from, arising out of, relating to, or caused by the restructuring plan announced by the Company before the date of this Agreement shall not, in and of itself, constitute a Material Adverse Effect.

 

“ Material Permits ” has the meaning set forth in Section 4.4 .

 

“ NECAP ” means NEC Capital Solutions Limited, a Japanese corporation with its principal place of business at 29-11, Shiba 5-chome, Minato-ku, Tokyo 108-0014, Japan .

 

“ NEC Debt Obligation ” means outstanding indebtedness for borrowed money owed by the Company to NEC Corporation.

 

“ New Common Shares ” has the meaning set forth in Section 2(a) .

 

“ New Preferred Shares ” has the meaning set forth in Section 2(b) .

 

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“ Option Agreement ” shall mean that certain Option Agreement by and between NEC Corporation and Purchaser, dated as of March 1, 2012, relating to certain call options and put options of Purchaser and NEC Corporation.

 

‘‘ Person ’’ means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other business entity, or a governmental entity (or any department, agency, or political subdivision thereof).

 

‘‘ Preferred Stock ” means the non-voting convertible preferred stock of the Company, issued pursuant to this Agreement and the rights and preferences of which shall be set forth in Exhibit I attached hereto .

 

“ Purchase Price ” has the meaning set forth in Section 2(a) .

 

“ Restructuring Plan ” has the meaning set forth in Section 3.4(b) .

 

“ Securities Act ” means the Securities Act of 1933, as amended.

 

“ Shares ” means the New Common Shares or the New Preferred Shares, as the context so requires.

 

“ Stockholders’ Agreement ” means that certain Stockholders’ Agreement, dated as of the date hereof, by and among the Company, NEC Corporation and Purchaser.

 

“ Subsidiary ” of a Party mean s a corporation, company or other entity more than 50% of whose outstanding shares or securities (representing the right for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by that Party , but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists .

 

“ Third-Party Claim ” has the meaning set forth in Section 7.5(a) .

 

‘‘ Transaction Documents ’’ means this Agreement, the schedules and exhibits attached hereto, the Stockholders’ Agreement, the Option Agreement and any Additional Definitive Agreements.

 

2.                                       Sale of Shares .

 

(a)                                  On the terms and subject to the conditions hereof, at the Closing, the Company will issue and sell to Purchaser, and Purchaser will purchase from the Company, 276,353,456 shares (the “ New Common Shares ”) of the Company’s Common Stock for a total purchase price of U.S. $ 50,000,000.00 (the “ Purchase Price ”), such that upon the completion of such sale, Purchaser will hold 51 % of the outstanding shares of the Common Stock of the Company.  Upon receipt of the Purchase Price, the Company shall use all of the Purchase Price to permanently reduce the amount of the NEC Debt Obligation set forth on Section 2 of the Disclosure Schedules.

 

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(b)                                  On the terms and subject to the conditions hereof, at or prior to the Closing, the Company will issue to NEC Corporation and NECAP, and NEC Corporation and NECAP will acquire from the Company 270,934,759 shares (the “ New Preferred Shares ”) of the Company’s Preferred Stock, at a purchase price of zero (0.0) Japanese yen per share, for a total purchase price of $0.00, pursuant to this Agreement , such that upon completion of such sale and the sale of the New Common Shares, NEC Corporation, together with NECAP, will hold 66.0% of the equity securities of the Company and Purchaser will hold 34.0% of the equity securities of the Company.

 

3.                                       Closing .

 

3.1                                Closing .  The Closing shall be held at the offices of the Company, on April 2, 2012 at 10:00 a.m. Japanese standard time , or at such other date and location as the Company , NEC Corporation and Purchaser may agree (the “ Closing Date ”).

 

3.2                                Deliveries .

 

(a)                                  At the Closing, Purchaser shall pay to the Company the Purchase Price for the New Common Shares issued and sold by the Company to Purchaser hereunder, by wire transfer of immediately available funds to the bank account of the Company designated by the Company in writing .  Any and all banking fees and charges (including remittance charges and lifting charges) incurred in connection with the payment of the Purchase Price shall be assumed and paid by Purchaser.  Upon receipt of the Purchase Price, the Company shall enter the name of KEMET Electronics Corporation in the shareholders registry of the Company in respect of such New Common Shares and shall deliver to Purchaser a certified copy of the Company’s shareholder registry showing Purchaser’s ownership of the New Common Shares .

 

(b)                                  At or prior to the Closing, NEC Corporation and the Company shall make or have made all deliveries required to complete the issuance of the Preferred Stock contemplated hereunder and the Company shall enter the name of NEC Corporation and NEACAP in the shareholders registry of the Company in respect of the New Preferred Shares and shall deliver to NEC Corporation (with a copy to Purchaser) a certified copy of the Company’s shareholders registry showing NEC Corporation’s and NECAP’s ownership of the New Preferred Shares .

 

3.3                                Conditions to Obligation to Close .

 

(a)                                  Mutual Conditions .  The respective obligations of each Party to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions, any and all of which may be waived, in whole or in part, by Purchaser, NEC Corporation and the Company to the extent permitted by applicable law:

 

(i)                                      all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act or equivalent anti-trust laws of any applicable jurisdictions (collectively, the “ Antitrust Laws ”) shall have expired or otherwise been terminated;

 

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(ii)                                   a ny and all consents (including all governmental or regulatory consents, approvals or authorizations required in connection with the valid execution, delivery and performance of this Agreement), notices, permits , waivers, filings, necessary or appropriate for consummation of the transactions contemplated by this Agreement , shall have been obtained and/or made from or with the Governmental Bodies having competent jurisdiction ; and

 

(iii)                                no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement and the other Transaction Documents, (B) cause any of the transactions contemplated by this Agreement and the other Transaction Documents to be rescinded following consummation, (C) adversely affect the right of Purchaser to own the New Common Shares or (D) adversely affect the right of the Company or any of its Subsidiaries to own its assets and to operate its business (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);

 

(b)                                  Conditions to Obligations of Purchaser .  Purchaser’s obligation to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions, any and all of which may be waived, in whole or in part, by Purchaser to the extent permitted by applicable law:

 

(i)                                      the representations and warranties set forth in Section 4 and Section 5 shall be true and correct in all material respects at and as of the Closing Date (other than representations and warranties as of a specified date, which shall be true and correct in all material respects as of such date), except to the extent that such representations and warranties are qualified by the term “material,” or contain terms such as “Material Adverse Effect”, in which case such representations and warranties (as so written, including the term “material” or “Material Adverse Effect”) shall be true and correct in all respects at and as of the Closing Date;

 

(ii)                                   the Company and NEC Corporation shall have performed and complied with all of their covenants hereunder in all material respects through the Closing, except to the extent that such covenants are qualified by the term “material,” or contain terms such as “Material Adverse Effect”, in which case the Company and NEC Corporation shall have performed and complied with all of such covenants (as so written, including the term “material” or “Material Adverse Effect”) in all respects through the Closing;

 

(iii)                                The Company and NEC Corporation shall have delivered to Purchaser a certificate to the effect that each of the conditions specified above in Sections 3.3(b)(i)-(ii)  is satisfied in all respects;

 

(iv)                               the relevant parties shall have entered into the Transaction Documents (including any Additional Definitive Agreements, as applicable) and the same shall be in full force and effect;

 

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(v)                                  NEC Corporation and the Company shall have entered into a new term loan agreement, the material terms of which are set forth in Exhibit II and the form of which is set forth in Exhibit III attached hereto, to replace the existing loan agreement under which the Company owes to NEC Corporation the NEC Debt Obligation;

 

(vi)                               the Company shall have delivered to Purchaser reasonably satisfactory evidence of issuance of the New Preferred Shares to NEC Corporation and NECAP hereunder;

 

(vii)                            all material third-party consents (except for consents from banks or other lenders of or to the Company where NEC Corporation has agreed to provide alternative loan to the Company as of Closing) , notices, permits, waivers necessary for the consummation of the transactions contemplated at the Closing (including any in respect of a change of control, if applicable) shall have been given or obtained;

 

(viii)                         NEC and the Company shall have delivered to Purchaser the resignation letters of the existing directors of the Company who will not hold the same position as a director of the Company after the Closing to allow the election of the four (4) new directors nominated by the Purchaser pursuant to the Stockholders’ Agreement; and

 

(ix)                               all actions to be taken by the Company and NEC Corporation in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Purchaser.

 

(c)                                   Conditions to the Company’s and NEC Corporation’s Obligations . The Company’s and NEC Corporation’s obligations to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions, any and all of which may be waived, in whole or in part, by the Company and NEC Corporation to the extent permitted by applicable law:

 

(i)                                      the representations and warranties set forth in Section 6 shall be true and correct in all material respects at and as of the Closing Date (other than representations and warranties as of a specified date, which shall be true and correct in all material respects as of such date), except to the extent that such representations and warranties are qualified by the term “material,” or contain terms such as “Material Adverse Effect”, in which case such representations and warranties (as so written, including the term “material” or “Material Adverse Effect”) shall be true and correct in all respects at and as of the Closing Date;

 

(ii)                                   Purchaser shall have performed and complied with all of its covenants hereunder in all material respects through the Closing, except to the extent that such covenants are qualified by the term “material,” or contain terms such as “Material Adverse Effect”, in which case Purchaser shall have performed and complied with all of such covenants (as so written, including the term “material” or “Material Adverse Effect”) in all respects through the Closing;

 

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(iii)                                Purchaser shall have delivered to the Company and NEC Corporation a certificate to the effect that each of the conditions specified above in Sections 3.3(c)(i)-(ii)  is satisfied in all respects;

 

(iv)                               the relevant parties shall have entered into the Transaction Documents (including any Additional Definitive Agreements, as applicable) and the same shall be in full force and effect;

 

(v)                                  NEC Corporation and the Company shall have entered into a new term loan agreement the material terms of which are set forth in Exhibit II attached hereto to replace the existing loan agreement under which the Company owes to NEC Corporation the NEC Debt Obligation; and

 

(vi)                               all actions to be taken by Purchaser in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Company and NEC Corporation.

 

(d)                                  Frustration of Closing Conditions .  No Party may rely on the failure of any condition set forth in this Section 3.3 if such Party’s failure to comply with any provision of this Agreement is the proximate cause of such failure of such condition.

 

3.4                                Pre-closing Covenants .

 

(a)                                  General .  Each Party, at its own cost, shall use its commercially reasonable efforts to take all actions and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the Closing conditions set forth in Section 3.3 (to the extent that such conditions relate to such Party)).

 

(b)                                  Operation of Business .  Prior to the earlier of the termination of this Agreement in accordance with its terms and the Closing Date, the Company shall continue to operate its business in accordance with past practice.  Other than pursuant to the recovery plan relating to the Company’s operations in Thailand (including such actions that are consistent with and taken in accordance with and pursuant to the restructuring plan for the Company’s operation in Japan and Thailand as announced by the Company before the date of this Agreement (the “ Restructuring Plan ”)) , prior to the earlier of the termination of this Agreement in accordance with its terms and the Closing Date, NEC Corporation will not cause or permit the Company or any of its Subsidiaries to engage in any practice, take any action, or enter into any transaction outside the ordinary course of business without the written consent of Purchaser, such consent not unreasonably withheld or delayed.  Without limiting the generality of the foregoing, prior to the earlier of the termination of this Agreement in accordance with its terms and the Closing Date, NEC Corporation will not cause or permit the Company or any of its Subsidiaries to (i) declare, set aside, or pay any dividend or make any distribution with respect to its capital stock or redeem, purchase, or otherwise acquire any of its capital stock, or (ii) issue any capital stock or securities or debt convertible into its capital stock, or make any commitment to effect the foregoing, except as permitted by the terms and conditions of this Agreement and the other

 

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Transaction Documents, or (iii) amend or modify the Rules of its Board of Directors, other than as permitted by the terms and conditions of the Transaction Documents.  Notwithstanding the foregoing, the amount of the NEC Debt Obligation as of the Closing Date or the effectiveness of the Stockholders’ Agreement shall not exceed JPY 30,000,000,000 without the prior written consent of Purchaser, and the Company shall deliver a statement to Purchaser at the Closing setting forth the amount of the NEC Debt Obligation as of the Closing Date

 

(c)                                   NEC Corporation will cause each of the Company and its Subsidiaries to give any notices to third parties, and will cause each of the Company and its Subsidiaries to use their commercially reasonable efforts to obtain any third-party consents, permits or waivers, or to make such filings or to provide such notices referred to in Section   3.3(b)(vii)  above.  Each of the Parties will (and NEC Corporation will cause each of the Company and its Subsidiaries to) give any notices to, make any filings with, and use its commercially reasonably efforts to obtain any authorizations, consents, and approvals of Governmental Bodies in connection with the matters referred to in Sections 3.3(a)(i)  and 3.3(a)(ii)  above.

 

(d)                                  Notification .  Each Party will give prompt written notice to the others of any material adverse development causing a breach of its own representations and warranties in Sections 4 , 5 and 6 , as applicable.  No disclosure by any Party pursuant to this Section 3.4(d) , however, shall be deemed to amend or supplement the Disclosure Schedules or to prevent or cure any misrepresentation, breach of warranty or breach of covenant.

 

(e)                                   Regulatory Approvals .  Each of Purchaser , NEC Corporation and the Company shall (i) make all filings required or desirable of each of them or any of their respective Affiliates under the Antitrust Laws with respect to the transactions contemplated hereby as promptly as practicable and, in any event, within forty-five (45)   days after the date of this Agreement with respect to filings required or desirable for the Closing, (ii) comply at the earliest practicable date with any request under any of the Antitrust Laws for additional information, documents, or other materials received by each of them or any of their respective Affiliates from any Governmental Body in respect of such filings or such transactions and (iii) cooperate with each other in connection with any such filing.

 

4.                                       Representations and Warranties Relating to the Company .  The Company represents and warrants to Purchaser, as of the date hereof and as of the Closing Date, that each of the following statements are correct and complete, except as set forth in the schedules accompanying this Agreement (the “ Disclosure Schedules ”).

 

4.1                                Organization and Good Standing .  Each of the Company and its Subsidiaries are corporations or other legal entities duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated or formed, and have the requisite corporate or other organizational power and authorization to own their properties and to carry on their business as now being conducted.  The Company has no Subsidiaries except as disclosed in Schedule 4.1 of the Disclosure Schedules.  Each of the Company and its Subsidiaries is duly qualified as a foreign corporation or other entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure

 

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to be so qualified or be in good standing would not reasonably be expected to have a Material Adverse Effect.  Neither the Company nor any of its Subsidiaries are in violation of any of the provisions of their respective certificates of incorporation, bylaws or other organizational or charter documents.

 

4.2                                Power and Authorization .  The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents to which it is a party and to issue the New Common Shares and the New Preferred Shares in accordance with the terms hereof and thereof.  The execution and delivery of this Agreement and the Transaction Documents to which it is party by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the New Common Shares and the New Preferred Shares have or shall have as of the Closing been duly authorized by the Company’s board of directors and its stockholders.  This Agreement and the other Transaction Documents to which it is party have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

4.3                                Non-contravention .  The execution, delivery and performance of this Agreement and the other Transaction Documents to which it is party by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not, and will not, (i) conflict with or violate any provision of the Company’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound, or affected, except to the extent that such conflict, default, termination, amendment, acceleration or cancellation right would not reasonably be expected to have a Material Adverse Effect, or (iii) subject to the fulfillment of the conditions set forth in Sections 3.3(a)  and (c)  result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any Governmental Body to which the Company is subject, or by which any property or asset of the Company is bound or affected, except to the extent that such violation would not reasonably be expected to have a Material Adverse Effect.

 

4.4                                Permits .  The Company possesses all certificates, permits, licenses and any similar authority issued by the appropriate Governmental Bodies necessary for the conduct of its business in the place and in the manner in which it is carried on at the date of this Agreement and at the date of the Closing (“ Material Permits ”), except where the failure to possess such Material Permits does not, individually or in the aggregate, have or would not reasonably be expected to result in a Material Adverse Effect, and the Company has not received any written notice of proceedings relating to the revocation or modification of any Material Permit.

 

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4.5          Issuance of Shares .  The New Common Shares and the New Preferred Shares are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens and will not be subject to preemptive or similar rights (other than those imposed pursuant to the Transaction Documents). The Company has or shall have reserved from its duly authorized capital stock the maximum number of shares of Common Stock and Preferred Stock issuable as of the Closing Date.

 

4.6          Financial Statements .   Set forth on Section 4.6 of the Disclosure Schedules are (a) the audited consolidated balance sheet of the Company and its Subsidiaries and related consolidated statements of income and unaudited consolidated statements of cash flows (or the equivalents) as of and for the fiscal years ended March  31, 2009, 2010 and 2011 (the “ Audited Financial Statements ”) and (b) the unaudited consolidated balance sheet of the Company and its Subsidiaries as of January 31, 2012 (the “ Latest Balance Sheet ”) and the related statements of income and cash flows (or the equivalent) for the 10 -month period then ended (together with the Latest Balance Sheet, the “ Interim Financial Statements ” and together with the Audited Financial Statements, the “ Company Financial Statements ”).  The Company Financial Statements have been prepared in all material respects in accordance with Japanese GAAP then in force , consistently applied (except that the unaudited statements may not contain all footnotes required by Japanese GAAP).  The Company Financial Statements are consistent with the books and records of the Company and its Subsidiaries (which in turn, are accurate and complete in all material respects) and present fairly in all material respects the financial position and results of operations of the Company and its Subsidiaries as of and for the periods ending on the dates of the Company Financial Statements.

 

4.7          Off Balance Sheet Arrangements .  There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off balance sheet entity that has not been disclosed to Purchaser or that otherwise would reasonably be expected to have a Material Adverse Effect.

 

4.8          Capital Stock and Related Matters .  The authorized capital stock of the Company consists of 450,000,000 shares of Common Stock as of the date hereof and will consist of 1,100,000,000 shares of Common Stock and 300,000,000 shares of Preferred Stock as of immediately prior to the Closing, and, as of the date hereof and as of immediately prior to the Closing, 265,516,066 shares of Common Stock are issued and outstanding.  As of the date hereof and as of immediately prior to the Closing, NEC Corporation and NECAP hold 265,396,066 shares and 120,000 shares, respectively , of the issued and outstanding Common Stock.  As of immediately prior to the Closing, 270,934,759 shares of Preferred Stock are outstanding.  The Company has issued no other capital stock except as expressly contemplated by the Transaction Documents and as disclosed on the corporate register for the Company as at immediately prior to the Closing date .  Except as disclosed in Section 4.8 of the Disclosure Schedules:  (A) no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (B) there are no outstanding stock acquisition rights, bonds with stock acquisition rights, options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which

 

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the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company or any of its Subsidiaries; (C) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the FIEA, the Securities Act or similar securities laws; (D) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (E) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance or transfer of the Shares; and (F) the Company does not have any stock option, stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement.

 

4.9          Material Changes; Undisclosed Events, Liabilities or Developments; Solvency.   Since the date of the latest Audited Financial Statements, except as disclosed in Section 4.9 of the Disclosure Schedules or except as required pursuant to the Transaction Document or the Restructuring Plan , (i) there has been no event, occurrence or development that, individually or in the aggregate, has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any material liabilities other than (A) trade payables, accrued expenses and other liabilities incurred in the ordinary course of business consistent with past practice, (B) liabilities not required to be reflected in the Company’s financial statements pursuant to Japanese GAAP and (C) other liabilities that would not, individually or in the aggregate, have a Material Adverse Effect, (iii) the Company has not altered its method of accounting or changed its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders, in their capacities as such, or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate. The Company has not taken any steps to seek protection pursuant to any bankruptcy or insolvency law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so. The Company is not as of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the Closing, will not be Insolvent (as defined below). “ Insolvent ” means (i) the Company is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (ii) the Company has negative net worth .

 

4.10        Absence of Litigation .  Except for those related to the Battery Claims and except as disclosed in Section 4.10 of the Disclosure Schedules and as claimant in the collection of account receivables arising in the ordinary course of action, there is no material action, suit, proceeding, inquiry or investigation before or by any Governmental Body, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or adversely affecting the Company, the Common Stock or any of its Subsidiaries or any of the Company’s or its Subsidiaries’ officers or directors (only arising out of the course of their performance of duties to the Company) , whether of a civil or criminal nature or otherwise.  In

 

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this Section 4.10 , the term “ material ” refers to actions, suits, proceedings, inquiries or investigations which could have a cost to the Company of 200 million Japanese yen or more.

 

4.11        Compliance . Except as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, (i) the Company is not in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company under), nor has the Company in the last two years received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) the Company is not in violation of any order of any Governmental Body and (iii) the Company is not and has not been in violation of any statute, rule or regulation of any Governmental Body.

 

4.12        Title .  The Company and its Subsidiaries have ownership and good and marketable title to all real property and ownership and good and marketable title to all personal property, in each case that are owned by them, free and clear of all liens, encumbrances and defects, except for title retention provisions in respect of goods and materials supplied to the Company or its Subsidiaries in the ordinary course of the Company’s business, liens arising in the ordinary course of the Company’s business by operation of law and such as do not materially affect the value of such property and do not interfere in any material respect with the use made and proposed to be made of such property by the Company and any of its Subsidiaries.  Any real property and facilities that are material to the Company and its Subsidiaries, taken as a whole, held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as do not materially interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.

 

4.13        Foreign Corrupt Practices . Neither the Company nor its Subsidiaries nor, to the knowledge of the Company, any director, officer , agent, employee or other Person acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity, (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee or to any foreign or domestic political parties or campaigns from corporate funds, (iii) violated or is in violation in any material respect of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or similar non-U.S. laws or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

4.14        Indebtedness . Except as disclosed in Section 4.14 of the Disclosure Schedules or as disclosed or provided in the Company Financial Statements and except for liabilities incurred in the ordinary course of business, the Company and each of its Subsidiaries (i) has no outstanding Indebtedness (as defined below), (ii) is not in violation of any term of and is not in default under any contract, agreement or instrument relating to any Indebtedness and (iii) is not a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is reasonably expected

 

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to have a Material Adverse Effect. Section 4.14 of the Disclosure Schedules sets forth the amount of the NEC Debt Obligation as of the date of the Latest Balance Sheet, if any.  For purposes of this Agreement: (x) “ Indebtedness ” of any Person means, without duplication (A) all indebtedness of such Person for borrowed money, (B) all obligations of such Person issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations of such Person with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments for the payment of which such Person is responsible or liable , including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations of such Person under any leasing or similar arrangement which, in connection with Japanese GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above of other Persons secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations of such Person in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; provided that for the indebtedness referred to in clauses (A) through (H), the indebtedness is in each case in excess of $1 million;  and (y) “ Contingent Obligation ” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

 

4.15        Insurance .  The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged in the same or similar locations; provided , however , that each of the Company and its Subsidiaries may self-insure to the same extent as other companies engaged in similar businesses and owning similar properties in the same general areas in which the Company or each such Subsidiary, as applicable, operates.  Except as disclosed in Section 4.15 of the Disclosure Schedules, neither the Company nor any Subsidiary has been refused any insurance coverage which it sought or for which it applied during the last two (2) years.  Except those related to the Company’s operations and facilities in Thailand and the insurance coverage applied to NEC Corporation’s Affiliates and the benefit of which will not extend to the Company after the Closing, neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to

 

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continue its business at a cost that would not reasonably be expected to have a Material Adverse Effect; provided , however , that each of the Company and its Subsidiaries may self-insure to the same extent as other companies engaged in similar businesses and owning similar properties in the same general areas in which the Company or each such Subsidiary, as applicable, operates.

