DRAFT SHARE PURCHASE AGREEMENT between Agency for Privatization in Federation of Bosnia and Herzegovina (The Seller) and (The Buyer) Sarajevo, November 2005
The Share Purchase Agreement, entered into between the Agency for Privatization in the Federation of Bosnia and Herzegovina, being a specialized state agency empowered to act on behalf of the State in accordance with BiH Federation laws, represented by director Mr. Resad Zutic (hereinafter referred to as the Seller) and, registered in the Registry of Companies with under the Registry No. having its seat inrepresented by, director (hereinafter referred to as the Buyer). PART I 1. DEFINITIONS For the purposes of this Agreement, the following terms shall have the meanings ascribed to them in this Article: 1.1. Party or Parties shall mean the Buyer and the Seller, as the context may require. 1.2. Company shall mean ENERGOINVEST Tvornica dalekovodnih stubova, d.d. Sarajevo 1.3. Shares shall mean the shares of capital stock of the Company being transferred from the Seller to the Buyer pursuant to the terms of this Agreement. 1.4 Closing shall mean the date of consumption of the purchase price and delivery of the investment guarantee contemplated by this Agreement, as well as transfer of ownership rights and other rights for shares by issuing the decision to approve registration of conducted privatization into the Court Registry. 1.5. Purchase Price shall mean the total amount to be paid for the Shares by the Buyer, which is specified in chapter 1.3 of this section. 1.6. Investments in the Company shall mean: investments agreed to be made within three years from the Closing date of this Agreement that ought to be made directly by the Buyer and will not be sourced out of the accounts of the Company. 1.7. Investment Guarantee shall mean a bank guarantee to be obtained by the Buyer in order to guarantee fulfillment of the Buyer s OBLIGATION to make investments in the Company. 1.8. Employment Plan shall mean the obligation of the Buyer to maintain a specified number of full time employees in the Company, to retain the existing employees in the Company and/or to employ new employees according to the provisions hereunder, in accordance with the Employment Plan that makes an ingredient part of this Agreement. 1.9. Declaration on Origin of Funds shall mean the declaration made pursuant to the Rules of Tender, which shall be presented by the Buyer prior to the date of signing this Agreement. 1.10. Force Majeure shall mean each event that the parties hereunder could not foresee and prevent and which makes the fulfillment of the obligations hereunder impossible. Such events might be wars, international embargo, civil riots, acts of nature, fire, terrorist acts and similar events as provided by law (which represent Force Majeure) 1.11. Penalties shall mean the penalty charges in case of failure or delay in fulfillment of the obligations, according to the provisions hereunder. 2
2. THE SUBJECT AND THE OBJECTIVE 2.1. The Subject of Sale. The 67% of the shares of ENERGOINVEST Tvornica dalekovodnih stubova, d.d. Sarajevo (hereinafter referred to as: the Company) held by the Federation of Bosnia and Herzegovina according to standing laws, totaling KM 7.109.420,00 2.2. The Objective. The objective of this Agreement is the sale of the Company s shares in accordance with the Laws on Privatization of the Federation of Bosnia and Herzegovina, according to the obligations that shall be undertaken by the Buyer with regard to the investments, employment and other obligations in accordance with the Business Plan and the Bid. 2.3. Intention of the Seller. The Seller intends to privatize the Company on behalf of the Federation of Bosnia and Herzegovina by selling and transferring shares of the Company to the Buyer in accordance with the Tender Rules and this Agreement. 2.4. Intention of the Buyer. The Buyer intends to buy shares of the Company, maintain and run the operation of the Company in accordance with the Business Plan. 2.5. Due Diligence. The Buyer has performed, i.e. has been provided the opportunity for its own due diligence of the Company, its legal status, standing laws, and the legal conditions thereof. However, the Buyer and the Seller have examined the relevant documents concerning the balance sheets, current liabilities, etc. The Seller, hereby, states it has no knowledge of any impediments or latent risks that have not been mentioned in the stipulated documents. 