 

4.16        Transactions with Affiliates .  None of the officers , directors or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than (i) for ordinary course services as officers , directors or employees and (ii) transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Company than could be obtained on an arm’s-length basis from unrelated third parties), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer , director or employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any such officer , director, or employee has a substantial interest or is a n officer , director, trustee or partner.

 

4.17        Employee Relations .  The Company and its Subsidiaries believe that their relations with their employees are good.  To the knowledge of the Company, (i) no executive of the Company is in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement with any other party or any restrictive covenant reasonably likely to have an Material Adverse Effect on the Company, and (ii) the continued employment of each such executive does not subject the Company to any liability with respect to any of the foregoing matters.

 

4.18        ERISA .

 

(a)           All information disclosed or made available to the Purchaser during the due diligence, together with information disclosed in Section 4.18(a)  of the Disclosure Schedules , concerning the plan, arrangement or contract entered into, maintained, or otherwise contributed to by the Company providing for terms of employment, severance or retirement benefits, pension plans, termination, retention or change-in-control bonuses, deferred compensation, cash incentives, commission plans, equity or equity-based awards, employee insurance coverage, medical, dental, disability or vacation benefits or any similar compensation or welfare benefit plan under which employees of the Company or their spouses or dependents have any current, future, or contingent rights, including any plan, arrangement or contract that is covered by applicable law (individually, an “ Employee Benefit Program ”, collectively, the “ Employee Benefit Programs ”) was true and correct in material respects at the date on which it was prepared .  Except as disclosed during the due diligence or in Section 4.18(a)  of the Disclosure Schedules, there are no Employee Benefit Programs under which the Company or any of its Subsidiaries may owe any material legal liability or obligation.

 

(b)           Except as disclosed in Section 4.18(b)  of the Disclosure Schedules, e ach Employee Benefit Program has been maintained and administered in all material respects in accordance with its terms and conditions in compliance with all applicable laws.

 

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(c)           No Employee Benefit Program exists that, as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated herein (whether alone or in connection with any subsequent event), will result in any payment or any increase in payment of, or accelerate the time of payment or vesting of, any compensation or benefits pursuant thereto.

 

(d)           Except as disclosed in Section 4.18(d)  of the Disclosure Schedules, there is no insufficiency in the amount of the reserve for any Employee Benefit Program that is required or appropriate under applicable law or accounting principles.

 

4.19        Labor Matters . The Company and its Subsidiaries are in compliance in all material respects with all applicable national, federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

4.20        Intellectual Property .  To the knowledge of the Company, the Company and its Subsidiaries own, or possess adequate rights or licenses to use, all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights (“ Intellectual Property Rights ”) necessary to conduct their business as now conducted.  The Company does not have any knowledge of any infringement by the Company or its Subsidiaries of Intellectual Property Rights of others which would reasonably be expected to result in a Material Adverse Effect.  There is no claim, action or proceeding being made or brought, or to the knowledge of the Company, being threatened, against the Company or any of its Subsidiaries regarding its Intellectual Property Rights which has a reasonable likelihood of adverse determination and such determination would reasonably be expected to result in a Material Adverse Effect.  The Company is unaware of any facts or circumstances which could reasonably be expected to give rise to any of the foregoing infringements or claims, actions or proceedings.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their trade secrets , except as determined in their commercially reasonable business judgment.

 

4.21        Environmental Laws . The Company (i) is in compliance in material respects with applicable Environmental Laws (as hereinafter defined), (ii) has received material permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) is in compliance in material respects with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term “ Environmental Laws ” means all applicable federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “ Hazardous Materials ”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal,

 

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transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder , in each case in force or in existence as of the date hereof and as of the Closing Date. It is acknowledged by the Parties that the representations and warranties in this Section 4.21 do not include that of nonexistence of environmental contamination in any property owned by the Company.

 

4.22        Tax Status .  To the knowledge of the Company, the Company and each of its Subsidiaries (i) has made or filed all federal, foreign and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject which are now due and for which filing extensions have not been obtained, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

 

4.23        Transfer Taxes .  On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the issuance or transfer of the New Common Shares to be sold to Purchaser hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.

 

5.             Representations and Warranties of NEC Corporation .  NEC Corporation represents and warrants with respect to itself to Purchaser as of the date hereof and as of Closing Date, as set forth below.

 

5.1          Organization .  NEC Corporation is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation or other formation.

 

5.2          Authorization of Transaction .  NEC Corporation has full power and authority (including full corporate or other entity power and authority) to execute and deliver this Agreement and the other Transaction Documents to which it is party and to perform its obligations hereunder and thereunder.  This Agreement and the Transaction Documents to which it is party constitute the valid and legally binding obligations of NEC Corporation, enforceable in accordance with their respective terms and conditions, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.  NEC Corporation has, or shall have as of the Closing, obtained any authorization, consent, or approval of, or made any filing required to, any Governmental Body in order to consummate the transactions contemplated by this Agreement and the other Transaction Documents.  This Agreement and the other Transaction Documents to which NEC Corporation is party have been duly and validly approved and authorized by all necessary corporate action on NEC Corporation’s part.

 

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5.3          Non-contravention .  Neither the execution and delivery of this Agreement and the Transaction Documents to which NEC Corporation is party, nor the consummation of the transactions contemplated hereby and thereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Body to which NEC Corporation is subject or any provision of its charter, bylaws, or other governing documents, (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which NEC Corporation is a party or by which it is bound or to which any of its assets are subject, or (C) result in the imposition or creation of a lien and any other encumbrance upon or with respect to the shares of Common Stock or Preferred Stock held by it.

 

5.4          Brokers’ Fees .  Except for legal fees, NEC Corporation has no liability to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement and the other Transaction Documents.

 

6.             Representations and Warranties of Purchaser .  Purchaser represents and warrants to the Company and NEC Corporation as of the date hereof and as of the Closing Date, as set forth below.

 

6.1          Power and Authorization .  Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or other formation.  Purchaser has the full corporate power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents to which it is party, and this Agreement and the Transaction Documents to which it is party constitute the valid and binding obligations of Purchaser, enforceable in accordance with their respective terms and conditions, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.  The execution, delivery and performance by Purchaser of this Agreement and the other Transaction Documents to which it is party ha ve been duly and validly approved and authorized by all necessary corporate action on Purchaser ’s part.

 

6.2          Consents .  Purchaser has, or shall have as of the Closing, obtained all governmental, statutory, or regulatory consents or authorizations required by it to execute, deliver and perform its obligations under this Agreement.

 

6.3          Non-contravention .  Neither the execution and delivery of this Agreement and the Transaction Documents to which Purchaser is party, nor the consummation of the transactions contemplated hereby and thereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Body to which Purchaser is subject or any provision of its charter, bylaws, or other governing documents, (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Purchaser is a party or by which it is bound or to which any of its assets are subject.

 

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6.4          Financial Capability .  Purchaser has, and at the Closing will have, sufficient funds available to pay the Purchase Price and any fees and expenses incurred by Purchaser in connection with the transactions contemplated by this Agreement.

 

7.     Remedies.

 

7.1          Survival .  All representations and warranties contained in or made pursuant to this Agreement or in any certificate delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing for a period beginning on the Closing Date and ending on the 15 month anniversary of the Closing Date; provided that the representations and warranties set forth in Sections 4.1 (first sentence only), 4.2 , 4.3(i) , 4.3(iii) , 4.5 , 4.8 , 5.1 , 5.2 , 5.3 , 6.1 , 6.2 and 6.3 (collectively, the “ Fundamental Representations ”) and corresponding representations and warranties in any certificate shall survive the execution and delivery of this Agreement and the Closing for a period beginning on the Closing Date and continuing in full force and effect until the expiration of any applicable statute of limitations (after giving effect to any extensions or waivers); provided further that the representations and warranties set forth in Section  4.21 and Section  4.22 shall terminate on the third anniversary of the Closing Date. All covenants and agreements that contemplate performance after the Closing contained herein shall survive the Closing indefinitely or for any shorter period expressly specified in accordance with their terms. Notwithstanding the preceding sentences, if notice of an indemnification claim shall have been delivered before the aforementioned time period has elapsed with respect to any breach of any such representation, warranty, covenant or agreement, such representation, warranty, covenant or agreement shall survive until such claim is finally resolved. No claim may be brought hereunder in respect of any covenant or agreement that contemplates performance entirely before or at the Closing unless such claim is brought prior to the first anniversary of the Closing Date.

 

7.2          Indemnification Provisions for Purchaser’s Benefit .

 

(a)           In the event the Company breaches (or in the event any third party alleges facts that, if true, would mean the Company has breached) any of its representations, warranties, pre-closing covenants or covenants contained in Section 2(a)  or Section 3.2(a)  contained herein and, provided that Purchaser makes a written claim for indemnification against NEC Corporation within the survival period, then, effective at and after the Closing and subject to the limitations and exclusions set out in this Section 7 , NEC Corporation undertakes to pay to the Company the amount which would be necessary to put the Company into the financial position which would have existed had there been no breach and to indemnify Purchaser from and against the entirety of any Losses Purchaser may suffer resulting from, arising out of, relating to, in the nature of, or caused by the breach (or alleged breach).  For the purposes of this clause (a), the representations and warranties of the Company contained in Section 4 of this Agreement shall be read as if all qualifications as to materiality, including each reference to the terms and phrases “material”, “in all material respects” or like phrases, and the defined term “Material Adverse Effect”, were deleted therefrom in determining whether there has been a breach of any such representation or warranty or in determining the amount of any Loss.

 

(b)           In the event NEC Corporation breaches (or in the event any third party alleges facts that, if true, would mean NEC Corporation has breached) any of its

 

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representations, warranties, and covenants contained herein and, provided that Purchaser makes a written claim for indemnification against NEC Corporation within the survival period, then NEC Corporation shall be obligated to indemnify Purchaser from and against the entirety of any Losses Purchaser may suffer resulting from, arising out of, relating to, in the nature of, or caused by the breach (or the alleged breach).  For the purposes of this clause (b), the representations and warranties of NEC Corporation contained in Section 5 of this Agreement shall be read as if all qualifications as to materiality, including each reference to the terms and phrases “material”, “in all material respects” or like phrases were deleted therefrom in determining whether there has been a breach of any such representation or warranty or in determining the amount of any Loss.

 

(c)           Nothing in this Section 7.2 restricts or limits the Purchaser or its Affiliates’ (including, for the avoidance of doubt, the Company after the Closing) general obligation at law to mitigate any loss or damage which it may incur as a consequence of a matter giving rise to a claim.

 

(d)           Special Indemnities .  Without limiting the generality of the indemnity set out in Sections 7.2(a)  and 7.2(b) , provided that Purchaser makes a written claim for indemnification against NEC Corporation, then , effective at and after the Closing , NEC Corporation shall be obligated to pay to the Company the amount which would be necessary to put the Company into the financial position which would have existed had there been no Battery Claims, including Losses in respect of outstanding claims resulting from, arising out of, or relating to the Battery Claims, including the reasonable costs and expenses relating to the defense or settlement of any Battery Claims (collectively, “ Battery Claims Losses ”).  Notwithstanding the foregoing, NEC Corporation shall not be obliged to make any payment to the Company (i) in respect of Battery Claims Losses the cash payment of which has been reflected in the Company Financial Statements , (ii) in respect of those Battery Claims Losses incurred and paid to those parties in the amounts and as named and as set forth in Section 7.2(d)  of the Disclosure Schedules prior to the date hereof, or (iii) if any such Battery Claims Losses are in the form of settlement money to be paid to the parties in connection with settlement agreements entered into prior to the date hereof and legal fees to be paid in connection with such settlement agreements, in the amounts and to the parties set forth in Section 7.2(d)  of the Disclosure Schedules and actually paid by the Company prior to the Closing, in each case resulting from, arising out of, or relating to the Battery Claims. Notwithstanding anything to the contrary in this Agreement, the payment obligations hereunder in respect of Battery Claims Losses shall not be subject to (i) any of the limitations under Section 7.4 , (ii) any limitation due to the fact the Purchaser knew or should have known about such Battery Claims or (iii) any survival period.

 

7.3          Indemnification Provisions for the Company’s and NEC Corporation’s Benefit .  In the event Purchaser breaches (or in the event any third party alleges facts that, if true, would mean Purchaser has breached) any of its representations, warranties, and covenants contained herein and, provided that the Company or NEC Corporation makes a written claim for indemnification against Purchaser within the survival period, then Purchaser shall be obligated to indemnify the Company and NEC Corporation from and against the entirety of any Losses the Company and NEC Corporation may suffer resulting from, arising out of, relating to, in the nature of, or caused by the breach (or the alleged breach).  For the purposes of this Section 7.3 , the representations and warranties of Purchaser contained in Section 6 of this Agreement shall be

 

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read as if all qualifications as to materiality, including each reference to the terms and phrases “material”, “in all material respects” or like phrases were deleted therefrom in determining whether there has been a breach of any such representation or warranty or in determining the amount of any Loss.  Nothing in this Section 7.3 restricts or limits the Company’s, NEC Corporation’s or their respective Affiliates’ general obligation at law to mitigate any loss or damage which it or they may incur as a consequence of a matter giving rise to a claim.

 

7.4                                Limitations on Liability.

 

(a)                                  Neither Purchaser nor the Company and NEC Corporation shall be entitled to assert any claim for indemnification or payment under this Section 7 with respect to a single course of conduct or related set of circumstances, occurrences or events unless the Losses arising therefrom exceed $ 1,000,000, in which case the Purchaser, the Company or NEC Corporation shall be entitled to claim only for the amount by which such claims exceed such deductible amount .

 

(b)                                  The maximum aggregate liability of the Company and NEC Corporation for indemnification claims and payment claims under Section 7.2 shall be limited to $25,000,000 .

 

(c)                                   The maximum aggregate liability of Purchaser for all indemnification claims and payment claims under this Agreement shall be limited to $25,000,000

 

(d)                                  Neither Party shall be liable for any loss of profits or earnings, or any punitive, indirect, incidental or consequential damages by reason of a breach of any representation, warranty, covenant or indemnity contained herein; provided that the foregoing is not intended to limit recovery of amounts paid by an Indemnified Party in connection with the defense, settlement or other resolution of any Third-Party Claim (including any punitive, indirect, incidental or consequential damages paid by an Indemnified Person to any third party) .

 

(e)                                   NEC Corporation shall not be liable for any claim under Section 7.2(a) , (x) if and to the extent the matter is specifically provided or reserved for (and not released prior to Closing) in the Company Financial Statements; (y) to the extent that the matter giving rise to the claim would not have arisen solely but for an act before or after Closing by Purchaser or its Affiliates or a director, employee or agent of Purchaser or its Affiliates; or (z) to the extent that the matter giving rise to the claim arises wholly or partially from an event before or after Closing solely at the written request or direction of, or with the consent of Purchaser or its Affiliates or an authorized agent or adviser of Purchaser or its Affiliates.

 

(f)                                    Insured Claims . NEC Corporation’s liability in respect of any claim shall be reduced by an amount equal to any loss or damage to which the claim relates which has actually been recovered by the Company under a policy of insurance.

 

(g)                                   Disclosure Documents . Except as set forth in Section 7.2(d) , NEC shall not be liable for any c laim under Section  7.2 if and to the extent that the actual fact, matter, event or circumstance giving rise to such c laim is fairly and reasonably disclosed on the face of the express terms of this Agreement (including the Disclosure Schedule s) .

 

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7.5                                Matters Involving Third Parties .

 

(a)                                  If any third party notifies any Party (the “ Indemnified Party ”) with respect to any matter (a “ Third-Party Claim ”) that may give rise to a claim (including, for the avoidance of doubt, a Battery Claim) for indemnification against any other Party (the “ Indemnifying Party ”) under this Section 7 , then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that such notice shall set forth in reasonable detail such Third-Party Claim and the basis for indemnification and no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party is thereby materially prejudiced.

 

(b)                                  Any Indemnifying Party will have the right to defend the Indemnified Party against the Third-Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified Party in writing within thirty (30) days after the Indemnified Party has given notice of the Third-Party Claim that the Indemnifying Party will assume responsibility for and indemnify the Indemnified Party from and against the entirety of any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third-Party Claim, (B) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third-Party Claim and fulfill its indemnification obligations hereunder, (C) the Third-Party Claim involves only money damages and does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third-Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice materially adverse to the continuing business interests or the reputation of the Indemnified Party and (E) the Indemnifying Party conducts the defense of the Third-Party Claim actively and diligently.

 

(c)                                   So long as the Indemnifying Party is conducting the defense of the Third-Party Claim in accordance with Section 7.5(b)  above, (A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third-Party Claim, (B) the Indemnified Party will not consent to the entry of any judgment on or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld), and (C) the Indemnifying Party will not consent to the entry of any judgment on or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnified Party (not to be unreasonably withheld).

 

(d)                                  In the event that the Indemnifying Party chooses to not exercise the rights under Section 7.5(b) above or any condition set forth in Section 7.5(b)  (A) through (D) above is or becomes unsatisfied, (A) the Indemnified Party may defend against the Third-Party Claim in any manner it may reasonably deem appropriate (but the Indemnified Party will need to consult with, and obtain consent from (not to be unreasonably withheld), any Indemnifying Party in connection therewith), (B) the Indemnified Party will not consent to the entry of any judgment on or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld), and (C) the Indemnifying

 

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Parties will remain responsible for any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third-Party Claim to the fullest extent provided in this Section 7 .

 

(e)                                   In the event the Indemnifying Party exercises the rights under Section 7.5(b)   but the condition in Section 7.5(b)(E ) above is or becomes unsatisfied, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment on or enter into any settlement with respect to, the Third-Party Claim in any manner it may reasonably deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith), (B) the Indemnifying Parties will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third-Party Claim (including reasonable attorneys’ fees and expenses) and (C) the Indemnifying Parties will remain responsible for any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third-Party Claim to the fullest extent provided in this Section 7 .

 

(f)                                    Each Party shall cooperate, and cause their respective A ffiliates to cooperate, in the defense of any Third - Party Claim and shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith.

 

(g)                                   Notwithstanding anything to the contrary in this Section  7 , the Company shall conduct the defense of the Third-Party Claim brought to it actively and diligently and shall not consent to the entry of any judgment on or enter into any settlement with respect to any Third-Party Claim without the prior written consent of NEC Corporation (not to be unreasonably withheld) .

 

7.6                                Exclusive Remedies .  Other than in respect of claims for indemnification arising out of fraud or criminal conduct (with respect to which the claimant shall have all remedies available at law or in equity), the remedies provided in this Section  7 (subject to the limitations set forth in this Section  7 ) shall be the exclusive remedies for the Parties and their permitted assigns and successors for any breach or inaccuracy in any representation, warranty or statement in, or any breach, non-fulfillment or default in the performance of any of the covenants or agreements contained in this Agreement .

 

8.                                       Termination. Certain of the Parties may terminate this Agreement as provided below:

 

8.1                                Termination of Agreement .

 

(a)                                  The Parties may terminate this Agreement by mutual written consent at any time prior to the Closing;

 

(b)                                  Purchaser may terminate this Agreement by giving written notice to the Company and NEC Corporation at any time prior to the Closing in the event any of the Company or NEC Corporation has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, Purchaser has notified the Company and

 

23

 

NEC Corporation in writing of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach;

 

(c)                                   The Company may terminate this Agreement by giving written notice to Purchaser at any time prior to the Closing in the event Purchaser has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Company has notified Purchaser in writing of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach;

 

(d)                                  NEC Corporation may terminate this Agreement by giving written notice to Purchaser at any time prior to the Closing in the event Purchaser has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, NEC Corporation has notified Purchaser in writing of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach; and

 

(e)                                   Any of the Company, NEC Corporation or Purchaser may terminate this Agreement if the Closing shall not have occurred on or before December  31, 2012 or such later date as the Parties may agree in writing.

 

8.2                                Effect of Termination .  If any Party terminates this Agreement pursuant to Section 8.1 above, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party except for any liability of any Party then in breach, including, without limitation, the obligation of such Party to satisfy its indemnification obligations pursuant to Section  7 of this Agreement.

 

9.                                       Other Agreements .

 

9.1                                Publicity .  None of the Parties to this Agreement, nor any of their respective Affiliates, shall issue any press release or otherwise make any public announcement or disclosure with respect to this Agreement or any of the transactions contemplated hereby or thereby without the prior written consent of the other Parties, such consent not unreasonably withheld, unless such disclosure is required by applicable law or by any stock exchange or any regulatory or governmental body having applicable jurisdiction , including, without limitation, U.S. federal securities laws and Japanese securities laws, in which case the Party making the announcement or disclosure shall use reasonable efforts to consult with the other Parties in advance as to its form, content and timing .

 

10.                                Miscellaneous .

 

10.1                         Dispute Resolution .  Any dispute arising out of or relating to this Agreement that cannot be resolved amicably between the Parties (including by way of escalation to the chief executive of each of the Company and Purchaser and a senior executive of NEC Corporation to facilitate such resolution) within sixty ( 6 0) days after written notice from a Party to the other Party that a dispute exists shall be finally determined before a tribunal of three arbitrators in London, England in accordance with the Commercial Arbitration Rules of the London International Court of Arbitration (the “ LICA ”). One arbitrator shall be selected by NEC Corporation , one arbitrator shall be selected by Purchaser and the third arbitrator shall be selected by mutual agreement of the first two arbitrators or by the LICA, if the arbitrators

 

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appointed by the Parties are unable to select a third arbitrator within thirty (30) days.  The award of arbitration shall be final and binding upon the Parties and shall not be subject to appeal to any court, and may be entered in any court of competent jurisdiction for execution forthwith.

 

10.2                         Governing Law .  This Agreement shall be governed in all respects by the laws of Japan without regards to the principles of conflicts of laws thereof.

 

10.3                         Survival .  The representations, warranties, covenants and agreements made herein shall survive the execution of this Agreement and the Closing.

 

10.4                         Further Assurances .  Each of the Parties shall execute such agreements, certificates, instruments and documents (including as may be required under Japanese laws or U.S. laws in connection with Share issuance or transfer and registration thereof) and perform such further acts as may be reasonably required or desirable to carry out the intent and accomplish the purpose of this Agreement and consummate the transactions contemplated hereby, including, without limitation, the negotiation in good faith and execution of any definitive agreement(s) reasonably required or desirable to allow the Company to continue to operate its business consistent with past practices (each, an “ Additional Definitive Agreement ”).  Any such Additional Definitive Agreement may include license agreements, transition services agreements or similar agreements with NEC Corporation or their affiliates.

 

10.5                         Amendments and Waivers .  No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by each of the Parties.  No waiver by any Party of any provision of this Agreement or any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be valid unless the same shall be in writing and signed by the Party making such waiver nor shall such waiver be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such default, misrepresentation, or breach of warranty or covenant.

 

10.6                         Successors and Assigns .  Except as otherwise expressly provided herein and subject to applicable law, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the Parties.

 

10.7                         Entire Agreement .  This Agreement and other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the Parties with regard to the subjects hereof and thereof.

 

10.8                         Incorporation of Exhibits, Annexes and Schedules .  The exhibits, annexes, and schedules, including, without limitation, the Disclosure Schedules, identified in this Agreement are incorporated herein by reference and made a part hereof.

 

10.9                         Governing Language .  This Agreement has been negotiated and executed by the Parties in English.  In the event any translation of this Agreement is prepared for convenience or any other purpose, the provisions of the English version shall prevail. For the avoidance of doubt, the documents disclosed during the due diligence or those referred to in the Disclosure Schedule may be prepared in the Japanese language.

 

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10.10                  Expenses .  Each Party shall bear its respective expenses and legal fees incurred with respect to this Agreement and the transactions contemplated hereby and thereby.  Except as set forth in Section 3.2 , the Company shall pay all transfer agent, stamp taxes or other fees, taxes and duties levied in connection with the sale, issuance or transfer of the New Common Shares and the New Preferred Shares .

 

10.11                  Notices, etc.   All notices, requests and other communications hereunder shall be in writing and shall be deemed to have been duly given at the time of receipt if delivered by hand or by e-mail , or three (3) days after being mailed, registered or certified mail, return receipt requested, with postage prepaid, to the address or e-mail address (as the case may be) listed for each such Party below such Party’s signature page hereto or, if any Party shall have designated a different address or e-mail address by notice to the other Party as provided by this section, then to the last address or e-mail address so designated.

 

10.12                  Severability .  In case any provision of this Agreement shall be declared invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.  The Parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

10.13                  Titles and Subtitles .  The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

 

10.14                  No Strict Construction .  The language used in this Agreement will be deemed to be the language chosen by the Parties to express their mutual intent, and no rules of strict construction will be applied against any Party.

 

10.15                  No Third Party Beneficiaries .  This Agreement is intended for the benefit of the Parties and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

10.16                  Counterparts .  This Agreement may be executed in any number of counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each Party and delivered to the other Party; provided that a facsimile signature or portable document format (pdf) or equivalent signature attached to an e-mail shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or pdf  or equivalent signature.

 

<signature pages follow>

 

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IN WITNESS WHEREOF, each of the Company, NEC Corporation and Purchaser ha s executed this Agreement as of the day first above written.

 

 

	NEC TOKIN C ORPORATION
	By:		/s/ SHIGENORI OYAMA
	Name:		Shigenori Oyama
	Title:		President
	Address for Notice:				7-1, Kohriyama 6-chome
					Taihaku-ku, Sendai-shi
					Miyagi 982-8510, Japan
	E-mail : f-katakura@ti.jp.nec.com
	Attn:	General Manager, Corporate Strategy Division ,
		NEC Tokin Corporation
	NEC CORPORATION
	By:		/s/ TAKAYUKI MORITA
	Name:		Takayuki Morita
	Title:		Senior Vice President
	Address for Notice:			7-1, Shiba 5-chome, Minato-ku, Tokyo 108-8001, Japan
	E-mail : t-yamamoto@df.jp.nec.com
	Attn:	General Manager, Affiliated Company Division
		NEC Corporation

 

 

	KEMET ELECTRONICS CORPORATION
	By:	/s/ PER-OLOF LOOF
	Name:	Per-Olof Loof
	Title:	Chief Executive Officer
	Address for Notice:		101 NE 3 rd  Ave., Ste. 1700
			Fort Lauderdale, FL 33301 USA
	E-mail : jamieassaf@kemet.com
	Attn: Vice President and General Counsel

 

Exhibit 99.3

 

OPTION AGREEMENT

 

This OPTION AGREEMENT (this “ Agreement ”) is entered into as of March 12, 2012, by and between NEC Corporation, a Japanese corporation with its principal place of business at 7-1, Shiba 5-chome, Minato-ku, Tokyo 108-8001, Japan (“ NEC Corporation ”), and KEMET Electronics Corporation, a Delaware corporation with its principal place of business at 2835 Kemet Way, Simpsonville, South Carolina 29681 (“ Purchaser ”).  NEC Corporation and Purchaser may hereafter be referred to collectively as the “ Parties ”, or individually as a “ Party ”.

RECITALS :

 

WHEREAS, pursuant to the Stock Purchase Agreement by and among NEC Corporation, Purchaser and NEC TOKIN Corporation, a Japanese corporation with its principal place of business at 7-1, Kohriyama 6-chome, Taihaku-ku, Sendai-shi, Miyagi 982-8510, Japan (the “ Company ”) dated as of March 12, 2012 (“ Stock Purchase Agreement ”), KEMET has agreed to purchase from the Company 276,353,456 shares of Common Stock (as hereinafter defined), representing 51% of the outstanding shares of Common Stock after giving effect to such purchase, for an aggregate purchase price of $50.0 million;

 

WHEREAS, pursuant to the Stock Purchase Agreement, the Company agrees to issue to NEC Corporation and NECAP shares of its new non-voting convertible preferred stock, and NEC Corporation and NECAP agrees to acquire such shares of new preferred stock, all on the terms and subject to the conditions set forth in the Stock Purchase Agreement, such that after giving effect to such issuance of the new non-voting convertible preferred stock and Purchaser’s purchase of the new shares of common stock, NEC Corporation will hold 66.0% of the outstanding equity securities of the Company and Purchaser will hold 34.0% of the outstanding equity securities of the Company;

 

WHEREAS, NEC Corporation desires to grant to Purchaser two options to purchase first, additional new shares of common stock from the Company, and second, all of the shares of common stock and non-voting convertible preferred stock of the Company then held by NEC Corporation and by NECAP, such that, after giving effect to Purchaser’s exercise of the first and second option, Purchaser will hold 51.0% and 100.0%, respectively, of the common stock of the Company, and 49.0% and 100.0%, respectively, of the outstanding equity securities of the Company; and

 

WHEREAS, Purchaser desires to grant to NEC Corporation an option to require Purchaser to purchase all of the shares of common stock and non-voting convertible preferred stock of the Company then held by NEC Corporation and by NECAP, such that after giving effect to NEC Corporation’s exercise of the option, Purchaser will hold 100.0% of the outstanding common stock and other equity securities of the Company.

 

AGREEMENT :

 

In consideration of the mutual promises, covenants and conditions hereinafter set forth, the Parties mutually agree as follows:

 

 

1.                                       Definitions .  For purposes of this Agreement, the following terms have the following meanings:

 

“ Additional Definitive Agreement ” has the meaning set forth in Section 10.4 .

 

“ Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person.

 

“ Antitrust Laws ” has the meaning set forth in Section 3.1(a) .

 

“ Closing ” means the First Call Option Closing, the Second Call Option Closing, or the Put Option Closing, as the context so requires.

 

“ Closing Date ” means the First Call Option Closing Date, the Second Call Option Closing Date, or the Put Option Closing Date, as the context so requires.

 

“ Common Stock ” means the common stock of the Company.

 

“ Company Financial Statements ” has the meaning set forth in Section 4.6 of the Stock Purchase Agreement.

 

“ Disclosure Schedules ” means the Disclosure Schedules as defined in the preamble to Section 4 of the Stock Purchase Agreement.

 

“ First Call Option Closing ” has the meaning set forth in Section 2.1(c) .

 

“ First Call Option Closing Date ” has the meaning set forth in Section 2.1(c) .

 

“ First Call Option ” has the meaning set forth in Section 2.1(a) .

 

“ First Call Option Notice ” has the meaning set forth in Section 2.1(b) .

 

“ First Call Option Purchase Price ” has the meaning set forth in Section 2.1(a) .

 

“ First Call Option Shares ” has the meaning set forth in Section 2.1(a) .

 

“ Fundamental Representations ” has the meaning set forth in Section 7.1 .

 

“ Governmental Body ” means with respect to any nation (including, without limitation, Japan and the U.S.), state, city, locality or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

 

“ Initial Closing ” means the sale and purchase of the New Common Shares under the Stock Purchase Agreement.

 

“ Initial Closing Date ” means the Closing Date as defined in the Stock Purchase Agreement.

 

 

“ Indemnified Party ” has the meaning set forth in Section 7.5(a) .

 

“ Indemnifying Party ” has the meaning set forth in Section 7.5(a) .

 

“ Japanese GAAP ” means Japanese generally accepted accounting principles, consistently applied.

 

“ LICA ” has the meaning set forth in Section 10.1 .

 

“ Losses ” means any loss, liability, damage or expense, including reasonably attorneys’ fees and expenses and amounts paid in investigation, defense or settlement thereof.

 

“ LTM EBITDA ” means (a) the operating profit of the Company plus (b) depreciation plus (c) amortization, determined for the immediately preceding twelve-month period ending on (x) the last day of the complete quarter immediately prior to the date of determination, or (y) the date of determination, if such date of determination falls on the last day of the complete quarter, as the case may be, such amounts determined in accordance with Japanese GAAP, and shall expressly exclude the following items: (i) any proceeds from any insurance policies, including, without limitation, with respect to the operation or facilities in Thailand and (ii) any one-time or non-recurring items or special adjustments (including, without limitation, gains from insurance proceeds or extinguishment of debt or other gains not realized in the ordinary course of business), in each case, whether positive or negative.

 

An event, violation or other matter will be deemed to have a “ Material Adverse Effect ” on the Company if such event, violation or other matter would be reasonably expected to be material in negative impact or amount to the Company’s business, intellectual property rights or condition, or, taken as a whole, its assets, liabilities, operations, or financial performance; provided that, (i) changes in general economic conditions or changes affecting the industry in which the Company operates generally (as opposed to Company-specific changes), (ii) changes in the national or world economy or national or foreign financial credit or securities markets as a whole, (iii) changes in applicable law or applicable GAAP following the date hereof, (iv) any failure, in and of itself, by the Company to meet any internal or published projections, forecasts or revenue or earnings predictions for any period ending on or after the date hereof (provided that the underlying cause of any such failure shall not be excluded from this clause (iv)), (v) acts of war, sabotage or terrorism, or any escalation or worsening of such acts, or any earthquakes, hurricanes, tornados, and other wind storms, floods or other natural disasters and (vi) any reasonably foreseeable effect resulting from, arising out of, relating to, or caused by the restructuring plan announced by the Company before the date of this Agreement shall not, in and of itself, constitute a Material Adverse Effect.

“ NECAP ” means NEC Capital Solutions Limited, a Japanese corporation with its principal place of business at 29-11, Shiba 5-chome, Minato-ku, Tokyo 108-0014, Japan.

 

“ NECAP Shares ” has the meaning set forth in Section 2.2(a) .

 

“ NEC Debt Obligation ” means outstanding indebtedness for borrowed money owed by the Company to NEC Corporation and all obligations evidenced by notes, bonds, debentures or similar instruments for the payment to NEC Corporation for which the Company is

 

 

responsible or liable; provided that NEC Debt Obligation does not include Thai Rebuilding Debt Obligation.

 

“ NEC Shares ” has the meaning set forth in Section 2.2(a) .

 

“ New Common Shares ” has the meaning set forth in Section 2(a)  of the Stock Purchase Agreement.

 

“ New Preferred Shares ” has the meaning set forth in Section 2(b)  of the Stock Purchase Agreement, the rights and preferences of which are set forth in Exhibit I attached thereto.

 

‘‘ Person ’’ means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other business entity, or a governmental entity (or any department, agency, or political subdivision thereof).

 

‘‘ Preferred Stock ” means the non-voting convertible preferred stock of the Company, issued pursuant to the Stock Purchase Agreement.

 

“ Purchase Price ” has the meaning set forth in Section 2(a)  of the Stock Purchase Agreement.

 

“ Put Option Purchase Price ” has the meaning set forth in Section 2.3(b) .

 

“ Put Option Closing ” has the meaning set forth in Section 2.3(d)(i) .

 

“ Put Option Closing Date ” has the meaning set forth in Section 2.3(d)(i) .

 

“ Put Option Notice ” has the meaning set forth in Section 2.3(a) .

 

“ Put Option ” has the meaning set forth in Section 2.3(a) .

 

“ Second Call Option ” has the meaning set forth in Section 2.2(a) .

 

“ Second Call Option Closing ” has the meaning set forth in Section 0 .

 

“ Second Call Option Closing Date ” has the meaning set forth in Section 0 .

 

“ Second Call Option Notice ” has the meaning set forth in Section 2.2(c) .

 

“ Second Call Option Purchase Price ” has the meaning set forth in Section 2.2(b) .

 

“ Second Call Option Shares ” has the meaning set forth in Section 2.2(a) .

 

“ Securities Act ” means the Securities Act of 1933, as amended.

 

 

“ Shares ” means the New Common Shares, the First Call Option Shares, the Second Call Option Shares, the NECAP Shares, the NEC Shares or the New Preferred Shares, as the context so requires.

 

“ Stockholders’ Agreement” means that certain Stockholders’ Agreement, dated as of the date hereof, by and among the Company, NEC Corporation and Purchaser.

 

“ Subsidiary” of a Party means a corporation, company or other entity more than 50% of whose outstanding shares or securities (representing the right for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by that Party, but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists.

 

“Thai Rebuilding Debt Obligation” means outstanding indebtedness owed by the Company to NEC Corporation for those obligations evidenced by notes, bonds, debentures or similar instruments, which has been provided to the Company by NEC Corporation resulting from the deficiency in the insurance proceeds with respect to damages suffered by the Company and its Affiliates, related to or arising from the Thai flooding, which amount of outstanding indebtedness is not to exceed the amount of US$70,000,000.

 

“ Third-Party Claim ” has the meaning set forth in Section 7.5(a) .

 

‘‘ Transaction Documents ’’ means this Agreement, the schedules and exhibits attached hereto, the Stock Purchase Agreement and the schedules and exhibits attached thereto, the Stockholders’ Agreement and any Additional Definitive Documents.

 

“ Unfunded And Unreserved Pension Liabilities ” means the projected benefit obligation of the Company less the value of the plan assets in both cases in the account of the Company prepared in accordance with Japanese GAAP, as of the date of determination set forth in this Agreement less the retirement benefit reserve in the amount set forth in the 1/31/2012 financial statements of the Company..

 

2.                                       Call Options; Put Option .

 

2.1                                First Call Option .

 

(a)                                  Purchaser shall have the option but not the obligation to purchase, free and clear of all liens, an additional 239,060,083 shares of Common Stock from the Company (the “ First Call Option ”) for a price equal to U.S. $50,000,000 (the “ First Call Option Purchase Price ”), such that after giving effect to the purchase and sale of such shares (the “ First Call Option Shares ”), Purchaser will hold, after giving effect to the conversion of 229,685,177 shares of Preferred Stock held by NEC Corporation and NECAP on a 1:1 basis into Common Stock, an aggregate of 51.0% of the Common Stock of the Company and an aggregate of 49.0% of the then outstanding equity securities of the Company.

 

(b)                                  Notice of First Call Option .  The Parties acknowledge that the closing of the First Call Option is scheduled on or about October 2013.  Notwithstanding the foregoing, at any time following the Initial Closing Date and until August 31, 2014, Purchaser

 

 

may exercise its First Call Option by giving written notice proposing the First Call Option Closing Date to the Company and NEC Corporation (the “ First Call Option Notice ”) which may be at least three (3) month and up to five (5) months after the date of the First Call Option Notice.

 

(c)                                   Closing of First Call Option .  The closing of the First Call Option (the “ First Call Option Closing ”) shall be held at the offices of the Company at such date and location as Purchaser may specify and NEC Corporation and the Company may agree, such agreement not unreasonably withheld (the “ First Call Option Closing Date ”).  At the First Call Option Closing, Purchaser shall pay to the Company the First Call Option Purchase Price for the First Call Option Shares sold by the Company to Purchaser hereunder, by wire transfer of immediately available funds to the bank account of the Company designated by the Company in writing and the Company shall issue and sell to Purchaser the First Call Option Shares.  Any and all banking fees and charges (including remittance charges and lifting charges) incurred in connection with the payment of the First Call Option Purchase Price shall be assumed and paid by Purchaser.  At the First Call Option Closing, NEC Corporation shall cause 229,685,177 shares of Preferred Stock held by NEC Corporation and NECAP to be converted on a 1:1 basis into Common Stock, in accordance with the terms of the Preferred Stock set forth in the Company’s Articles of Incorporation.  Upon receipt of the First Call Option Purchase Price, the Purchaser and NEC Corporation shall cooperate to cause the Company to enter the name of KEMET Electronics Corporation in the Company’s shareholders registry in respect of such First Call Option Shares and to deliver to Purchaser a certified copy of the shareholder registry showing Purchaser’s ownership of the First Call Option Shares and NEC Corporation’s and NECAP’s holdings of Common Stock and Preferred Stock, after giving effect to the conversion set forth in the immediately preceding sentence.  Upon receipt of the First Call Option Purchase Price, the Purchaser and NEC Corporation shall cooperate to cause the Company to use all of the First Call Option Purchase Price to permanently reduce the amount of the then outstanding NEC Debt Obligation.

 

(d)                                  Closing Conditions for First Call Option .

 

(i)                                      Each of the conditions set forth in Section 3 shall be satisfied or waived by the applicable party.  For the avoidance of doubt, references to the applicable Closing shall mean the First Call Option Closing and references to the applicable Closing Date shall mean the First Call Option Closing Date.

 

(ii)                                   Additional First Call Option Closing Condition s.  Purchaser’s obligation to consummate the transactions to be performed by it in connection with the First Call Option Closing shall be subject to (A) notice by Purchaser to NEC Corporation that it has received updates to the Disclosure Schedules which it and NEC Corporation have reasonably cooperated to cause the Company to make in good faith solely in connection with the First Call Option to reflect the facts, events or circumstances existing after the date hereof and (B) delivery of evidence reasonably satisfactory to Purchaser of the conversion of 229,685,177 shares of Preferred Stock held by NEC Corporation and NECAP into 229,685,177 shares of Common Stock.

 

 

2.2                                Second Call Option .

 

(a)                                  Provided that Purchaser shall have exercised the First Call Option by delivering its First Call Option Notice on or before August 31, 2014, and whether or not the First Call Option Closing has occurred (other than as a result of a breach by Purchaser of its obligation to pay the purchase price for the First Call Option Shares), Purchaser shall have the option but not the obligation (the “ Second Call Option ”) to purchase all shares of Common Stock and Preferred Stock, free and clear of all liens, then held by NEC Corporation (the “ NEC Shares ”) and then held by NECAP (the “ NECAP Shares ”) (all such shares of Common Stock and Preferred Stock then held by NEC Corporation and NECAP, the “ Second Call Option Shares ”), for an aggregate purchase price equal to the Second Call Option Purchase Price, such that after giving effect to the purchase and sale and transfer of such Second Call Option Shares, Purchaser will hold all then outstanding equity securities of the Company.

 

(b)                                  Determination of Second Call Option Purchase Price .  Purchaser and NEC Corporation shall cooperate to cause the Company to calculate the aggregate purchase price of the Second Call Option Shares purchased by Purchaser from NEC Corporation and NECAP at the Second Call Option Closing (the “ Second Call Option Purchase Price ”).  The Second Call Option Purchase Price shall be determined as the greater of: (A) (x) the product of (i) LTM EBITDA (with a date of determination of the Second Call Option Closing Date) and (ii) 6.0, less (y) $100,000,000 (which represents the sum of the Purchase Price and the First Call Option Purchase Price) less (z) the Unfunded And Unreserved Pension Liabilities as of the Second Call Option Closing Date and (B) the outstanding NEC Debt Obligation, as of immediately prior to the Second Call Option Closing Date.  In the event the First Call Option Closing has not occurred or will not occur, the amount under clause (A)(y) in this Section 2.2(b)  shall be $50,000,000.  The estimated amount of the Second Call Option Purchase Price for the purpose of Purchaser’s payment for the Second Call Option Closing shall be reasonably agreed upon by NEC Corporation and Purchaser at least twenty (20) days prior to the Second Call Option Closing Date, based on the Company’s calculation pursuant to its reasonable best estimation.  The final amount of the Second Call Option Purchase Price shall be reasonably confirmed by NEC Corporation and Purchaser based on the Company’s calculation pursuant to the actual figures as of the Second Call Option Closing Date as soon as reasonably practicable, but in any event, within twenty (20) days following the Second Call Option Closing Date.  In the event that the difference between the estimated Second Call Option Purchase Price and the final Second Call Option Purchase Price is more than US$10,000, the appropriate adjustment shall be made between (i) NEC Corporation and Purchaser and (ii) NECAP and Purchaser within thirty (30) days following the Second Call Option Closing Date.

 

(c)                                   Notice of Second Call Option .  On or after August 1, 2014, and continuing until May 31, 2018, Purchaser may exercise its Second Call Option by giving written notice proposing the Second Call Option Closing Date to the Company and NEC Corporation (the “ Second Call Option Notice ”), which may be at least three (3) months and up to five (5) months after the date of the Second Call Option Notice; provided that Purchaser shall have exercised the First Call Option by providing a First Call Option Notice pursuant to Section 2.1(b)  on or before August 31, 2014.

 

 

(d)                                  Closing of Second Call Option .

 

(i)                                      The closing of the Second Call Option (the “ Second Call Option Closing ”) shall be held at the offices of the Company at such date and location as Purchaser may specify and NEC Corporation may agree, such agreement not unreasonably withheld (the “ Second Call Option Closing Date ”).