3. THE SALE AND THE TRANSFER 3.1. Sale of Shares. The Seller, hereby, commits to sell and transfer to the Buyer 67% of shares of the total capital stock of the Company ( the Shares ) on the day designated in this chapter under section 3.2. The Buyer hereby accepts such sale of the Shares. 3.2. Date of Sale and Transfer - Deal. The transfer of the ownership over the shares as well as other rights shall come into effect on the day of the receipt of the agreed price amount on the bank account specified in section 4.3 but also by providing a guarantee for the investments specified in chapter 8 hereunder. On the date of these pre-requisites fulfillment, the Seller shall issue a decision on the approval to register the executed privatization in the Court Registry. 3.3. The Right to Withdraw. The transfer of the Shares will be carried out in accordance with the terms and conditions of this Agreement that refer to: (a) Purchase price, and (b) Performance Bond Guarantee, in accordance with Section 8 of this Agreement. Failure to fulfill both conditions within 15 days after signing the Agreement gives the right to the Seller to withdraw from this Agreement with prior notification to the Buyer in writing (Withdrawal). Exercising this right shall not rule out the Seller s any further compensation claim. 4. PURCHASE PRICE AND PAYMENT 4.1. Purchase price. The total purchase price of the shares offered according to section 3.1. ( Purchase Price ) is totaling KM (Convertible Marks ). The Buyer shall bear the bank fees. 3
4.2. Payment Deadline. The Purchase price shall be payable within 15 days from the signature date of this Agreement. 4.3. Method of Payment. Any amount to be paid by the Buyer to the Seller will be paid by remittance, or in cash, or by certified check or by transfer and shall be made available immediately. The payment by remittance shall be effected to a separate account of the Agency for Privatization in the Federation of Bosnia and Herzegovina as follows: Bank: UPI BANKA Sarajevo Account title: Agencija za privatizaciju u Federaciji BiH Account number: 154-001-2000050827. The document on the transfer of money shall bear the Company name ENERGOINVEST Tvornica dalekovodnih stubova, d.d. Sarajevo, the name of the Buyer and the identification number/reference number of the Seller (if applicable). Besides, the Buyer shall provide - along with the remittance notification in writing to the Seller stating the amount, purpose, date of this Agreement and the identification/reference number referred to above. The payment shall be considered effected and received on the day of the confirmation of receipt by UPI BANKA Sarajevo. The Buyer is obliged to effect payment of the purchase price established under section 4.1. of this Chapter. PART II 5. BUSINESS OBLIGATIONS 5.1. Business Plan. The Buyer, hereby, agrees to manage the Company in accordance with the Business Plan, attached as Annex 2 to this Agreement (hereinafter referred to as: the Business Plan ). The Buyer shall maintain the operation of the Company in accordance with reasonable economical judgment and the Business Plan in Bosnia and Herzegovina for a period of three years from the date of signing the Agreement ( Business Plan Period ). The Buyer reserves the right to increase, decrease or modify production of the Company, and manage the operation in the best possible way so as to achieve the objective of this Agreement. 5.2. Alienation of Assets. During the Business Plan Period, the Buyer shall not cause, nor enable that: a) the assets of the Company are abandoned, ceded, sold, transferred or renounced in full or to a considerable amount without obtaining prior consent from the Seller; b) Production, workforce, i.e. Company services are abandoned or considerably reduced, or c) Assume any other measures leading to the same economic results mentioned under a) and b), apart from those consistent with reasonable economic judgment used to implement the Business Plan. This provision does not ban the Buyer from the pledge right, or mortgage, i.e. approval for other share interest over the property and assets of the Company and its subsidiaries where the Company holds the controlling block of share, if this is considered economically reasonable and not jeopardizing the Company and/or its subsidiaries, with the Company s being their major shareholder. 5.3. Plan Review and Modification. The Buyer shall meet with the Seller once a year during the Business Plan period in order to assess the Business Plan progress ( Annual Meeting ). If the Buyer proposes to modify the Business Plan it will only materialize with prior written consent from the Seller that will not challenge the modification unreasonably. Furthermore, the Buyer shall ensure the documentation for the Seller to prove the fulfillment of the Business Plan at an Annual meeting. The Annual meeting is convened by the Seller every year upon completion of a Business Plan period. 5.4. Sale and Transfer of the Company. The Buyer shall reserve the right to sell, i.e. transfer the shares of the Company, agreed to by the Seller. In any case of such transfer the Buyer shall remain directly and fully responsible for the fulfillment of its obligations assumed in this Agreement. 4