 

(ii)                                   At the Second Call Option Closing, Purchaser shall pay to each of NEC Corporation and NECAP its pro-rata share of the estimated Second Call Option Purchase Price for the Second Call Option Shares purchased and transferred by NEC Corporation and NECAP to Purchaser hereunder, by wire transfer of immediately available funds to each of the bank accounts of NEC Corporation and NECAP designated respectively by NEC Corporation and NECAP in writing, and NEC Corporation shall transfer its Shares and cause the transfer of the NECAP Shares to Purchaser subject to the terms and conditions of this Agreement.  Upon receipt by NEC Corporation and NECAP of the estimated Second Call Option Purchase Price, NEC Corporation and Purchaser shall cooperate to cause the Company to enter the name of KEMET Electronics Corporation in the Company’s shareholders registry in respect of the Second Call Option Shares.  Upon receipt of the estimated Second Call Option Purchase Price, NEC Corporation shall use all or a part of the estimated Second Call Option Purchase Price to forgive or otherwise permanently reduce the amount of the then outstanding NEC Debt Obligation to zero.  Notwithstanding the immediately foregoing sentence, upon the request of either Party, the Parties agree to discuss in good faith an alternative treatment of the NEC Debt Obligation that is no more prejudicial to the Company or the Parties as the treatment set forth in the immediately foregoing sentence.

 

(iii)                                Any and all banking fees and charges (including remittance charges and lifting charges) incurred in connection with the payment of the Second Call Option Purchase Price shall be assumed and paid by Purchaser.

 

(iv)                               NEC Corporation shall indemnify Purchaser for any and all Losses suffered by Purchaser in connection with the transfer of the NECAP Shares, including, without exception, losses suffered in connection with breaches of the representation and warranties contained in Section 5.5 , as applied to the NECAP Shares, other than the obligation of Purchaser to pay the purchase price for the NECAP Shares.

 

(e)                                   Closing Conditions for Second Call Option .

 

(i)                                      Each of the conditions set forth in Section 3 shall be satisfied or waived by the applicable party.  For the avoidance of doubt, references to the applicable Closing shall mean the Second Call Option Closing and references to the applicable Closing Date shall mean the Second Call Option Closing Date.

 

(ii)                                   Additional Second Call Option Closing Conditions .  NEC Corporation’s obligation to consummate the transactions to be performed by it in connection with the Second Call Option Closing shall be subject to the satisfaction or waiver of the following conditions (A) and (E) and Purchaser’s obligation to consummate the transactions to

 

 

be performed by it in connection with the Second Call Option Closing shall be subject to the satisfaction or waiver of the following conditions (B), (C), (D) and (F):

 

(A)                                Purchaser shall have exercised the First Call Option by delivering its First Call Option Notice on or before August 31, 2014, and whether or not the First Call Option Closing shall have occurred pursuant to Section 2.1 (other than as a result of a breach by Purchaser of its obligation to pay the purchase price for the First Call Option Shares).  Each of the Parties acknowledges and agrees that the First Call Option Closing may occur simultaneously with the Second Call Option Closing.

 

(B)                                NECAP has agreed to sell to Purchaser the NECAP Shares held by NECAP.

 

(C)                                Concurrently with the Second Call Option Closing, NEC Corporation shall forgive or otherwise permanently reduce the NEC Debt Obligation (which shall have been reduced using the First Call Option Purchase Price pursuant to Section 2.1(c)) to zero and NEC Corporation shall deliver to Purchaser documents, certificates or instruments evidencing such condition in form and substance reasonably acceptable to Purchaser.

 

(D)                                Notice by Purchaser to NEC Corporation that it has received updates to the Disclosure Schedules which it and NEC Corporation have reasonably cooperated to cause the Company to make in good faith solely in connection with the Second Call Option to reflect the facts, events or circumstances existing after the date hereof.

 

(E)                                 The Company shall have repaid (or Purchaser shall have provided the funds to NEC Corporation to repay) all, or 51%, as the case may be, of the outstanding amount of the Thai Rebuilding Debt Obligation, if any, in accordance with the terms and conditions of Section 9.1 or Section 9.2 , as applicable.

 

(F)                                  In the event the Second Call Option is exercised after April 1, 2016, concurrently with the Second Call Option Closing, NEC Corporation shall forgive 49% of the outstanding amount of the Thai Rebuilding Debt Obligation, if any, in accordance with the terms of Section 9.2 .

 

2.3                                Put Options .

 

(a)                                  NEC Corporation shall have the right during the period beginning August 1, 2014 and continuing to May 31, 2018  to deliver a written demand (the “ Put Option Notice ”) to the Company and Purchaser that requires Purchaser to purchase all of the Shares then held by NEC Corporation and NECAP and specifies the Put Option Closing Date (the “ Put Option ”).  Notwithstanding the foregoing, during the period from August 1, 2014 through April 1, 2016, NEC may exercise the Put Option only if the LTM EBITDA (with a date of determination of the Put Option Closing Date) exceeds $50,000,000.

 

 

(b)                                  Determination of Put Option Purchase Price .  Purchaser and NEC Corporation shall cooperate to cause the Company to calculate the aggregate purchase price of all of the shares of Common Stock and Preferred Stock to be purchased by Purchaser from NEC Corporation and NECAP at the Put Option Closing (the “ Put Option Purchase Price ”).  The Put Option Purchase Price shall be determined as (I) the greater of: (A) (w) the product of (i) LTM EBITDA (with a date of determination of the Put Option Closing Date) and (ii) 6.0, less (x) the sum of the Purchase Price and the First Call Option Purchase Price (if applicable) paid by Purchaser, less (y) the Unfunded And Unreserved Pension Liabilities as of the Put Option Closing Date and (B) the outstanding NEC Debt Obligation as of the Put Option Closing Date, less (II) the outstanding NEC Debt Obligation as of the Put Option Closing Date.  The estimated amount of the Put Option Purchase Price for the purpose of Purchaser’s payment for the Put Option Closing shall be reasonably agreed upon by NEC Corporation and Purchaser at least twenty (20) days prior to the Put Option Closing Date based on the Company’s calculation pursuant to its reasonable best estimation, and the final amount of the Put Option Purchase Price shall be reasonably confirmed by NEC Corporation and Purchaser based on the Company’s calculation pursuant to the actual figures as of the Put Option Closing Date as soon as reasonably practicable, but in any event, within twenty (20) days following the date of the Put Option Closing Date.  In the event that the difference between the estimated amount and the final amount is more than US$10,000, appropriate adjustment shall be made between (i) NEC Corporation and Purchaser and (ii) NECAP and Purchaser within thirty (30) days following the Put Option Closing Date.

 

(c)                                   Notwithstanding Section 2.3(b)  above, in the event NEC Corporation and Purchaser have a disagreement at the Company’s board level without resolution after going through the escalation mechanism described in the Stockholders’ Agreement as the result of NEC Corporation’s exercise against Purchaser of its voting rights in respect of the matters set forth in Section 9.4 or 10.5 of the Stockholders’ Agreement, as evidenced by any vote in opposition to the vote of Purchaser on such matters, and NEC Corporation subsequently exercises the Put Option pursuant to this Section 2.3 , then the Put Option Purchase Price shall be the lesser of (A) the amount determined pursuant to Section 2.3(b)  without regard to this Section 2.3(c)  and (B) (v) the product of (i) LTM EBITDA (with a date of determination of the Put Option Closing Date) and (ii) 8.0, less (w) the sum of the Purchase Price and the First Call Option Purchase Price (if applicable) paid by Purchaser, less (x) the Unfunded And Unreserved Pension Liabilities as of the Put Option Closing Date less (y) the amount of the outstanding NEC Debt Obligation as of the date of the Put Option Closing Date.  If the Put Option Purchase Price is calculated in accordance with clause (B) of the immediately foregoing sentence and such calculation results in a negative figure, then the Put Option Purchase Price shall be deemed to be zero and NEC Corporation shall forgive or otherwise permanently reduce the amount of the then outstanding NEC Debt Obligation by the absolute amount of such negative figure, which remaining amount of the NEC Debt Obligation shall remain outstanding subject to the terms of Section 2.4 .  Notwithstanding the immediately foregoing sentence, upon the request of either Party, the Parties agree to discuss in good faith an alternative treatment of the NEC Debt Obligation that is no more prejudicial to the Company or the Parties as the treatment set forth in the immediately foregoing sentence.

 

 

(d)                                  Closing of Put Option .

 

(i)                                      The closing as a result of Put Option (the “ Put Option Closing ”) shall be held at the offices of the Company at such date and location as Purchaser may specify and NEC Corporation and the Company may agree, such agreement not unreasonably withheld (the “ Put Option Closing Date ”).

 

(ii)                                   At the Put Option Closing, Purchaser shall pay to each of NEC Corporation and NECAP its pro-rata share of the Put Option Purchase Price for all of the Common Stock and Preferred Stock then held by NEC Corporation and NECAP, by wire transfer of immediately available funds to the bank accounts of NEC Corporation and NECAP designated respectively by NEC Corporation and NECAP in writing, and NEC Corporation shall transfer its Shares, and shall cause the transfer of the NECAP Shares, to Purchaser subject to the terms and conditions of this Agreement.  Upon receipt by NEC Corporation and NECAP of the Put Option Purchase Price, NEC Corporation and Purchaser shall cause the Company to enter the name of KEMET Electronics Corporation in the Company’s shareholders registry in respect of all of the Shares transferred to Purchaser at the Put Option Closing.

 

(iii)                                Any and all banking fees and charges (including remittance charges and lifting charges) incurred in connection with the payment of the Put Option Purchase Price shall be assumed and paid by Purchaser.

 

(iv)                               NEC Corporation shall indemnify Purchaser for any and all Losses suffered by Purchaser in connection with the transfer of the NECAP Shares, including, without exception, losses suffered in connection with breaches of the representation and warranties contained in Section 5.5 , as applied to the NECAP Shares, other than the obligation of Purchaser to pay the purchase price for the NECAP Shares.

 

(e)                                   Closing Conditions for Put Option .

 

(i)                                      Each of the conditions set forth in Section 3 shall be satisfied or waived by the applicable party.  For the avoidance of doubt, references to the applicable Closing shall mean the Put Option Closing and references to the applicable Closing Date shall mean the Put Option Closing Date.

 

(ii)                                   Additional Put Option Closing Conditions . Purchaser’s obligation to consummate the transactions to be performed by it in connection with the Put Option Closing shall be subject to the satisfaction or waiver of the following conditions:

 

(A)                                NECAP has agreed to sell to Purchaser the NECAP Shares held by NECAP; and

 

(B)                                (i) Purchaser shall be permitted under its Loan and Security Agreement, dated as of September 30, 2010 and its outstanding 10.5% Senior Notes due May 1, 2018, to pay the Put Option Purchase Price; provided that Purchase shall use its reasonable best efforts to obtain such permission and this condition shall be deemed to be waived after May 1, 2018.

 

 

(C)                                Purchaser shall have received such updates to the Disclosure Schedules which it and NEC Corporation have reasonably cooperated to cause the Company to make in good faith solely in connection with the Put Option Closing to reflect the facts, events or circumstances existing after  the date hereof.

 

(D)                                The NEC Debt Obligation shall remain outstanding and shall be continued as set forth in Section 2.4 .

 

(E)                                 51% of the outstanding amount of the Thai Rebuilding Debt Obligation, if any, shall remain outstanding and shall be continued as set forth in Section 2.4 .

 

(F)                                  Concurrently with the Put Option Closing, NEC Corporation shall forgive 49% of the outstanding amount of the Thai Rebuilding Debt Obligation, if any.

 

2.4                                Continued Loans .  NEC Corporation shall be required to leave in place the NEC Debt Obligation until May 31, 2018 and 51% of the Thai Rebuilding Debt Obligation until the due date thereof (but not later than May 31, 2018), if any amount is outstanding, in the event NEC Corporation exercises the Put Option; provided that, (i) the lending rates for the continued loan in respect of the NEC Debt Obligation and the Thai Rebuilding Debt Obligation shall be subject to changes reasonably made by NEC Corporation to reflect a new lending rate to be determined by NEC Corporation based on the credit spread which would be available to companies of the same credit rating in Japan as the Company, (ii) other terms for the continued loan shall be subject to changes reasonably acceptable to NEC Corporation and KEMET and (iii) NEC Corporation shall have the right to, at its option, on terms reasonably acceptable to Purchaser, convert the NEC Debt Obligation to preferred stock of the Company with mandatory dividends that accrue at a rate equivalent to the Japanese market lending rate that NEC reasonably determines based on reference to similar instruments and with a cash redemption date of May 31, 2018. If KEMET reasonably believes that such changed lending rates does not reflect Japanese market standard lending rates, KEMET is entitled to appeal with the evidence and KEMET and NEC Corporation shall enter into a good faith discussion. For the avoidance of doubt, the condition set forth in Sections 2.3(e)(ii)(D) or 2.3(e)(ii)(E)  shall not be satisfied and the Put Option shall not close in the event the terms of the continued loan (other than the interest rate) in respect of the NEC Debt Obligation and the Thai Rebuilding Debt Obligation or the terms of the preferred stock are not reasonably acceptable to NEC Corporation and Purchaser as provided herein; provided that in the event the changed terms of the NEC Debt Obligation or the Thai Rebuilding Debt Obligation (other than the interest rate), as applicable, are similar to and consistent with the existing terms of the NEC Debt Obligation or the Thai Rebuilding Debt Obligation, as applicable, as set forth in Exhibit III to the Stock Purchase Agreement and as modified by the Transaction Documents as in effect prior to, and without taking into account, the exercise of the Put Option, then the condition set forth in Sections 2.3(e)(ii)(D)  or 2.3(e)(ii)(E) , as applicable, shall be deemed to be satisfied .  In the event neither the Second Call Option nor the Put Option has been exercised by May 31, 2018, Purchaser shall cause the Company to repay in full the outstanding NEC Debt Obligation and the Thai Rebuilding Debt Obligation.

 

 

2.5                                Conditions for exercise of conversion rights .  NEC Corporation shall convert 229,685,177 shares of the Preferred Stock held by NEC Corporation and NECAP into the Common Stock by giving a written notice to the Company, Purchaser and NECAP in the event Purchaser exercises the First Call Option, the Company has issued all of the First Call Option Shares to Purchaser and all closing conditions to the First Call Option have been satisfied or waived.  In the event the shares of Preferred Stock have not been converted pursuant to the immediately preceding sentence, NEC Corporation and NECAP may instead (and not in addition to) convert up to 229,685,177 shares of the Preferred Stock held by NEC Corporation and NECAP into the Common Stock by giving a written notice to the Company on or after September 1, 2014.  For the avoidance of doubt, NEC, KEMET and NECAP agree that the provisions governing the conversion rights of the shares of Preferred Stock contained in this Agreement and the Stockholders’ Agreement shall supersede and control all of the rights, requirements, and obligations related to the conversion rights of the holders of the Preferred Stock at all times.

 

2.6                                Exchange Rate .  For the purpose of calculating the estimated and final Second Call Option Purchase Price and the estimated and final Put Option Purchase Price under Sections 2.2(b)  and 2.3(b)  or 2.3(c) , the NEC Debt Obligation, the LTM EBITDA and the Unfunded And Unreserved Pension Liabilities shall be converted into US$ at the arithmetic average of the TTM USD exchange rate quoted by the Bank of Tokyo-Mitsubishi UFJ, Ltd. for each business day during the preceding calendar month ending at least 20 days prior to the Second Call Option Closing Date or the Put Option Closing Date, as applicable.

 

2.7                                Further Negotiations .  In the event that neither of the Second Call Option nor the Put Option has been exercised on or before May 31, 2018,  each of the Parties shall negotiate in good faith the business arrangements among the Parties with respect to the Company, including, without limitation, further call options, put options or mutual agreement to modify or terminate the business relationship among the Parties with respect to the Company and shall execute such agreements, certificates, instruments and documents (including as may be required under Japanese laws or U.S. laws) and perform such further acts as may be reasonably required or desirable to carry out the intent and accomplish the purpose of this Section 2.7 .

 

3.                                       Conditions to Obligation to Close .

 

3.1                                Mutual Conditions .  The respective obligations of each Party to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction or waiver at or prior to the applicable Closing of each of the following conditions, any and all of which may be waived, in whole or in part, by Purchaser and NEC Corporation to the extent permitted by applicable law:

 

(a)                                  all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act or equivalent anti-trust laws of any applicable jurisdictions (collectively, the “ Antitrust Laws ”) shall have expired or otherwise been terminated;

 

(b)                                  any and all consents (including affirmative response by the Japan Fair Trade Commission under the prior consultation system under Japanese antitrust laws, all governmental or regulatory consents, approvals or authorizations required in connection with the

 

 

valid execution, delivery and performance of this Agreement), notices, permits, waivers, filings, necessary or appropriate for consummation of the transactions contemplated by this Agreement, shall have been obtained and/or made from or with the Governmental Bodies having competent jurisdiction;

 

(c)                                   no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement and the other Transaction Documents, (B) cause any of the transactions contemplated by this Agreement and the other Transaction Documents to be rescinded following consummation, (C) adversely affect the right of Purchaser to own the Shares or (D) adversely affect the right of the Company or any of its Subsidiaries to own its assets and to operate its business (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); and

 

(d)                                  all material third-party consents, notices, permits, waivers necessary for the consummation of the transactions contemplated at the applicable Closing (including any in respect of a change of control, if applicable) shall have been given or obtained.

 

3.2                                Conditions to Obligations of Purchaser .  Purchaser’s obligation to consummate the transactions to be performed by it in connection with the applicable Closing is subject to satisfaction of the following conditions, any and all of which may be waived, in whole or in part, by Purchaser to the extent permitted by applicable law:

 

(a)                                  the representations and warranties set forth in Section 5 shall be true and correct in all material respects at and as of the applicable Closing Date (other than representations and warranties as of a specified date, which shall be true and correct in all material respects as of such date), except to the extent that such representations and warranties are qualified by the term “material,” or contain terms such as “Material Adverse Effect”, in which case such representations and warranties (as so written, including the term “material” or “Material Adverse Effect”) shall be true and correct in all respects at and as of the applicable Closing Date;

 

(b)                                  NEC Corporation shall have performed and complied with all of their covenants hereunder in all material respects through the applicable Closing, except to the extent that such covenants are qualified by the term “material,” or contain terms such as “Material Adverse Effect”, in which case NEC Corporation shall have performed and complied with all of such covenants (as so written, including the term “material” or “Material Adverse Effect”) in all respects through the applicable Closing;

 

(c)                                   NEC Corporation shall have delivered to Purchaser a certificate to the effect that each of the conditions specified above in Sections 3.2(a)-(b)  is satisfied in all respects;

 

 

(d)                                  the relevant parties shall have entered into the Transaction Documents (including any Additional Definitive Documents, as applicable) and the same shall be in full force and effect; and

 

(e)                                   all actions to be taken by NEC Corporation in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Purchaser.

 

3.3                                Conditions to NEC Corporation’ Obligations . NEC Corporation’s obligations to consummate the transactions to be performed by it in connection with the applicable Closing is subject to satisfaction of the following conditions, any and all of which may be waived, in whole or in part, by NEC Corporation to the extent permitted by applicable law:

 

(a)                                  the representations and warranties set forth in Section 6 shall be true and correct in all material respects at and as of the applicable Closing Date (other than representations and warranties as of a specified date, which shall be true and correct in all material respects as of such date), except to the extent that such representations and warranties are qualified by the term “material,” or contain terms such as “Material Adverse Effect”, in which case such representations and warranties (as so written, including the term “material” or “Material Adverse Effect”) shall be true and correct in all respects at and as of the applicable Closing Date;

 

(b)                                  Purchaser shall have performed and complied with all of its covenants hereunder in all material respects through the applicable Closing, except to the extent that such covenants are qualified by the term “material,” or contain terms such as “Material Adverse Effect”, in which case Purchaser shall have performed and complied with all of such covenants (as so written, including the term “material” or “Material Adverse Effect”) in all respects through the applicable Closing;

 

(c)                                   Purchaser shall have delivered to the Company a certificate to the effect that each of the conditions specified above in Sections 3.3(a)-(b)  is satisfied in all respects;

 

(d)                                  the relevant parties shall have entered into the Transaction Documents (including any Additional Definitive Agreements, as applicable) and the same shall be in full force and effect; and

 

(e)                                   all actions to be taken by Purchaser in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to NEC Corporation.

 

3.4                                Frustration of Closing Conditions .  No party hereto may rely on the failure of any condition set forth in this Section 3 if such party’s failure to comply with any provision of this Agreement is the proximate cause of such failure of such condition.

 

 

4.                                       Pre-closing Covenants .

 

4.1                                General .  Each Party, at its own cost, shall use its commercially reasonable efforts to take all actions and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the Closing conditions set forth in Section 3 (to the extent that such conditions relate to such Party)), including, without limitation, taking all necessary actions under the Stockholders’ Agreement to cause the Company to issue the First Call Option Shares.

 

4.2                                Notification .  Each Party will give prompt written notice to the others of any material adverse development causing a breach of its own representations and warranties in Sections 5 and 6 , as applicable.  No disclosure by any Party pursuant to this Section 4.2 , however, shall be deemed to amend or supplement the Disclosure Schedules or to prevent or cure any misrepresentation, breach of warranty or breach of covenant.

 

4.3                                Regulatory Approvals .  Each of Purchaser, NEC Corporation and the Company (as caused by Purchaser and NEC Corporation) shall (i) make all filings required or desirable of each of them or any of their respective Affiliates under the Antitrust Laws with respect to the transactions contemplated hereby as promptly as practicable, (ii) comply at the earliest practicable date with any request under any of the Antitrust Laws for additional information, documents, or other materials received by each of them or any of their respective Affiliates from any Governmental Body in respect of such filings or such transactions and (iii) cooperate with each other in connection with any such filing.

 

5.                                       Representations and Warranties of NEC Corporation .  NEC Corporation represents and warrants to Purchaser as of the date hereof and as of each applicable Closing Date, as set forth below.

 

5.1                                Organization .  NEC Corporation is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation or other formation.

 

5.2                                Authorization of Transaction .  NEC Corporation has full power and authority (including full corporate or other entity power and authority) to execute and deliver this Agreement and the other Transaction Documents to which it is party and to perform its obligations hereunder and thereunder.  This Agreement and the Transaction Documents to which it is party constitute the valid and legally binding obligations of NEC Corporation, enforceable in accordance with their respective terms and conditions, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.  NEC Corporation has, or shall have as of the applicable Closing, obtained any authorization, consent, or approval of, or made any filing required to, any Governmental Body in order to consummate the transactions contemplated by this Agreement and the other Transaction Documents.  This Agreement and the other Transaction Documents to which NEC Corporation is party have been duly and validly approved and authorized by all necessary corporate action on NEC Corporation’s part.

 

 

5.3                                Non-contravention .  Neither the execution and delivery of this Agreement and the Transaction Documents to which NEC Corporation is party, nor the consummation of the transactions contemplated hereby and thereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Body to which NEC Corporation is subject or any provision of its charter, bylaws, or other governing documents, (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which NEC Corporation is a party or by which it is bound or to which any of its assets are subject, or (C) result in the imposition or creation of a lien and any other encumbrance upon or with respect to the shares of Common Stock or Preferred Stock held by it.

 

5.4                                Brokers’ Fees .  Except for legal fees, NEC Corporation has no liability to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement and the other Transaction Documents.

 

5.5                                Shares .  NEC Corporation holds of record, has good and marketable title to, and owns beneficially the number of shares of Common Stock and Preferred Stock set forth in Section 4.8 of the Stock Purchase Agreement or otherwise disclosed in the Disclosure Schedules, free and clear of any restrictions on transfer (other than any restrictions under applicable securities laws, Articles of Incorporation of the Company and the Transaction Documents), taxes, liens, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands, and pursuant to the terms and conditions of this Agreement, Purchaser will acquire good and marketable title to such shares of Common Stock and Preferred Stock, as applicable, free and clear of any restrictions on transfer (other than any restrictions under applicable securities laws, Articles of Incorporation of the Company and the Transaction Documents), taxes, liens, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands.  NEC Corporation is not, or will not be, a party to any option, warrant, purchase right, or other contract or commitment (other than this Agreement and the Stockholders’ Agreement) that could require NEC Corporation to sell, transfer, or otherwise dispose of any capital stock of the Company.  Other than the Stockholders’ Agreement, NEC Corporation is not, or will not be, a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any capital stock of the Company.

 

5.6                                Representations and Warranties relating to the Company .  NEC Corporation represents and warrants to Purchaser as of the date hereof and as of the First Call Option Closing Date that each of the statements relating to the Company described in Section 4 of the Stock Purchase Agreement are true, correct and complete, except as set forth in the Disclosure Schedules; provided that updates to the Disclosure Schedules reflecting events after the date hereof and prior to the First Call Option Closing shall be deemed to modify the representations and warranties of NEC Corporation for the purpose of determining whether the conditions to the First Call Option Closing have been met and  shall be deemed to modify the representations and warranties of NEC Corporation in respect of its indemnification obligations pursuant to Section 7.2(a) .  NEC Corporation further represents and warrants to Purchaser as of the Second Call Option Closing Date and the Put Option Closing Date that each of the statements relating to the Company described in Sections 4.1 (first sentence only), 4.2, 4.3(i), 4.3(iii), 4.5 and 4.8 of the Stock Purchase Agreement are true, correct and complete, except as set forth in the

 

 

Disclosure Schedules, provided that updates to the Disclosure Schedules reflecting events after the date hereof and prior to the Second Call Option Closing or the Put Option Closing shall be deemed to modify the representations and warranties of NEC Corporation for the purpose of determining whether the conditions to the Second Call Option Closing and the Put Option Closing have been met and shall be deemed to modify the representations and warranties of NEC Corporation in respect of its indemnification obligations pursuant to Section 7.2(a) .  For the avoidance of doubts, NEC Corporation shall be permitted to update and deliver to Purchaser the Disclosure Schedules attached to the Stock Purchase Agreement on or before the thirtieth (30th) day immediately prior to each of the First Call Option Closing, the Second Call Option Closing and the Put Option Closing Date.  Purchaser and NEC Corporation shall cooperate to cause the Company to fully cooperate with NEC Corporation in the preparation of the updated Disclosure Schedules in good faith and to furnish such records and information as may be reasonably requested by NEC Corporation in connection therewith.

 

6.                                       Representations and Warranties of Purchaser .  Purchaser represents and warrants to NEC Corporation as of the date hereof and as of each applicable Closing Date, as set forth below.

 

6.1                                Power and Authorization .  Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or other formation.  Purchaser has the full corporate power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents to which it is party, and this Agreement and the Transaction Documents to which it is party constitute the valid and binding obligations of Purchaser, enforceable in accordance with their respective terms and conditions, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.  The execution, delivery and performance by Purchaser of this Agreement and the other Transaction Documents to which it is party have been duly and validly approved and authorized by all necessary corporate action on Purchaser’s part.

 

6.2                                Consents .  Purchaser has, or shall have as of the applicable Closing, obtained all governmental, statutory, or regulatory consents or authorizations required by it to execute, deliver and perform its obligations under this Agreement.

 

6.3                                Non-contravention .  Neither the execution and delivery of this Agreement and the Transaction Documents to which Purchaser is a party, nor the consummation of the transactions contemplated hereby and thereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Body to which Purchaser is subject or any provision of its charter, bylaws, or other governing documents, (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Purchaser is a party or by which it is bound or to which any of its assets are subject.

 

 

6.4                                Financial Capability .  Purchaser has, and at each of the First Call Closing and the Second Call Closing will have, sufficient funds available to pay the First Call Option Purchase Price and the Second Call Option Purchase Price, as the case may be, and any fees and expenses incurred by Purchaser in connection with the First Call Option and the Second Call Option, as the case may be.

 

7.                                       Remedies .

 

7.1                                Survival .  All representations and warranties contained herein or made pursuant to this Agreement or in any certificate delivered pursuant to this Agreement shall survive the First Call Option Closing for a period beginning on the First Call Option Closing Date and ending on the 15 month anniversary of the First Call Option Closing Date; provided that the representations and warranties set forth in Sections 5.1 , 5.2 , 5.3 , 5.5 , the second sentence of Section 5.6 and Sections 6.1 , 6.2 and 6.3 (the “ Fundamental Representations ”) and corresponding representations and warranties in any certificate shall survive the execution and delivery of this Agreement and each of the First Call Option Closing, the Second Call Option Closing or the Put Option Closing for a period beginning on the applicable Closing Date and continuing in full force and effect until the expiration of any applicable statute of limitations (after giving effect to any extensions or waivers). All covenants and agreements that contemplate performance after any applicable Closing contained herein shall survive such Closing indefinitely or for any shorter period expressly specified in accordance with their terms. Notwithstanding the preceding sentences, if notice of an indemnification claim shall have been delivered before the aforementioned time period has elapsed with respect to any breach of any such representation, warranty, covenant or agreement, such representation, warranty, covenant or agreement shall survive until such claim is finally resolved. No claim may be brought hereunder in respect of any covenant or agreement that contemplates performance entirely before or at any applicable Closing unless such claim is brought prior to the first anniversary of such applicable Closing Date.

 

7.2                                Indemnification Provisions for Purchaser’s Benefit .

 

(a)                                  In the event NEC Corporation breaches (or in the event any third party alleges facts that, if true, would mean NEC Corporation has breached) any of its representations and warranties regarding the Company set forth in Section 5.6 or in the event the Company breaches any of its covenants contained in Section 2.1 , provided that Purchaser makes a written claim for indemnification against NEC Corporation within the survival period for such breaches, then, effective at and after each applicable Closing and subject to the limitations and exclusions set out in this Section 7 , NEC Corporation undertakes to pay 49% of the amount which would be necessary to put the Company into the financial position which would have existed had there been no breach.  Furthermore, NEC Corporation shall be obligated to indemnify Purchaser from and against any Losses Purchaser may suffer resulting from, arising out of, relating to, in the nature of, or caused by the breach (or alleged breach) of the covenants related to the  issuance of First Call Option Shares or the representations and warranties of the Company related to the issuance of the First Call Option Shares as set forth in Sections 4.1, 4.2, 4.3 4.5 or 4.8 of the Stock Purchase Agreement , and to indemnify Purchaser from and against 49% of any Losses Purchaser may suffer resulting from any other breach (or alleged breach).  For the purpose of this clause (a) , the representations and warranties of regarding the Company

 

 

set forth in Section 5.6 of this Agreement shall be read as if all qualifications as to materiality, including each reference to the terms and phrases “material”, “in all material respects” or like phrases were deleted therefrom in determining whether there has been a breach of any such representation or warranty or in determining the amount of any Loss.

 

(b)                                  In the event NEC Corporation breaches (or in the event any third party alleges facts that, if true, would mean NEC Corporation has breached) any of its representations, warranties, and covenants contained herein (other than those regarding the Company set forth in Section 5.6 ) and, provided that Purchaser makes a written claim for indemnification against NEC Corporation within the survival period, then NEC Corporation shall be obligated to indemnify Purchaser from and against the entirety of any Losses Purchaser may suffer resulting from, arising out of, relating to, in the nature of, or caused by the breach (or the alleged breach).  For the purposes of this clause (b) , the representations and warranties of NEC Corporation contained in Section 5 of this Agreement shall be read as if all qualifications as to materiality, including each reference to the terms and phrases “material”, “in all material respects” or like phrases were deleted therefrom in determining whether there has been a breach of any such representation or warranty or in determining the amount of any Loss.

 

(c)                                   Nothing in this Section 7.2 restricts or limits Purchaser or its Affiliates’ (including, for the avoidance of doubt, the Company after the Initial Closing) general obligation at law to mitigate any loss or damage which it may incur as a consequence of a matter giving rise to a claim.

 

7.3                                Indemnification Provisions for NEC Corporation’ Benefit .  In the event Purchaser breaches (or in the event any third party alleges facts that, if true, would mean Purchaser has breached) any of its representations, warranties, and covenants contained herein and, provided that NEC Corporation makes a written claim for indemnification against Purchaser within the survival period, then Purchaser shall be obligated to indemnify NEC Corporation from and against any Losses NEC Corporation may suffer resulting from, arising out of, relating to, in the nature of, or caused by the breach (or alleged breach).  Notwithstanding the foregoing, Purchaser shall have no indemnification obligations whatsoever to the Company at any time following the Second Call Option Closing or a Put Option Closing.  For the purposes of this Section 7.3 , the representations and warranties of Purchaser contained in Section 6 of this Agreement shall be read as if all qualifications as to materiality, including each reference to the terms and phrases “material”, “in all material respects” or like phrases were deleted therefrom in determining whether there has been a breach of any such representation or warranty or in determining the amount of any Loss.  Nothing in this Section 7.3 restricts or limits the Company’s, NEC Corporation’s or their respective Affiliates’ general obligation at law to mitigate any loss or damage which it may incur as a consequence of a matter giving rise to a claim.

 

7.4                                Limitations on Liability .

 

(a)                                  Neither Purchaser nor NEC Corporation shall be entitled to assert any claim for indemnification under this Section 7 with respect to a single course of conduct or related set of circumstances, occurrences or events unless the Losses arising therefrom exceed

 

 

$1,000,000, in which case the Purchaser or NEC Corporation, as the case may be, shall be entitled to claim only for the amount by which such claims exceed such deductible amount.

 

(b)                                  The maximum aggregate liability of NEC Corporation for all indemnification claims under this Agreement shall be limited to (i) $25,000,000 with respect to written claims for indemnification arising on or after the First Call Option Closing Date, and (ii) the Second Call Option Purchase Price or the Put Option Purchase Price, as applicable, including the amount of the NEC Debt Obligation that remains outstanding, with respect to written claims for indemnification regarding the Fundamental Representations arising on or after the Second Call Option Closing or the Put Option Closing, as applicable.

 

(c)                                   The maximum aggregate liability of Purchaser for all indemnification claims this Agreement shall be limited to (i) $25,000,000 with respect to written claims for indemnification arising on or after the First Call Option Closing Date and (ii) the Second Call Option Purchase Price or the Put Option Purchase Price, as applicable, including the amount of the NEC Debt Obligation that remains outstanding, with respect to written claims for indemnification regarding the Fundamental Representations arising on or after the Second Call Option Closing or the Put Option Closing, as applicable.

 

(d)                                  Neither Party shall be liable for any loss of profits or earnings, or any punitive, indirect, incidental or consequential damages by reason of a breach of any representation, warranty, covenant or indemnity contained herein; provided that the foregoing is not intended to limit recovery of amounts paid by an Indemnified Party in connection with the defense, settlement or other resolution of any Third-Party Claim (including any punitive, indirect, incidental or consequential damages paid by an Indemnified Person to any third party).

 

(e)                                   NEC Corporation shall not be liable for any claim under Section 7.2(a) , (x) if and to the extent the matter is specifically provided or reserved for (and not released prior to the applicable Closing) in the Company Financial Statements provided by the Company in connection with the applicable Closing; (y) to the extent that the matter giving rise to the claim would not have arisen solely but for an act before or after the applicable Closing by Purchaser or its Affiliates or a director, employee or agent of Purchaser or its Affiliates; or (z) to the extent that the matter giving rise to the claim arises wholly or partially from an event before or after the applicable Closing solely at the written request or direction of, or with the consent of Purchaser or its Affiliates or an authorized agent or adviser of Purchaser or its Affiliates.

 

(f)                                    Insured Claims . NEC Corporation’s liability in respect of any claims pursuant to Section 7.2(a) that are payable to the Company shall be reduced by an amount equal to 49% of any loss or damage to which the claim relates which has actually been recovered by the Company under a policy of insurance.

 

(g)                                   Disclosure Documents . Except as expressly set forth in Section 5.6 and Section 7.2(a) , NEC shall not be liable for any claim under Section 7.2 if and to the extent that the actual fact, matter, event or circumstance giving rise to such claim is fairly and reasonably disclosed on the face of the express terms of this Agreement (including the Disclosure Schedules). Further, any events that initially occur after the date hereof shall be deemed to be disclosed in the Disclosure Schedules updated in accordance with Section 5.6 if

 

 

such events have been discussed by the entire Board of Directors in a meeting held after the Initial Closing and are reflected in, and reasonably apparent from a review of,  the minutes of the Board of Directors of the Company held after the Initial Closing.

 

(h)                                  No Double Recovery .  In the event Purchaser’s claim under Section 7.2 arises from or is related to the same facts, events or circumstances giving rise to a claim for indemnification pursuant to Section 7 of the Stock Purchase Agreement, Purchaser’s claim for indemnification under Section 7 of this Agreement shall be offset by any payments actually made to Purchaser pursuant to Section 7 of the Stock Purchase Agreement for such related claim.

 

7.5                                Matters Involving Third Parties .

 

(a)                                  If any third party notifies any Party (the “ Indemnified Party ”) with respect to any matter (a “ Third-Party Claim ”) that may give rise to a claim for indemnification against any other Party (the “ Indemnifying Party ”) under this Section 7 , then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however , that such notice shall set forth in reasonable detail such Third-Party Claim and the basis for indemnification and no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party is thereby materially prejudiced.

 

(b)                                  Any Indemnifying Party will have the right to defend the Indemnified Party against the Third-Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified Party in writing within 30 days after the Indemnified Party has given notice of the Third-Party Claim that the Indemnifying Party will assume responsibility for and indemnify the Indemnified Party from and against the entirety of any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third-Party Claim, (B) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third-Party Claim and fulfill its indemnification obligations hereunder, (C) the Third-Party Claim involves only money damages and does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third-Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice materially adverse to the continuing business interests or the reputation of the Indemnified Party and (E) the Indemnifying Party conducts the defense of the Third-Party Claim actively and diligently.

 

(c)                                   So long as the Indemnifying Party is conducting the defense of the Third-Party Claim in accordance with Section 7.5(b) above, (A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third-Party Claim, (B) the Indemnified Party will not consent to the entry of any judgment on or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld), and (C) the Indemnifying Party will not consent to the entry of any judgment on or enter into any settlement with respect to the Third-

 

 

Party Claim without the prior written consent of the Indemnified Party (not to be unreasonably withheld).

 

(d)                                  In the event that the Indemnifying Party chooses to not exercise the rights under Section 7.5(b) above or any condition set forth in Section 7.5(b)  (A) through (D) above is or becomes unsatisfied, (A) the Indemnified Party may defend against the Third-Party Claim in any manner it may reasonably deem appropriate (but the Indemnified Party will need to consult with, and obtain consent from (not to be unreasonably withheld), any Indemnifying Party in connection therewith), (B) the Indemnified Party will not consent to the entry of any judgment on or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld), and (C) the Indemnifying Parties will remain responsible for any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third-Party Claim to the fullest extent provided in this Section 7 .

 

(e)                                   In the event the Indemnifying Party exercises the rights under Section 7.5(b) but the condition in Section 7.5(b) (E) above is or becomes unsatisfied, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment on or enter into any settlement with respect to, the Third-Party Claim in any manner it may reasonably deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith), (B) the Indemnifying Parties will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third-Party Claim (including reasonable attorneys’ fees and expenses) and (C) the Indemnifying Parties will remain responsible for any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third-Party Claim to the fullest extent provided in this Section 7 .

 

(f)                                    Each party shall cooperate, and cause their respective Affiliates to cooperate, in the defense of any Third-Party Claim and shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith.

 

7.6                                Exclusive Remedies .  Other than in respect of claims for indemnification arising out of fraud or criminal conduct (with respect to which the claimant shall have all remedies available at law or in equity), the remedies provided in this Section 7 (subject to the limitations set forth in this Section 7 ) shall be the exclusive remedies for the Parties and their permitted assigns and successors for any breach or inaccuracy in any representation, warranty or statement in, or any breach, non-fulfillment or default in the performance of any of the covenants or agreements contained in this Agreement.

 

 

8.                                       Termination. Certain of the Parties may terminate this Agreement as provided below:

 

8.1                                Termination of Agreement .

 

(a)                                  The Parties may terminate this Agreement by mutual written consent at any time;

 

(b)                                  Purchaser may terminate this Agreement by giving written notice to NEC Corporation at any time prior to the First Call Option Closingn the event NEC Corporation shall file for bankruptcy, corporate reorganization, civil rehabilitation, special liquidation or similar proceedings, and such petition is not withdrawn or rejected or an order or notification for any attachment, auction or compulsory execution shall be received by or made in respect of NEC Corporation and such order or notification is not withdrawn, rejected or cancelled (effective as of the date of such notice); and

 

(c)                                   NEC Corporation may terminate this Agreement by giving written notice to Purchaser at any time prior to the First Call Option Closing  in the event Purchaser shall file for bankruptcy, corporate reorganization, civil rehabilitation, special liquidation or similar proceedings, and such petition is not withdrawn or rejected, or an order or notification for any attachment, auction or compulsory execution shall be received by or made in respect of Purchaser and such order or notification is not withdrawn, rejected or cancelled (effective as of the date of such notice).

 

8.2                                Effect of Termination .  If any Party terminates this Agreement pursuant to Section 8.1 above, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party except for any liability of any Party then in breach, including, without limitation, the obligation of such Party to satisfy its indemnification obligations pursuant to Section 7 of this Agreement.)

 

9.                                       Thai Rebuilding Debt Obligation .

 

9.1                                In the event Purchaser exercises the Second Call Option on or before April 1, 2016 by providing a Second Call Option Notice under Section 2.2(c) , Purchaser shall cause the Company to repay all the outstanding amount of the Thai Rebuilding Debt Obligation, if any, to NEC Corporation on the Second Call Option Closing Date. NEC shall exercise its voting rights under the Stockholders’ Agreement and take all such other similar actions in its capacity as a stockholder of the Company, to approve the repayment by the Company of all the outstanding amount of the Thai Rebuilding Debt Obligation, and not take any action in its capacity as the Lender under such obligations to hinder, prevent or delay any such repayment.

 

9.2                                In the event Purchaser exercises the Second Call Option after April 1, 2016 by providing a Second Call Option Notice under Section 2.2(c) , Purchaser shall cause the Company to repay 51% of the outstanding amount of the Thai Rebuilding Debt Obligation, if any, to NEC Corporation at the Second Call Option Closing or in the event NEC Corporation exercises the Put Option under Section 2.3 , 51% of the Thai Rebuilding Debt Obligation, if any, will remain outstanding and NEC Corporation shall forgive the remaining 49% of such outstanding Thai Rebuilding Debt Obligation, if any, at the Second Call Option Closing or the

 

 

Put Option Closing, as the case may be.  Notwithstanding the immediately foregoing sentence, upon the request of either Party, the Parties agree to discuss in good faith an alternative treatment of the Thai Rebuilding Debt Obligation that is no more prejudicial to the Company or the Parties as the treatment set forth in such immediately foregoing sentence. NEC shall exercise its voting rights under the Stockholders’ Agreement and take all such other similar actions in its capacity as a stockholder of the Company, to approve the repayment by the Company of 51% of the outstanding amount of the Thai Rebuilding Debt Obligation, and not take any action in its capacity as the Lender under such obligations to hinder, prevent or delay any such repayment.

 

10.                                Miscellaneous .

 

10.1                         Dispute Resolution .  Any dispute arising out of or relating to this Agreement that cannot be resolved amicably between the Parties (including by way of escalation to the chief executive of each of Purchaser and a senior executive of NEC Corporation to facilitate such resolution) within sixty (60) days after written notice from a Party to the other Party that a dispute exists shall be finally determined before a tribunal of three arbitrators in London, England in accordance with the Commercial Arbitration Rules of the London International Court of Arbitration (the “ LICA ”). One arbitrator shall be selected by NEC Corporation, one arbitrator shall be selected by Purchaser and the third arbitrator shall be selected by mutual agreement of the first two arbitrators or by the LICA, if the arbitrators appointed by the Parties are unable to select a third arbitrator within thirty (30) days.  The award of arbitration shall be final and binding upon the Parties and shall not be subject to appeal to any court, and may be entered in any court of competent jurisdiction for execution forthwith.

 

10.2                         Governing Law .  This Agreement shall be governed in all respects by the laws of Japan without regards to the principles of conflicts of laws thereof.

 

10.3                         Survival .  The representations, warranties, covenants and agreements made herein shall survive the execution of this Agreement and each Closing.

 

10.4                         Further Assurances .  Each of the Parties shall execute such agreements, certificates, instruments and documents (including as may be required under Japanese laws or U.S. laws in connection with Share issuance or transfer and registration thereof) and perform such further acts as may be reasonably required or desirable to carry out the intent and accomplish the purpose of this Agreement and consummate the transactions contemplated hereby, including, without limitation, the negotiation in good faith and execution of any definitive agreement(s) reasonably required or desirable to carry out the intent and accomplish the purpose of the First Call Option, the Second Call Option, the Put Option and the provisions of Section 2.7 (each, an “ Additional Definitive Agreement ”) and to allow the Company to continue to operate its business consistent with past practices.  Any such Additional Definitive Documents may include license agreements, transition services agreements or similar agreements with NEC Corporation or their affiliates.

 

10.5                         Amendments and Waivers .  No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by each of the Parties.  No waiver by any Party of any provision of this Agreement or any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be valid unless the

 

 

same shall be in writing and signed by the Party making such waiver nor shall such waiver be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such default, misrepresentation, or breach of warranty or covenant.

 

10.6                         Successors and Assigns .  Except as otherwise expressly provided herein and subject to applicable law, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the Parties.  Notwithstanding the foregoing, none of Purchaser or NEC Corporation may transfer any of its rights to exercise any of the First Call Option, the Second Call Option or the Put Option, separate or apart from this Agreement or from the shares of Common Stock or Preferred Stock which it holds.

 

10.7                         Entire Agreement .  This Agreement and other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the Parties with regard to the subjects hereof and thereof.

 

10.8                         Incorporation of Exhibits, Annexes and Schedules .  The exhibits, annexes, and schedules, including, without limitation, the Disclosure Schedules, identified in this Agreement are incorporated herein by reference and made a part hereof.

 

10.9                         Governing Language .  This Agreement has been negotiated and executed by the Parties in English.  In the event any translation of this Agreement is prepared for convenience or any other purpose, the provisions of the English version shall prevail.  For the avoidance of doubt, the documents disclosed during the due diligence or those referred to in the Disclosure Schedule may be prepared in the Japanese language.

 

10.10                  Expenses .  Each Party shall bear its respective expenses and legal fees incurred with respect to this Agreement and the transactions contemplated hereby and thereby.  Except as set forth in Sections 2.1(c)  and 2.3(d)(iii) , Purchaser and NEC Corporation shall cooperate to cause the Company shall pay all transfer agent, stamp taxes or other fees, taxes and duties levied in connection with the sale, issuance or transfer of the Shares.

 

10.11                  Notices, etc.   All notices, requests and other communications hereunder shall be in writing and shall be deemed to have been duly given at the time of receipt if delivered by hand or by e-mail, or three days after being mailed, registered or certified mail, return receipt requested, with postage prepaid, to the address or e-mail address (as the case may be) listed for each such Party below such Party’s signature page hereto or, if any Party shall have designated a different address or e-mail address by notice to the other Party as provided by this section, then to the last address or e-mail address so designated.

 

10.12                  Severability .  In case any provision of this Agreement shall be declared invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.  The Parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

 

10.13                  Titles and Subtitles .  The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

 

10.14                  Publicity .  Neither of the Parties to this Agreement, nor any of their respective Affiliates, shall issue any press release or otherwise make any public announcement or disclosure with respect to this Agreement or any of the transactions contemplated hereby or thereby without the prior written consent of the other Parties, such consent not unreasonably withheld, unless such disclosure is required by applicable law or by any stock exchange or any regulatory or governmental body having applicable jurisdiction, including, without limitation, U.S. federal securities laws and Japanese securities laws, in which case the Party making the announcement or disclosure shall use reasonable efforts to consult with the other Parties in advance as to its form, content and timing.

 

10.15                  No Strict Construction .  The language used in this Agreement will be deemed to be the language chosen by the Parties to express their mutual intent, and no rules of strict construction will be applied against any Party.

 

10.16                  No Third Party Beneficiaries .  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

10.17                  Counterparts .  This Agreement may be executed in any number of counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature or portable document format (pdf) or equivalent signature attached to an e-mail shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or pdf  or equivalent signature.

 

 

IN WITNESS WHEREOF, each of NEC Corporation and Purchaser has executed this Agreement as of the day first above written.

 

 

	NEC CORPORATION
	By:		/s/ TAKAYUKI MORITA
	Name:		Takayuki Morita
	Title:		Senior Vice President
	Address for Notice:			7-1, Shiba 5-chome, Minato-ku
				Tokyo 108-8001, Japan
	E-mail: t-yamamoto@df.jp.nec.com
	Attn:	General Manager, Affiliated Company Division
		NEC Corporation

 

 

	KEMET ELECTRONICS CORPORATION
	By:	/s/ PER-OLOF LOOF
	Name:	Per-Olof Loof
	Title:	Chief Executive Officer
	Address for Notice:		101 NE 3 rd  Ave., Ste. 1700
			Fort Lauderdale, FL 33301 USA
	E-mail: jamieassaf@kemet.com
	Attn: Vice President and General Counsel

 

Exhibit 99.4

 

 

STOCKHOLDERS’ AGREEMENT

 

by and between

 

KEMET ELECTRONICS CORPORATION

 

NEC CORPORATION

 

and

 

NEC TOKIN CORPORATION

 

 

March 12, 2012

 

 

 

 

TABLE OF CONTENTS

 

1.	Definitions	1
2.	Capital Structure; Indemnification	5
3.	Transfer of Shares; Conversion; Covenant to Issue Shares	5
4.	Right to Voluntary Transfers	7
5.	Transfers in Compliance with Law; Substitution of Transferee	8
6.	Preemptive Rights	9
7.	After-Acquired Securities	9
8.	Certain Management Services	9
9.	Stockholders’ Rights and Obligations	13
10.	Board of Directors; Officers	14
11.	Accounting, Audits	18
12.	Repayment of NEC Debt Obligation; Additional Funding	20
13.	Effective Date; Termination; Breach	22
14.	Confidentiality and Non-Disclosure	22
15.	Compliance with Laws	23
16.	General Provisions	23

 

 

STOCKHOLDERS’ AGREEMENT

 

This Stockholders’ Agreement (this “ Agreement ”) dated March 12, 2012, by and among NEC TOKIN Corporation, a Japanese corporation with its principal place of business at 7-1, Kohriyama 6-chome, Taihaku-ku, Sendai-shi, Miyagi 982-8510, Japan (the “ Company ”), NEC Corporation, a Japanese corporation with its principal place of business at 7-1, Shiba 5-chome, Minato-ku, Tokyo 108-8001, Japan (“ NEC ”), and KEMET Electronics Corporation, a Delaware corporation with its principal place of business at 2835 Kemet Way, Simpsonville, South Carolina 29681, USA (“ KEMET ”). The Company, NEC, and KEMET may hereafter be referred to collectively as the “ Parties ”, or individually as a “ Party ”.  NEC and KEMET may hereafter be referred to collectively as the “ Initial Stockholders ”, or individually as an “ Initial Stockholder ”.

 

RECITALS

 

WHEREAS, pursuant to the Stock Purchase Agreement by and among the Company, NEC and KEMET, dated as of March 12, 2012 (the “ Stock Purchase Agreement ”), KEMET has agreed to purchase from the Company 276,353,456 shares of Common Stock (as hereinafter defined), representing 51% of the outstanding shares of Common Stock after giving effect to such purchase, for an aggregate purchase price of $50.0 million; and

 

WHEREAS, pursuant to the Stock Purchase Agreement, the Company has agreed to distribute, on a pro-rata basis, shares of Preferred Stock to its current shareholders, such that NEC and NECAP will receive from the Company 270,934,759 shares of its new Preferred Stock (as hereinafter defined), such that after giving effect to such issuance and receipt, and the sale and purchase set forth immediately above, NEC will hold 66.0% of the outstanding equity securities of the Company and KEMET will hold 34.0% of the outstanding equity securities of the Company; and

 

WHEREAS, the Company, NEC and KEMET intend to regulate the relationship of the Stockholders (as defined below) in the conduct of the business and affairs of the Company.

 

WHEREAS, the Company, NEC and KEMET also desire to enter into a business collaboration, and, in connection therewith, the Company desires to obtain certain management services of KEMET.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:

 

AGREEMENT

1.                                       Definitions

 

1.1                                Certain Definitions .

 

Except as otherwise provided, capitalized terms used herein shall have the following meanings:

 

 

“ Affiliate ” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise (provided that the Company shall not be deemed an Affiliate of any Stockholder).

 

“ Annual Plan ” shall have the meaning specified in Section 10.7 .

 

“ Articles of Incorporation ” shall mean the Articles of Incorporation of the Company.

 

“ Board of Directors ” shall mean the Board of Directors of the Company.

 

“ Closing ” shall have the meaning given in the Stock Purchase Agreement.

 

“ Common Stock ” shall mean the common stock of the Company or any other capital stock of the Company into which such stock is reclassified or reconstituted (but excluding the Preferred Stock).

 

“ Company ” shall have the meaning set forth in the preamble above.

 

“ Competitively Sensitive Information ” shall have the meaning set forth in Section 11.10 .

 

“ Confidential Information ” shall have the meaning specified in Section 14.1 .

 

“ Critical Operating Functions ” means the Fixed Cost Restructuring and the Thailand Rebuilding.

 

“ Deadlock ” shall have the meaning specified in Section 11.8 .

 

“ Effective Date ” shall have the meaning specified in Section 13.1 .

 

“ Escalation Notice ” shall have the meaning specified in Section 11.8 .

 

“ Escalation Officers ” shall have the meaning specified in Section 11.8 .

 

“ First Call Option ” shall have the meaning given to it in the Option Agreement.

 

“ First Call Option Shares ” shall have the meaning given to it in the Option Agreement.

 

“ Fixed Cost Restructuring ” means the restructuring of the business and operations of the Company designed to reduce the fixed operating cost of production and overhead, including rationalization of the business, throughput optimization of the plants, determining the size of the workforce and determining the nature and extent, and terms and conditions of, any required reduction in force initiatives particularly focused on the Company’s headquarter location in Japan and Asian manufacturing locations, and related actions targeting specifically fixed cost centers.

 

“ Force Majeure Event ” has the meaning set forth in Section 16.5(a) .

 

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“ Governmental Authority ” shall mean the government of any nation, state, city, locality or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

 

“ Independent Accountant ” shall have the meaning specified in Section 11.1 .

 

“ Initial Stockholders ” shall mean KEMET and NEC.

 

“ Japanese GAAP ” shall have the meaning specified in Section 11.2 .

 

“ KEMET Termination Event ” shall have the meaning specified in Section 13.2 .

 

“ Liabilities ” shall have the meaning specified in Section 8.3(a)(i) .

 

“ LICA ” shall have the meaning specified in Section 16.4 .

 

“ Loan Agreements ” shall mean the loan agreement for the NEC Debt Obligation and the indenture or loan agreement for the Thai Rebuilding Debt Obligation between the Company and NEC Corporation.

 

“ Manager ” shall mean KEMET, when acting in its capacity as manager providing the services specified under Section 8 of this Agreement.

 

“ Manager Representatives ” shall have the meaning specified in Section 8.3(a)(i) .

 

“ NEC ” shall have the meaning set forth in the preamble above.

 

“ NEC Debt Obligation ” shall mean, at any point in time, the balance of principal and accrued interest outstanding at such time for borrowed money payable by the Company to NEC and all obligations evidenced by notes, bonds, debentures or similar instruments for the payment to NEC Corporation of which the Company is responsible or liable; provided that the NEC Debt Obligation shall not include the Thai Rebuilding Debt Obligation.

 

“ NECAP ” shall mean NEC Capital Solutions Limited, a Japanese corporation with its principal place of business at 29-11, Shiba 5-chome, Minato-ku, Tokyo 108-0014, Japan.

 

“ NEC Termination Event ” shall have the meaning specified in Section 13.2 .

 

“ Offered Securities ” shall have the meaning specified in Section 4.1(a) .

 

“ Offer Price ” shall have the meaning specified in Section 4.1(a) .

 

“ Offering Notice ” shall have the meaning specified in Section 4.1(a) .

 

“ Option ” shall have the meaning specified in Section 4.1(b) .

 

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“ Option Agreement ” shall mean that certain Option Agreement between NEC and KEMET, dated as of March 12, 2012, relating to certain call options and put options of KEMET and NEC.

 

“ Option Period ” shall have the meaning specified in Section 4.1(b) .

 

“ Party ” shall have the meaning set forth in the preamble above.

 

“ Person ” shall mean any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or other entity.

 

“ Preferred Stock ” shall mean the non-voting convertible preferred stock of the Company issued under the Stock Purchase Agreement.

 

“ Products ” means all products produced or manufactured by the Company, including without limitation capacitors, proadlizers, EMC and noise countermeasure inductors and transformers, piezoelectric devices, electronic materials, sensors, anechoic chambers and access devices.

 

“ Services ” has the meaning specified in Section 8.1(a) .

 

“ Shares ” shall mean, with respect to each Stockholder, all shares, whether now owned or hereafter acquired, of Common Stock and Preferred Stock owned thereby.

 

“ Stockholders ” shall mean KEMET, NEC, NECAP and any transferee thereof who has agreed to be bound by the terms and conditions of this Agreement in accordance with Section 5 , and the term “ Stockholder ” shall mean any such Person. “ Stockholders Meeting ” shall have the meaning specified in Section 9.1 .

 

“ Subsidiary ” of a Party means a corporation, company or other entity more than 50% of whose outstanding shares or securities (representing the right for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by that Party, but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists.

 

“ Thailand Rebuilding ” means the relocation, rebuilding, start-up and operation of the Company’s new manufacturing operations to restore the Company’s operations that existed in Thailand prior to the flooding that occurred in 2011, including determining the proper size of the facility, selection of machinery to be purchased by the Company, determination of the Products and output to be produced in the facility, the number of employees at the facility, the structure and layout of the manufacturing lines, debottlenecking of the Product lines, and optimization of the facility.

 

“ Thai Rebuilding Debt Obligation ” has the meaning specified in Section 12.2 .

 

“ Third Party Purchaser ” shall have the meaning specified in Section 4.1(a) .

 

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“ transfer ” shall have the meaning specified in Section 3.1 .

 

“ Transfer Notice ” shall have the meaning specified in Section 4.2(b) .

 

“ Transfer Price ” shall have the meaning specified in Section 4.2(b) .

 

“ Transferred Shares ” shall have the meaning specified in Section 4.2(b) .

 

“ Transfer Restriction Termination Date ” shall have the meaning specified in Section 3.2 .

 

“ U.S. GAAP ” shall mean U.S. generally accepted accounting principles.

 

“ Written Consent ” shall have the meaning specified in Section 9.1 .

 

1.2                                Other Terms .

 

Other terms may be defined elsewhere in the text of this Agreement and, unless otherwise indicated, shall have such meaning throughout this Agreement.

 

1.3                                Other Definitional Provisions .

 

The words “hereof,” “herein,” and “hereunder” and words of similar import shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.

 

2.                                       Capital Structure; Indemnification

 

2.1                                Capitalization .  As of the Effective Date, NEC and NECAP, collectively, are the holders of 265,516,066 shares or 49% of the shares of Common Stock, 120,000 shares of which is held by NECAP, and KEMET is the holder of 276,353,456 shares or 51% of the shares of Common Stock.  As of the Effective Date, NEC is the holder of 270,934,759 shares or one hundred percent (100%) of the shares of Preferred Stock.  For the purposes of this Agreement, the number of shares of Common Stock or Preferred Stock, as the case may be, held by NECAP shall be deemed to be included in the number of shares of Common Stock or Preferred Stock, as the case may be, held by NEC.

 

2.2                                Indemnification .  The Parties acknowledge and agree that NECAP is both a Stockholder as defined in this Agreement and a Person independent of NEC.  Notwithstanding the foregoing, NEC hereby agrees to indemnify KEMET for any and all losses suffered by KEMET in connection with NECAP’s breach of any Stockholder obligation hereunder or the failure of NECAP to satisfy the covenants of a Stockholder as contained herein (including by failing to take such action as is required of each Stockholder under this Agreement).

 

3.                                       Transfer of Shares; Conversion; Covenant to Issue Shares

 

3.1                                Limitations on Transfer .  Unless otherwise agreed in writing by the Initial Stockholders, no Stockholder shall sell, give, assign, hypothecate, pledge, encumber, grant a

 

5

 

security interest in or otherwise dispose of (directly or indirectly, whether by operation of law or otherwise) (each a “ transfer ”) any Shares or any right, title or interest therein or thereto, except in accordance with the provisions of this Agreement, including, without limitation, this Section 3 and Section 4 ; provided that, nothing contained herein shall prohibit or restrict the transfer of the Shares of Common Stock or Preferred Stock held by NECAP to NEC; provided further that, NEC and KEMET may transfer any or all of its Shares in accordance with Section 4 beginning after the Transfer Restriction Termination Date; provided further that, nothing contained herein shall prohibit or restrict the transfer of shares of Common Stock or shares of Preferred Stock as contemplated by the Stock Purchase Agreement or the Option Agreement. Any attempt to transfer any Shares or any rights thereunder in violation of the preceding sentence shall be null and void.

 

3.2                                Transfer Restriction Period .  The “ Transfer Restriction Termination Date ” shall be May 31, 2018.

 

3.3                                Conditions for Exercise of Conversion Rights.   NEC shall convert 229,685,177 shares of the Preferred Stock held by NEC and NECAP into the Common Stock by giving a written notice to the Company, KEMET and NECAP in the event KEMET exercises the First Call Option, the Company has issued all of the First Call Option Shares to KEMET and all closing conditions to the First Call Option have been satisfied or waived.  In the event the shares of Preferred Stock have not been converted pursuant to the immediately preceding sentence, NEC and NECAP may instead (and not in addition to) convert up to 229,685,177 shares of the Preferred Stock held by NEC and NECAP into the Common Stock by giving a written notice to the Company on or after September 1, 2014.  NEC (together with NECAP) may convert all of the then outstanding shares of the Preferred Stock into Common Stock by giving a written notice to the Company and KEMET only (i) in the event of a failure by KEMET to take actions within its control necessary to cause the Company to repay the NEC Debt Obligation in an amount equal to the purchase price paid in cash by KEMET to the Company for Shares purchased from the Company pursuant to Section 12.1 or in the event of a failure by the Company to pay the principal amount when due at the scheduled maturity of the NEC Debt Obligation (after giving effect to any forgiveness or permanent reduction provided for in the Option Agreement or any other written agreement relating to the NEC Debt Obligation) or in the event of a failure by the Company to make interest payments to NEC when due under the NEC Debt Obligation for a period of four years, (ii) in the event of a termination event set forth in Section 8.1(c) of the Option Agreement or (iii) on or after May 31, 2018.  For the avoidance of doubt, NEC may not convert, and NEC and the Company shall prevent NECAP from converting, any shares of Preferred Stock in the event KEMET exercises the First Call Option and the Company has not issued to KEMET the First Call Option Shares (except where the Company has not issued to KEMET the First Call Option Shares solely because KEMET has failed to pay the purchase price for such First Call Option Shares).  NEC may not convert, and NEC and the Company shall prevent NECAP from converting, the Preferred Stock other than as set forth in this Section 3.3 .  NEC shall not take any action, in any capacity. that would prevent, hinder, prohibit, frustrate, limit or delay the ability of the Company to apply the proceeds from the purchase of Shares by KEMET pursuant to Section 12.1 to the repayment of the NEC Debt Obligation and KEMET may take any and all necessary actions to cause the Company to use such proceeds for such purpose and NEC agrees to not object to the taking of any such actions.  For the avoidance of doubt, NEC, KEMET and NECAP agree that the provisions governing the conversion rights of the shares of Preferred Stock contained in this

 

6

 

Agreement and the Option Agreement shall supersede and control all of the rights, requirements, and obligations related to the conversion rights of the holders of the Preferred Stock at all times.

 

3.4                                Issuance of First Call Option Shares .  In the event KEMET elects to exercise the First Call Option, the Initial Stockholders and the Company shall take any and all necessary actions to issue the First Call Option Shares and to satisfy the closing conditions to the First Call Option as set forth in the Option Agreement.  In the event such closing conditions to the First Call Option are satisfied or otherwise waived, and the Company does not issue to KEMET the First Call Option Shares, notwithstanding anything to the contrary in this Agreement, including with limitation, the provisions set forth in Sections 9.4 and 10.5 herein, KEMET may take any and all necessary actions to cause the Company to issue the First Call Option Shares to it and NEC agrees to not object to the taking of any such actions.

 

4.                                       Right to Voluntary Transfers

 

4.1                                Right of First Refusal .

 

(a)                                  Offering Notice .  Subject to Section 3 , if NEC wishes to transfer all or a portion of its Shares to any third party (a “ Third Party Purchaser ”), NEC shall first offer such Shares to KEMET by sending written notice (an “ Offering Notice ”) to KEMET that shall state (i) the identity of the proposed Third Party Purchaser, (ii) the number of Shares proposed to be transferred (the “ Offered Securities ”), (iii) the proposed purchase price per Share for the Offered Securities, which shall be payable in cash in full upon the consummation of the proposed sale and purchase transaction (the “ Offer Price ”) and (iv) the other terms and conditions of such proposed sale.

 

(b)                                  Option; Exercise .  For a period of forty five (45) days after the delivery of the Offering Notice pursuant to Section 4.1(a)  (the “ Option Period ”), KEMET shall have the right (the “ Option ”) to purchase all of the Offered Securities for cash at a purchase price equal to the Offer Price and upon the terms and conditions set forth in the Offering Notice.  The right of KEMET to purchase all of the Offered Securities under this Section 4.1(b)  shall be exercisable by delivering written notice of the exercise thereof, prior to the expiration of the Option Period, to NEC.  The Option may be exercised in respect of all, but not a portion of the Offered Securities.  The failure of KEMET to respond within the Option Period shall be deemed to be a waiver of the Option.

 

(c)                                   Closing .  The closing of the purchase of the Offered Securities elected by KEMET under Section 4.1(b)  shall be conditioned on any approval required from a Governmental Authority or any filing required with a Governmental Authority in order to complete such purchase and shall be held at the time and place as the Initial Stockholders agree.  At the closing of the purchases of such Offered Securities elected by KEMET under Section 4.1(b) , NEC shall take necessary actions so that the name of KEMET Electronics Corporation is entered in the register of shareholders of the Company in respect of such Offered Securities.  KEMET shall deliver at the closing payment in full for the Offered Securities purchased by it.  Any and all banking fees and charges (including remittance charges and lifting charges) incurred in connection with such closing payment shall be assumed and paid by KEMET.  At such closing, the Company and the

 

7

 

Initial Stockholders shall execute such additional documents as are otherwise necessary or appropriate.

 

(d)                                  Sale to Third Party Purchaser .  In the event KEMET does not elect to purchase the Offered Securities under Section 4.1(b) , NEC may sell such Offered Securities not purchased by KEMET to the proposed Third Party Purchaser at the Offer Price and on the terms and conditions set forth in the Offering Notice.

 

4.2                                Tag Along Rights .

 

(a)                                  In connection with any proposed transfer by NEC permitted under Section 3 of all or a portion of its shares of Common Stock or Preferred Stock, as the case may be, to any Third Party Purchaser, KEMET shall have the right to participate in such proposed transfer of Shares at a purchase price equal to the Offer Price and on the terms and conditions set forth in the Offering Notice by delivering written notice to NEC within twenty five (25) days after receipt of the Offering Notice required to be delivered by NEC pursuant to Section 4.1(a) .  If KEMET elects to participate in such transfer, KEMET shall be entitled to sell in the proposed transfer the number of shares of Common Stock held by KEMET equal to the percentage of the Offered Securities (irrespective of whether such Offered Securities are shares of Common Stock or Preferred Stock) determined by dividing (A) the total number of shares of Common Stock then owned by KEMET by (B) the sum of (x) the total number of shares of Common Stock then owned by KEMET and (y) the total number of shares of Common Stock and Preferred Stock then owned by NEC.

 

(b)                                  In connection with any proposed transfer by KEMET permitted under Section 3 of all or a portion of its shares of Common Stock to any Third Party Purchaser, NEC shall have the right to participate in such proposed transfer at a purchase price equal to the proposed purchase price per share of Common Stock, of such shares (the “ Transfer Price ”) and on the terms and conditions set forth in a written notice (the “ Transfer Notice ) delivered by KEMET to NEC by delivering written notice to KEMET within twenty five (25) days after receipt of the Transfer Notice.  If NEC elects to participate in such transfer, NEC shall be entitled to sell in the proposed transfer the number of shares of Common Stock held by NEC equal to the percentage of the shares of Common Stock proposed to be transferred by KEMET in the Transfer Notice (the “ Transferred Shares ”) determined by dividing (A) the total number of shares of Common Stock owned by NEC by (B) the sum of (x) the total number of shares of Common Stock owned by NEC and (y) the total number of shares of Common Stock owned by KEMET.

 

5.                                       Transfers in Compliance with Law; Substitution of Transferee

 

Notwithstanding any other provision of this Agreement, no transfer may be made pursuant to either Section 3 or Section 4 unless (a) the transferee has agreed in writing to be bound by the terms and conditions of this Agreement pursuant to an instrument substantially in the form attached hereto as Exhibit A, (b) the transfer complies in all respects with the applicable provisions of this Agreement and (c) the transfer complies in all respects with applicable law.

 

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6.                                       Preemptive Rights

 

(a)           Except for issuances of Common Stock issued as a dividend or share split of any Common Stock then outstanding, or upon conversion of Preferred Stock to Common Stock, if the Company authorizes the issuance or sale of any of its Common Stock to any Person other than KEMET, the Company shall first offer to sell to KEMET a portion of such Common Stock equal to the quotient determined by dividing (1) the number of shares of Common Stock then held by KEMET by (2) the aggregate number of shares of Common Stock then held by all Stockholders.  KEMET shall be entitled to purchase such Common Stock at the price and on the terms as such Common Stock is being offered to any other Persons.  The Company is not permitted to issue shares of Preferred Stock, other than as contemplated under the Stock Purchase Agreement.

 

(b)           In order to exercise its purchase rights hereunder, KEMET must within fifteen (15) days after receipt of written notice from the Company describing in reasonable detail the Common Stock being offered, the purchase price thereof, the payment terms and KEMET’s percentage allotment, deliver a written notice to the Company describing its election hereunder.

 

(c)           Nothing in this Section 6 shall be deemed to prevent KEMET from purchasing for cash any Common Stock or Preferred Stock.  No Stockholder other than KEMET shall have the rights set forth in this Section 6 .

 

7.                                       After-Acquired Securities

 

All of the provisions of this Agreement shall apply to all of the Shares now owned or which may be issued or transferred hereafter to a Stockholder in consequence of any additional issuance, purchase, exchange or reclassification of any of such Shares, corporate reorganization, or any other form of recapitalization, consolidation, merger, share split or share dividend, or which are acquired by a Stockholder in any other manner.

 

8.                                       Certain Management Services

 

8.1          Appointment; Services; Critical Operating Functions .

 

(a)           Appointment .  Subject to Section 8.1(c) , the Company hereby retains the Manager to perform, and the Manager agrees to use commercially reasonable efforts to render to the Company and its Subsidiaries, on the terms set forth in Section 8 , certain management and consulting services regarding the business of the Company and its Subsidiaries as may from time to time be reasonably requested by the officers of the Company or its Subsidiaries and agreed to by the Manager.  Without limiting the generality of the foregoing, these services may include providing advice and assistance to the officers in connection with the operation of the Company’s business and operations in the following areas: (a) Product lines, (b) plants and facilities, (c) production capacity, (d) quality control, (e) asset allocation and relocation, (f) procurement, (g) logistics, (h) finance, payroll and accounting, (i) compliance and (j) information technology (collectively, the “ Services ”).

 

(b)           Critical Operating Functions .  In recognition of the unique expertise of the Manager in the ability to provide the Services and to operate the business, the Manager shall have

 

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the additional authority to plan, design, implement, and manage the Critical Operating Functions.  The Manager shall consult with the officers of the Company to develop the plans for the Critical Operating Functions.  Following these meetings and with this input, the Manager shall, jointly with the President of the Company (unless there is a disagreement between the Manager and the President with respect to such plans, in which case just the Manager), propose reasonably detailed plans to implement the Critical Operating Functions to the Board of Directors for review and approval at a meeting of the Board of Directors.  At the meeting, the Board of Directors shall review the plans submitted and either (a) approve the plans as submitted, (b) request a meeting with the Manager to discuss certain changes to the plans requested by the Board of Directors or (c) reject the plans without requesting a meeting with the Manager.  In the event the plans are approved, the Manager shall use reasonable best efforts to implement such plans in all material respects with the cooperation of the officers and employees of the Company.  In the event the Board of Directors wishes to meet with the Manager to discuss changes to the plans with the Manager, representatives of the Board of Directors (which shall include at least one director nominated by NEC) shall meet with representatives of the Manager to discuss any issues and to attempt to resolve any questions or issues within ten (10) business days following the date of the meeting.  If the result of the meeting between the representatives of the Board of Directors and the Manager is an agreement on the submitted or revised plans, the Manager shall implement the agreed-upon plans in all material respects.  In the event the Manager shall, during the course of providing the Services hereunder in the Critical Operating Functions, determine that a material change from a prior agreed-upon plan is necessary, appropriate or desirable, the Manager shall submit such material changes to the Board of Directors for review and approval, and the provisions of this Section 8.1(b)  shall apply to such changes as if such changes were a new plan, including following the steps set forth above.  During any period of discussion between the Manager and a representative of the Board of Directors, the Manager shall provide such information, reports, estimates or documentation as the Board of Directors may reasonably request.

 

(c)           Limitations on Scope .  Notwithstanding Section 8.1(a) , the Manager shall have no responsibility for, or authority over, decisions relating to the marketing, sale or pricing of the tantalum capacitor Products or any customer relations with respect to tantalum capacitor Products.

 

8.2          Equipment, Materials and Labor .

 

(a)           Company to Provide .

 

(i)                                      Subject to Section 8.2(b) , the Company shall provide all equipment, capital, facilities, material and labor reasonably necessary for the continued operation of the Company and for the Manager to provide the Services.  This obligation includes, but is not limited to:

 

(A)          the employment and compensation of all personnel reasonably required to carry out the manufacturing of the Products, as well as to control the transportation, receiving, handling and storage of parts and assembly, manufacturing, testing and all other production-related jobs, as well as the shipment of waste and scrap materials; and

 

(B)          the employment and compensation of all personnel reasonably required to perform the functions of accounting, recruiting, hiring, out placement, administrative, payroll, taxes and bookkeeping records.

 

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(b)                                  Manager to Provide .  Notwithstanding Section 8.2(a)(i) , the Manager shall provide two full-time employees to provide operational and advisory services to the Company on site.  Such employees shall report to the President of the Company. Subject to Section 8.5(b), in no event will Manager be required to expend any funds or advance any expenses in the course of providing the Services hereunder.

 

(c)                                   Title .

 

(i)            The Company acknowledges that it will acquire no right, title or interest (including any license rights or rights of use) in any intellectual property which is owned or licensed by the Manager by reason of the provision of the Services provided hereunder.  The Company shall not remove or alter any copyright, trademark, confidentiality or other proprietary notices that appear on any intellectual property owned or licensed by the Manager, and the Company shall reproduce any such notices on any and all copies thereof.  The Company shall not attempt to decompile, translate, reverse engineer or make excessive copies of any intellectual property owned or licensed by the Manager, and the Company shall promptly notify the Manager of any such attempt, regardless of whether by the Company or any third party, of which the Company becomes aware.

 

(ii)           Title to all equipment and material used by the Manager to provide the Services shall remain with the Company at all times.

 

(d)                                  No Labor Relationship .      The Company recognizes and agrees that there shall be no labor relationship between the Manager and the Company’s personnel.

 

8.3          Limitation of Liability .

 

(a)   Manager Liability .

 

(i)            Neither the Manager nor any of its Affiliates, nor any of their respective members, managers, partners, directors, officers, employees, agents and/or controlling persons, nor any successor by operation of law (including by merger) of any such person, nor any entity that acquires all or substantially all of the assets of any such person in a single transaction or series of related transactions (all of the foregoing, collectively, the “ Manager Representatives ”) shall be liable to the Company or any of its Subsidiaries or Affiliates or any of the equity holders or creditors of the Company or any of its Affiliates for any damage, loss, liability, deficiency, diminution in value, action, suit, claim, proceeding, investigation, audit, demand, assessment, fine, judgment, cost or other expense (including, without limitation, legal fees and expenses, and whether direct or indirect, in contract or tort or otherwise) (collectively “ Liabilities ”) arising out of, related to, caused by, based upon or in connection with the performance of services contemplated by this Agreement unless such Liability shall be proven to result directly and primarily from the gross negligence or willful misconduct of such person.

 

(ii)           The Manager makes no representations or warranties, express or implied, in respect of the Services provided by any Manager Representative.

 

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(iii)          In no event will any Manager Representative be liable to the Company (i) for any special, indirect, punitive, incidental or consequential damages, including, without limitation, loss of profits or savings or lost business, whether or not such damages are foreseeable or such Manager Representative has been advised of the possibility of such damages or (ii) in respect of any Liabilities relating to any third-party claims (whether based in contract, tort or otherwise).

 

(iv)          Under no circumstances will the aggregate of any and all Liabilities of the Manager Representatives exceed, in the aggregate, the reimbursed expenses actually paid to the Manager hereunder unless such Liability shall be proven to result directly and primarily from the gross negligence or willful misconduct of such person or persons, in which event, the aggregate of any and all such Liabilities shall not exceed $25.0 million; provided that no Manager Representative shall be liable to the Company or any Stockholder for taking any action in good faith which has been recommended or approved by the Board of Directors or failing to take any action in good faith which it has been instructed not to take by the Board of Directors or for any Liabilities arising directly or indirectly from events or circumstances resulting from such action or failure.

 

8.4                                Nonperformance; Early Termination .

 

(a)                                  Nonperformance .

 

(i)            The Manager’s inability to perform any of its responsibilities under this Agreement shall be excused if and to the extent the nonperformance is caused by: (i) the failure of the Company, its third-party providers, its subcontractors or its or their employees or agents: (A) to perform the Company’s obligations under this Agreement, or (B) to provide resources the Manager reasonably requested when required; (ii) the wrongful or tortious actions of the Company, its third-party providers, its subcontractors or its or their employees or agents; (iii) the Manager’s compliance with the Company’s instructions, decisions, consents, notices, acceptances, authorizations, waivers, permissions or approvals; or (iv) the improper functioning or unavailability of technology for which the Manager does not have operational responsibility.

 

(ii)           In the event the Company fails to perform its obligations hereunder or to provide resources under this Agreement when required, the Manager will nonetheless use commercially reasonable efforts to provide the Services in the absence of such resources, provided that pursuant to Section 8.5 the Company will reimburse the Manager for any costs reasonably incurred by the Manager in the course of mitigating, overcoming or working around the effects of such nonperformance.

 

(b)                                  Early Termination .  Any of the Manager, NEC or the Company may terminate all of the services being provided under this Section 8 if any other of such Parties commits a willful and material breach of its obligations set forth in this Section 8 and does not cure such breach, or provide a plan to cure such breach, within ninety (90) days after being requested to do so by another of such Parties not in breach.

 

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8.5          No Management Fee; Expense Reimbursement .

 

(a)           No Management Fee .         For the Services to be rendered by the Manager under Section 8 , the Manager shall not be entitled to receive a separate management fee.

 

(b)           Expenses .  The Company shall promptly reimburse the Manager for the cost of all reasonable out-of-pocket fees and expenses (including without limitation attorneys’ fees) incurred by the Manager and its Affiliates in connection with the performance of the Services hereunder and all matters related thereto.  The aforementioned expenses will be payable by the Company to the Manager or its designee on a quarterly basis in arrears commencing on the date hereof, upon presentation by the Manager of invoices for such expenses, provided that the Manager will provide to the Company budgetary estimates of such expenses on a quarterly basis for approval by the President of the Company (not to be unreasonably withheld) and will obtain prior approval from the President when the Manager engages attorneys or other professional advisors or experts in connection with its providing the Services and all matters related thereto.  Notwithstanding the foregoing, the Manager’s expense reimbursement under this Agreement shall be limited to (i) $2.6 million for each 12-month period beginning on the Effective Date and ending at the closing of the First Call Option (in the event that KEMET elects to exercise the First Call Option) and (ii) $4.8 million for each 12-month period beginning immediately following the closing of the First Call Option (in the event KEMET elects to exercise the First Call Option) until the termination of this Agreement.

 

9.                                       Stockholders’ Rights and Obligations

 

9.1          General .

 

From and after the execution of this Agreement, each Stockholder shall vote its shares of Common Stock at any regular or special meeting of stockholders of the Company (a “ Stockholders Meeting ”) or (if permitted under applicable law) in any written consent executed in lieu of such a meeting of stockholders (a “ Written Consent ”), and shall take all other actions (including, without limitation, those required by the Companies Act of Japan) necessary to give effect to the provisions of this Agreement.  In addition, each Stockholder shall vote its shares of Common Stock at any Stockholders Meeting, or act by Written Consent with respect to such shares, upon any matter submitted for action by the Company’s stockholders or with respect to which such Stockholder may vote or act by Written Consent in conformity with the specific terms and provisions of this Agreement and the Articles of Incorporation.

 

9.2          Stockholder Actions .

 

In order to effectuate the provisions of this Section 9 or Section 10 , each Initial Stockholder (a) agrees that when any action or vote is required to be taken by such Initial Stockholder pursuant to this Agreement, such Initial Stockholder shall use reasonable efforts to call, or cause the appropriate directors of the Company to call, a Stockholders Meeting, or to execute or cause to be executed a Written Consent to effectuate such stockholder action, and (b) shall use reasonable efforts to cause the Board of Directors to adopt, either at a meeting of the Board of Directors or by unanimous written consent of the Board of Directors (if permitted under applicable law), all the resolutions necessary to effectuate the provisions of this Agreement.

 

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9.3          Meetings; Quorum Requirements .

 

The Company and the Initial Stockholders agree as follows with respect to Stockholders Meetings: (i) Stockholders Meetings shall be held at least annually; (ii) notice of any special meetings shall be given not less than fourteen (14) days in advance (subject to shortening by written waiver by the stockholders or actual attendance at the meeting); and (iii) unless otherwise required by the Companies Act of Japan or by this Agreement, a quorum shall be stockholders representing, in person or by proxy, a majority of the voting rights ( giketsuken ) of the Company.

 

9.4          Matters Requiring Approval of the Stockholders .

 

Resolutions of the Stockholders shall, except as otherwise required by the Companies Act of Japan, be adopted by the affirmative vote of a majority of the shares of Common Stock entitled to vote at such meeting.  Notwithstanding the foregoing, the Company shall not be authorized to take such action necessary to complete, to execute or deliver documents in respect of, or to otherwise obligate itself or its subsidiaries for the following items of business, each of which shall require the affirmative vote of each of the Initial Stockholders at a Stockholders Meeting at which both Initial Stockholders are present or the Written Consent of each of the Initial Stockholders, as the case may be, so long as each Initial Stockholder holds at least thirty-four percent (34.0%) of the equity securities of the Company:

 

(a)                                  any issuance of any capital stock or any other securities convertible into or exchangeable for capital stock of the Company, and the use of proceeds thereof;

 

(b)                                  the Annual Plan, revised Annual Plan and annual accounts;

 

(c)                                   any amendments to the Articles of Incorporation;

 

(d)                                  any dissolution of the Company or filing by the Company for liquidation, receivership, or reorganization or any similar action under any insolvency laws;

 

(e)                                   remuneration of members of Board of Directors;

 

(f)                                    any dividend or other distribution to be made by the Company; and

 

(g)                                   any item of business requiring stockholder approval by more than a simple majority of stockholders present at the stockholders’ meeting under the Companies Act of Japan or other applicable law.

 

10.                                Board of Directors; Officers

 

10.1        Duties; Election; Number and Composition .

 

Subject to the rights of the Stockholders contained in the Articles of Incorporation, this Agreement and the Companies Act of Japan, the management of the Company shall rest with the Board of Directors.  Each Initial Stockholder shall vote its shares of Common Stock at any Stockholders Meeting, or act by Written Consent with respect to such Shares, and take all other actions necessary to ensure that the number of directors constituting the entire Board of Director

 

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shall be seven (7).  An Initial Stockholder who maintains ownership of not less than sixty-six percent (66%) of the shares of Common Stock shall be entitled to nominate five (5) directors.  An Initial Stockholder who maintains ownership of not less than fifty-one percent (51%) of the shares of Common Stock shall be entitled to nominate four (4) directors.  An Initial Stockholder who maintains ownership of not less than forty-nine percent (49%) of the shares of Common Stock shall be entitled to nominate three (3) directors.  An Initial Stockholder who maintains ownership of not less than thirty-four percent (34%) of the shares of Common Stock of the Company shall be entitled to nominate two (2) directors.  An Initial Stockholder who maintains ownership of one hundred percent (100%) of the shares of Common Stock shall be entitled to nominate seven (7) directors.  If the total number of the directors nominated by each Initial Stockholder pursuant to the foregoing is less than seven (7), the rest of the directors shall be nominated jointly by NEC and KEMET.  Each Initial Stockholder shall vote its shares of Common Stock at any Stockholders Meeting called for the purpose of filling positions on the Board of Directors, or (if permitted under applicable law) in any Written Consent executed for such purpose, and take all other actions necessary to ensure the election to the Board of Directors of directors nominated by each Initial Stockholder in accordance with this Section 10.1 and the removal of any current directors necessary to allow for the election of the new directors.

 

10.2        Meetings; Quorum Requirements .

 

Subject to the requirements of Japanese law, (i) meetings of the Board of Directors shall be held at least quarterly; (ii) notice of such meetings shall be given not less than seven (7) days in advance (subject to a shortening of such period by a unanimous written waiver or actual attendance at a special Board of Directors meeting); (iii) a quorum of the Board of Directors shall be deemed present at any duly noticed regular or special meeting if more than one-half of all directors are present, including at least one director nominated by NEC; (iv) meetings shall be held in Tokyo or Sendai, Japan, unless the directors unanimously determine otherwise; provided that, any director may attend by telephonic conference, video conference or other communications equipment by means of which all persons participating in the meeting can hear each other, as permitted under Japanese laws.

 

10.3        Vacancies .

 

In the event a vacancy shall occur for any reason in the Board of Directors, each Initial Stockholder agrees to cause the members of the Board of Directors nominated by it promptly to convene a Stockholders Meeting and exercise its voting rights so as to appoint a replacement.  Such vacancy shall be filled by an individual who shall be nominated by the Initial Stockholder that nominated the person to be replaced, and the Initial Stockholders shall vote their shares of Common Stock in favor of the election of such new nominee.  The new nominee shall serve the remainder of the term of his or her predecessor.

 

10.4        Removal of Directors .

 

No director shall be removed during the term for which he or she was elected without the consent of the Initial Stockholder that nominated that director for election, which consent may be withheld, unless the director willfully breached, grossly neglected, or engaged in gross misconduct of, the performance of his or her duties as a director or engaged in any act or conduct which was

 

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illegal.  In the event that an Initial Stockholder proposes to remove for any reason any of the directors nominated by such Initial Stockholder, the Initial Stockholders shall vote their shares of Common Stock in favor of such removal.

 

10.5        Voting Requirements .

 

The Board of Directors shall make decisions regarding the business and affairs of the Company by at least a majority vote, subject to a Stockholders’ vote in accordance with the Companies Act of Japan in the case of actions required by Japanese law, the Articles of Incorporation or this Agreement.  Notwithstanding the foregoing, the Company shall not be authorized to take such action necessary to complete, to execute or deliver documents in respect of, or to otherwise obligate itself or its subsidiaries for the following items of business, each of which shall require the approval of at least one director nominated by NEC and one director nominated by KEMET:

 

(a)           each of the items set forth in Section 9.4(a) - (g) ;

 

(b)           use of proceeds from any issuance of any capital stock or any other securities convertible into or exchangeable for capital stock of the Company;

 

(c)           use of proceeds payable under any insurance policy of the Company in excess of the threshold amounts set forth in the Rules of the Board of Directors of the Company;

 

(d)           any investments in excess of the threshold amounts set forth in the Rules of the Board of Directors of the Company except as is provided in and has been approved in the Annual Plan;

 

(e)           the Annual Plan, revised Annual Plan and annual accounts;

 

(f)            shutdown or reduction by a substantial portion of the operations at a manufacturing plant or business facilities;

 

(g)           any amendment, modification or other change to the Rules of the Board of Directors of the Company;

 

(h)           any material change in the terms of employment of the Company’s officers, including remuneration, termination or hiring;

 

(i)            any change to, or termination of, any collective bargaining or similar agreement with any unions representing any employees of the Company;

 

(j)            implementation of any reorganization plan, including, without limitation, a redundancy or dismissal plan;

 

(k)           capital expenditures and operating expenses above threshold amounts determined by the Board of Directors;

 

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(l)                                      the repurchase of shares of Common Stock from an Affiliate of the Company or from the Stockholders;

 

(m)                              transactions with Affiliates of the Company involving consideration, expenditures or liabilities in excess of the threshold amounts set forth in the Rules of the Board of Directors of the Company;

 

(n)                                  adoption of or material changes to Company employee benefit plans;

 

(o)                                  sale of material assets involving consideration, expenditure or liabilities in excess of the threshold amounts set forth in the Rules of the Board of Directors of the Company;

 

(p)                                  agreements to license or sell the Company’s intellectual property involving consideration, expenditure or liabilities in excess of the threshold amounts set forth in the Rules of the Board of Directors of the Company;

 

(q)                                  acquisition of material assets or any business;

 

(r)                                     agreements by the Company to incur indebtedness, or prepayments by the Company of its indebtedness;

 

(s)                                    granting of liens on any property of the Company;

 

(t)                                     approval of the plan to implement the Critical Operating Functions proposed by the Manager and/or the President of the Company pursuant to Section 8.1(b) ;

 

(u)                                  entering into new lines of business; and

 

(v)                                  any action reasonably determined by any director nominated by either KEMET or NEC as outside of the ordinary course.

 

10.6        Representative Director; Officers .

 

The senior employees of the Company shall include one representative director who shall also be elected President of the Company, and such other officers as the Board of Directors may determine are necessary. The Company shall have two (2) representative directors who shall be nominated and elected from the directors as follows.

 

(a)           NEC shall be entitled to nominate the President and representative director of the Company.

 

(b)           KEMET shall be entitled to nominate the Chairman of the Board and representative director of the Company.

 

Each Initial Stockholder shall cause the directors nominated by it to elect the President and representative director of the Company and the Chairman and representative director of the Company in accordance with this Section 10.6 .

 

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10.7        Annual Business Plan .

 

The Company shall, not less than thirty (30) days prior to the end of each fiscal year, prepare and submit to the Board of Directors for its approval an annual business plan and operating and capital expenditure budget of the Company set forth in reasonable detail (the “ Annual Plan ”) for the next succeeding fiscal year.  The Company shall, prior to submitting the Annual Plan or any amendment to the Annual Plan to the Board of Directors, provide each of the Initial Stockholders with details of such Annual Plan and consult with each of them in good faith.

 

11.                                Accounting, Audits

 

11.1        Statutory Auditor; Independent Accountant .

 

The Company shall have a board of statutory auditors consisting of three (3) statutory auditors, two of whom shall be nominated by NEC so long as NEC maintains ownership of greater than fifty percent (50.0%) of the equity securities of the Company and one of whom shall be nominated by KEMET so long as KEMET maintains ownership of at least thirty-four percent (34.0%) of the equity securities of the Company.  One of the statutory auditors nominated by NEC shall be a full-time statutory auditor.  In addition to the statutory auditors, (a) if required by Japanese law or (b) if the Board of Directors shall so elect, the Company shall retain an independent certified public accountant ( konin kaikeishi ) or audit corporation ( kansa hojin ) of international reputation having offices in Japan, which shall be nominated by the Board of Directors and selected in accordance with applicable law as “ kaikei kansanin” (the “ Independent Accountant ”).  The Independent Accountant must also be a Registered Public Accounting Firm with the Public Company Accounting Oversight Board (“PCAOB”) of the United States of America.

 

11.2        Books and Records .

 

The Company agrees to maintain books, records and reports as required under the laws of Japan.  The financial statements and books and records of the Company shall be maintained in accordance with Japanese generally accepted accounting principles (“ Japanese GAAP ”).

 

11.3        Quarterly and Annual Financial Statements .

 

The Company agrees to prepare and complete quarterly financial statements, within fifteen (15) days after the end of each of the first three (3) quarters of the Company’s fiscal year, and annual financial statements within thirty (30) days after the end of the Company’s fiscal year, each prepared in accordance with Japanese GAAP.  The Company agrees to prepare and deliver to KEMET, at the cost and expense to KEMET, up to three years of historical financial statements, accompanied by an opinion of the Independent Accountant, on or before the later of sixty (60) days after the Effective Date or May 31, 2012, such historical financial statements and audit opinion prepared in accordance with U.S. GAAP.  The Company also agrees to prepare and deliver to KEMET quarterly financial statements, within fifteen (15) days after the end of each of the first three (3) quarters of the Company’s fiscal year, with the first such financial statements to be delivered on or before July 15, 2012, and annual preliminary financial statements within twenty-two (22) days after the end of the Company’s fiscal year, with the first such preliminary

 

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financial statements to be delivered on or before April 22, 2013, and annual final audited financial statements, accompanied by an opinion of the Independent Accountant, within fifty (50) days after the end of the Company’s fiscal year, with such first audited financial statements and opinion to be delivered on or before May 20, 2013, each such quarterly and annual financial statements and audit opinion prepared in accordance with U.S. GAAP.  If the above timing for the provision of financial information is found to be unworkable, KEMET and the Company shall discuss in good faith the alternative timing. The Company agrees to continue to prepare and deliver to NEC financial statements and other information requested by NEC in accordance with the practice existing as of the date hereof. Each Initial Stockholder shall have the right to receive from the Company such other reports or information relating to the operations of the Company as may be reasonably requested by such Initial Stockholder.  Each Initial Stockholder shall have the right to receive from the Company unaudited monthly financial reports upon request.

 

11.4        Audit .

 

The year end financial statements of the Company shall be audited by the Independent Accountant.  The Independent Accountant shall submit to the Company its report(s) on the financial statements of the Company and the schedules with respect thereto prepared in accordance with Japanese GAAP within the period after the end of the business year of the Company required by applicable Japanese laws or as requested by the Company.

 

11.5        Fiscal Year .

 

The Company’s fiscal year shall be April 1 st  to March 31 st .

 

11.6        Taxation Documents .

 

Each Initial Stockholder shall have the right to receive from the Company all information and documentation that is required by the appropriate taxing authorities for such Stockholder to determine its tax liabilities relating to any distributions (or deemed distributions) with respect to the shares of Common Stock or Preferred Stock owned by such Stockholder. Such information and documentation shall include, but not be limited to, information with respect to the Company’s tax liabilities and copies of the Company’s Japanese tax returns.

 

11.7        Reasonable Access .

 

Each of NEC and KEMET, and at the request of either NEC and KEMET, each of their respective officers, employees, agents, and other representatives of their respective independent accountants or valuation experts may, during normal business hours and upon reasonable request, examine the Company’s books and records, to the extent necessary for it to comply with applicable laws, including, without limitation, the Securities Act of 1933, as amended, and the Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

11.8        Deadlock and Escalation Process.

 

Each Initial Stockholder may initiate the escalation process by giving written notice (“ Escalation Notice ”) to the other Initial Stockholder if a Deadlock arises.  Each Initial

 

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Stockholder shall designate one executive to represent them (collectively, the “ Escalation Officers ”).  The Escalation Officers shall have a meeting in person or by conference call, which meeting shall be conducted within fifteen (15) days after delivery of the Escalation Notice.  The Escalation Officers shall conduct such additional meetings as they deem necessary to exchange relevant information, will appoint staff to engage in resolution of disputed facts, and will attempt to resolve the dispute. “ Deadlock ” means a situation whereby a resolution concerning any of the enumerated items contained in Sections 9.4 or 10.5 has failed to obtain the requisite affirmative approval within thirty (30) days after such proposal.

 

11.9        Company’s Name .

 

During the term of this Agreement, in accordance with the NEC Brand License Agreement between the Company (or its Subsidiaries) and NEC, the Company and its Subsidiaries may continue to use the letter of “NEC” in the name of the Company and the NEC logo on or in connection with its products and services.  It is confirmed by the Parties that NEC has the right to terminate the NEC Brand License Agreements with the Company and with its Subsidiaries if NEC ceases to have the ownership of not less than forty nine percent (49%) shares of Common Stock.

 

11.10      Firewalls .

 

KEMET and the Company shall firewall information related to the marketing, sale or pricing of the tantalum capacitor Products and its customer relations related to the Company’s tantalum Products (the “ Competitively Sensitive Information ”) (including through the redaction of Competitively Sensitive Information from documents which also contain non-sensitive information), to ensure that the Parties are in compliance with all applicable antitrust laws. For this purpose, KEMET and the Company shall take reasonable preventive measures, including, but not limited to, (i) review by the Company’s counsel or legal staff of the materials to be submitted to the Board of Directors to ensure that such materials do not contain any Competitively Sensitive Information and (ii) causing each of the directors, auditors, officers or employees nominated by or seconded by KEMET or any KEMET employee providing the Services to enter into a confidentiality agreement reasonably acceptable to KEMET which contains obligations, subject to customary exceptions, not to disclose to KEMET or any third party the Competitively Sensitive Information or use the Competitively Sensitive Information in KEMET’s business.

 

12.                                Repayment of NEC Debt Obligation; Additional Funding

 

12.1        Outstanding NEC Debt Obligation .  The Initial Stockholders agree to cause the Company and the Company agrees to repay the NEC Debt Obligation in an amount equal to the purchase price paid in cash by KEMET to the Company at the Closing, upon receipt by the Company of such purchase price.  The Initial Stockholders further agree to cause the Company and the Company further agrees to repay the NEC Debt Obligation in an amount equal to the purchase price paid in cash by KEMET to the Company for additional Shares purchased from the Company, if any, at any time during the term of this Agreement, upon receipt of the purchase price for such additional Shares and KEMET shall use commercially reasonable efforts to cause the Company to reduce the outstanding balance of the NEC Debt Obligation, consistent with good business practices; provided , however , that NEC shall not declare a default or otherwise accelerate the maturity of the remainder of the NEC Debt Obligations or the Thai Rebuilding Debt Obligation

 

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except in either case at the stated maturity thereof, so long as NEC maintains the ownership of greater than fifty percent (50%) of the equity securities of the Company and the ownership of not less than forty nine percent (49%) of the outstanding shares of the Common Stock of the Company, unless the failure to own such shares of Common Stock is a result of the inability, failure or refusal of NEC to convert the shares of Preferred Stock into Common Stock as contemplated by the Transaction Documents or as a result of the violation by NEC of the transfer restrictions set forth in the Transaction Documents. In the event the balance of the Company’s cash and cash equivalent exceeds 6.0 billion Japanese yen, KEMET and NEC shall discuss in good faith the repayment of some or all of the NEC Debt Obligation earlier than otherwise provided for in this Section 12.1 .  The Company and NEC agree not to increase the principal amount of the NEC Debt Obligation without the prior written consent of KEMET.  Notwithstanding the terms of the NEC Debt Obligation,(i) in the event of any prepayment pursuant to this Section 12.1, no Settlement Money (as defined in the NEC Debt Obligation) shall be due or owing in connection with such prepayment and (ii) the default rate of interest on any late payment shall be at a rate of six percent (6%) per annum..

 

12.2        Additional Funding .  Upon written request of the Company, NEC shall provide to the Company funding evidenced by notes, bonds, debentures or similar instruments with a maturity date of three years in the amount necessitated due to the deficiency (the amount of which has previously been discussed and agreed to by NEC and KEMET) in the insurance proceeds actually received by the Company with respect to damages suffered by the Company and its Affiliates on account of the Thai flooding, the principal amount not to exceed the amount in Japanese yen equivalent to US$70,000,000 as of the date NEC provides to the Company such funding (the outstanding indebtedness by the Company to NEC for all obligations under such notes, bonds, debentures or similar instruments shall be referred to as “ Thai Rebuilding Debt Obligation” ); provided that KEMET shall cause the Company to and the Company shall use the proceeds of the Thai Rebuilding Debt Obligation only for the purpose of implementing the recovery plan relating to the Company’s operations in Thailand, restructuring the Company’s business and for working capital needs arising in connection with the Thai Rebuilding.  The terms and conditions for the Thai Rebuilding Debt Obligation shall be discussed and agreed to by the NEC and the Company taking into consideration the terms for the NEC Debt Obligations and the market conditions at the time of the written request of the Company and the Company shall bear the actual and reasonable costs and expenses of third parties which are not NEC’s Subsidiaries incurred by the Company and NEC in connection with the preparation and execution of notes, bond, debentures, or similar instruments evidencing the Thai Rebuilding Debt Obligation (including without limitation stamp taxes and attorney’s fees).  Notwithstanding the foregoing, the amount of expenses which shall be borne by the Company shall not exceed JPY50,000,000 unless otherwise agreed by KEMET and NEC. In the event that the Company fails to repay the outstanding amount of the Thai Rebuilding Debt Obligation when due, the Parties shall discuss in good faith the terms for an extension (including, without limitation, the purpose of use of the loan proceeds) through the issuance of new notes, bonds, debentures or similar instruments with a maturity date not later than May 31, 2018.  KEMET shall use reasonable best efforts to cause the Company to and the Company will use reasonable best efforts to reduce the outstanding balance of the Thai Rebuilding Debt Obligation with such repayment taking priority over any expenses incurred outside of the normal course of business, but not including any expenses related to the recovery plan relating to the Company’s operations in Thailand, restructuring the Company’s business and the working capital requirements of the Company.

 

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13.                                Effective Date; Termination; Breach

 

13.1        Term .

 

This Agreement is conditional and shall become effective on Closing having occurred under the Stock Purchase Agreement (the “ Effective Date ”) and, unless earlier terminated pursuant to Section 13.2 , shall continue in full force and effect until one of the Initial Stockholders ceases to own any Shares.

 

13.2        Early Termination .

 

This Agreement may be terminated at any time as follows:

 

(a)           by mutual written consent of the Parties (effective as of the date specified therein);

 

(b)           by written notice of NEC to the other Parties, if (i) KEMET shall file for bankruptcy, corporate reorganization, civil rehabilitation, special liquidation or similar proceedings, and such petition is not withdrawn or rejected or (ii) an order or notification for any attachment, auction or compulsory execution shall be received by or made in respect of KEMET and such order or notification is not withdrawn, rejected or cancelled (effective as of the date of such notice) (each, an “ NEC Termination Event ”);

 

(c)           by written notice of KEMET to the other Parties, if (i) NEC shall file for bankruptcy, corporate reorganization, civil rehabilitation, special liquidation or similar proceedings, and such petition is not withdrawn or rejected or (ii) an order or notification for any attachment, auction or compulsory execution shall be received by or made in respect of NEC and such order or notification is not withdrawn, rejected or cancelled (effective as of the date of such notice) (each, a “ KEMET Termination Event ”).

 

Termination of this Agreement shall not relieve any Party of any obligation or liability hereunder accruing prior to the date of termination.

 

13.3        Breach of Agreement.

 

In the event any Party shall be in material breach of or shall fail to perform any of its material obligations set forth herein, and any such breach or failure shall not be cured within sixty (60) days after written notice thereof is given to such Party, the non-breaching Party shall be entitled to all of the remedies available to it pursuant to Section 16.4 of this Agreement.

 

14.                                Confidentiality and Non-Disclosure

 

14.1        Confidentiality .

 

All information marked as “ confidential ” or “ proprietary ” and disclosed in writing by one Party to another Party pursuant to this Agreement, and all information disclosed orally by one Party to another Party pursuant to this Agreement that is identified as confidential at the time of disclosure and reduced to writing or marked as confidential within 30 days following such oral

 

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disclosure (collectively, “ Confidential Information ”), shall be considered proprietary and confidential information of the disclosing Party and shall be subject to the following provisions of this Section 14 .

 

During the Term and for a period of three (3) years after the termination of this Agreement, each Party agrees, with respect to Confidential Information of any other Party, (i) not to use such Confidential Information except as expressly permitted hereunder without the prior written consent of the disclosing Party, (ii) to disclose such Confidential Information only to those employees, agents or contractors who have a reasonable need to know such Confidential Information for the purposes of this Agreement, and (iii) to use reasonable care to safeguard the confidentiality of such Confidential Information and to prevent the disclosure of such Confidential Information to any third party (other than those referred to in the preceding clause (ii)) without the prior written consent of the disclosing Party.  The foregoing obligations of a Party receiving Confidential Information from another Party shall not apply to information that: (a) is or becomes available in the public domain other than as a consequence of a breach of this Agreement, (b) was in the possession of the receiving Party prior to its receipt from the disclosing Party, (c) is received by the receiving Party from a third party without any duty of confidentiality, or (d) is independently developed by the receiving Party.

 

14.2        Court or Administrative Order .

 

In the event any Party to this Agreement is requested or required (pursuant to any governmental rule, regulation, or from or through requests for information or documents by any governmental authority in connection with legal proceedings, civil investigations, or other similar legal processes) to disclose any Confidential Information of another Party, such Party shall provide such other Party with prompt written notice of the request or requirement so that such other Party may seek a protective order or other appropriate remedy or waive compliance with the provisions of this Agreement.  If, in the absence of a protective order or other remedy or the receipt of a waiver by such other Party, the Party being requested or required to disclose any Confidential Information and is nonetheless legally compelled to disclose such Confidential Information, may, without liability hereunder, disclose only that portion of the Confidential Information which it is legally compelled to disclose.

 

15.                                Compliance with Laws

 

At all times during the term of this Agreement, the Parties shall in the operation of the Company comply with any and all applicable laws, including, without limitation, antitrust laws, regulations, and orders of government authorities and agencies of Japan and other country having jurisdiction.

 

16.                                General Provisions

 

16.1        Severability .

 

If any provision or any portion of any provision of this Agreement shall be held invalid or unenforceable, the validity and enforceability of the remaining portion of such provision and the

 

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remaining provisions of this Agreement, and the application thereof to any other Person or circumstance, shall not be affected thereby.

 

16.2        Publicity .

 

Neither of the Parties to this Agreement, nor any of their respective Affiliates, shall issue any press release or otherwise make any public announcement or disclosure with respect to this Agreement, the Stock Purchase Agreement or the Option Agreement or any of the transactions contemplated hereby or thereby without the prior written consent of the other Parties, such consent not unreasonably withheld, unless such disclosure is required by applicable law or by any stock exchange or any regulatory or governmental body having applicable jurisdiction, including, without limitation, U.S. federal securities laws and Japanese securities laws, in which case the Party making the announcement or disclosure shall use reasonable efforts to consult with the other Parties in advance as to its form, content and timing.

 

16.3        Governing Law .

 

This Agreement shall be construed and enforced in accordance with, and the rights of the Parties shall be governed by, the laws of Japan.

 

16.4        Arbitration .

 

Any dispute arising out of or relating to this Agreement, including as a result of any breach of this Agreement by any Party, that cannot be resolved amicably between the Parties (including by way of escalation to the chief executive of each of the Company and KEMET and an officer of NEC to facilitate such resolution) within sixty (60) days after written notice from a Party to the other Party that a dispute exists shall be finally determined before a tribunal of three arbitrators in London, England in accordance with the Commercial Arbitration Rules of the London International Court of Arbitration (the “ LICA ”). One arbitrator shall be selected by the KEMET, one arbitrator shall be selected by NEC and the third arbitrator shall be selected by mutual agreement of the first two arbitrators or by the LICA, if the arbitrators appointed by the Parties are unable to select a third arbitrator within thirty (30) days.  The award of arbitration shall be final and binding upon the Parties and shall not be subject to appeal to any court, and may be entered in any court of competent jurisdiction for execution forthwith.

 

16.5        Force Majeure.

 

(a)           No Party shall be liable for its failure to perform hereunder due to contingencies beyond its reasonable control, including but not limited to, acts of God, acts of the Public Enemy, fires, floods, wars, sabotage, riots, civil strife, accidents, labor disputes, lockouts or shortages (whether or not within such Party’s ability to settle), any governmental laws, ordinances, rules, regulations, action or inaction (whether valid or invalid including, but not limited to, priorities, requisitions, allocations and price adjustment restrictions), delay or inability to obtain supplies, raw materials, energy, products, equipment or transportation, and any other similar or different contingency beyond such Party’s reasonable control (each a “ Force Majeure Event ”).

 

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(b)           Except where the nature of the Force Majeure Event prevents it from doing so, a Party suffering from a Force Majeure Event shall notify the other Parties in writing within fifteen (15) business days after the occurrence of the Force Majeure Event, and shall in every instance, to the extent it is capable of doing so, use all reasonable efforts to remedy such Force Majeure Event.

 

16.6        Delay; Amendment and Waiver .

 

(a)           No failure or delay on the part of a Party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Parties at law, in equity or otherwise.

 

(b)           Any amendment, supplement or modification of or to any provision of this Agreement or any waiver of any provision of this Agreement shall be effective only if it is made or given in writing and signed by each Party. Any such amendment, supplement, modification or waiver shall be binding upon the Parties.

 

16.7        Notices .

 

All notices and other communications pursuant to this Agreement shall be delivered personally, delivered by e-mail or air-mailed by certified or registered mail postage prepaid, return receipt requested, to the Parties at the following addresses, or at such other addresses as the Parties may designate by written notice in the manner aforesaid:

 

If to NEC, to:

 

NEC Corporation
7-1, Shiba 5-chome, Minato-ku, Tokyo 108-8001, Japan
Email: t-yamamoto@df.jp.nec.com
Attention:  General Manager, Affiliated Company Division

 

If to KEMET or the Manager, to:

 

KEMET Electronics Corporation
101 NE 3 rd  Ave., Ste. 1700, Fort Lauderdale, FL 33301 USA
Email:  jamieassaf@kemet.com
Attention:  Vice President and General Counsel

 

If to Company, to:

 

NEC TOKIN Corporation

 

7-1, Kohriyama 6-chome, Taihaku-ku, Sendai-shi, Miyagi 982-8510, Japan
Email: f-katakura@ti.jp.nec.com
Attention:  General Manager, Corporate Strategy Division

 

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A notice shall be deemed given when delivered, in the case of personal delivery or e-mail, or seven (7) business days after mailing in the manner prescribed herein.

 

16.8        Entire Agreement .

 

This Agreement and the Exhibits hereto contain the entire agreement among the Parties regarding the matters described herein and supersede all previous and contemporaneous oral and written discussions and all prior agreements and understandings among the Parties regarding such matters.

 

16.9        Successors and Assigns; Third Party Beneficiaries .

 

This Agreement shall inure to the benefit of, and be binding upon, the Parties and their respective successors and permitted assigns.  This Agreement is not assignable except in connection with a transfer of Shares in accordance with this Agreement.  No Person other than the Parties and their successors and permitted assigns is intended to be a beneficiary of this Agreement.

 

16.10      Counterparts .

 

This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.

 

16.11      Survival .

 

Sections 11.6 , 12 and 14 shall survive termination or expiration of this Agreement.

 

16.12      Further Assurances .

 

Each of the Parties shall execute such documents and perform such further acts as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement and the transactions contemplated hereby.

 

16.13      Costs .

 

Except as otherwise specifically provided herein, the Parties shall bear their respective expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement, including all fees and expenses of agents, representatives, counsel and accountants.

 

16.14      English .

 

This Agreement has been negotiated and executed by the Parties in the English language.  Should a translation of this Agreement into any other language be made for any reason, all matters involving interpretation shall be governed by the English version.

 

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16.15      No Strict Construction .

 

The language used in this Agreement will be deemed to be the language chosen by the Parties to express their mutual intent, and no rules of strict construction will be applied against any Party.

 

16.16      Descriptive Headings; Interpretation .

 

The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  References in this Agreement to Sections or Exhibits mean a section or exhibit of this Agreement unless otherwise indicated.  References to this Agreement shall be deemed to include the exhibits hereto, unless the context otherwise requires.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first above written.

 

 

	KEMET ELECTRONICS CORPORATION
	By:	/s/ Per-Olof Loof
		Name: Per-Olof Loof
		Title: Chief Executive Officer
	NEC CORPORATION
	By:	/s/ Takayuki Morita
		Name: Takayuki Morita
		Title: Senior Vice President
	NEC TOKIN CORPORATION
	By:	/s/ SHIGENORI OYAMA
		Name: Shigenori Oyama
		Title: President