6. INVESTMENT COMMITMENTS 6.1. Investment Commitments. The Buyer shall invest in the Company a total amount of KM in the period of years as follows: in the next (breakdown by year) years after the Closing Date of the Agreement ( Investment Period ) in accordance with the Investment Plan given in Annex 3 of this Agreement ( hereinafter referred to as the Investment Obligation ). 6.2. The Meaning of Investment OBLIGATION. The term investments implies the investments directly in the Company, not sourced from the Company s assets, in the period of three years after signing the Agreement. Investments shall be in cash or tangible assets (land and buildings, new facilities and equipment, vehicles, furniture and office equipment, construction facilities) - (quote from Investment Plan). Direct cash payments from the Buyer so as to offset the Company s debt shall be considered an investment. Investments financed from the retained revenues of the Company shall not be considered an investment as defined above. 6.3. Proof of Investment. The Buyer shall ensure every year to the Seller a valid proof on the actual investments as determined in the Investment Obligation provision. This proof shall have to be ensured for each Annual meeting. The Buyer shall, upon request from the Seller, present the annual balance sheet within 15 (fifteen) days from its adoption at the Annual convention. 6.4. Failure to Invest. Failure to fulfill the investment obligations, in full or in part, shall give the right to the Agency to claim penalties in the amount of 120% (hundred and twenty percent) of the amount that the Buyer has failed to invest, in accordance with the provisions on the Investment Obligation. The penalties shall be payable at the end of every year of the Investment period during which the Buyer has failed to fulfill its investment obligations. Payment of penalties related to the invest failure within the agreed time period (as per Business Plan) shall be effected within two months after setting the date for payment. Payment of penalties shall release the Buyer only from the obligation to invest that refers to that particular penalty. The penalty amount can be deducted from the Performance Bond Guarantee Amount. 6.5. Delayed Fulfillment. In case the Buyer has fulfilled the investment obligation but with delay, the Seller has the right, in accordance with the provisions of this Section, to claim penalties to the amount of 10% (ten percent) of the amount that the Buyer has failed to invest in a timely fashion. Failure to invest in full or in part gives the right to the Seller to claim penalties to the amount of 10% (ten percent) of the amount that the Buyer has failed to invest in time on account of delayed fulfillment of obligations. Payment of penalties shall not release the Buyer from its obligation to complete the investment. In case the Seller decides not to take action in accordance with section 6.4 of this Part of the Agreement thus giving it the right of choice (to take action in accordance with either section 6.4 or 6.5) it may take action in accordance with the provisions of this section. 7. EMPLOYMENT OBLIGATION 7. Employment. The Buyer is obliged to implement the Employment Plan in the next three years in accordance with the Employment Plan given in Annex 4 (hereinafter referred to as Employment Obligation ). 7.1. Proof of Employment. The Buyer shall ensure every year to the Seller a valid proof of employed workers. This proof shall be ensured for every Annual meeting. The Buyer shall, upon request from 5
the Seller, present employee registration and deregistration forms as well as other required evidence supporting the employment obligation towards the Company. 7.2. Failure to Employ. Failure to fulfill the employment obligation, in full or in part, gives Seller the right to claim penalties. In accordance with the Employment Plan, for every less employed worker the Buyer shall be obliged to pay penalties as per the following formula: Number of workers x Number of months x Average gross salary in FBiH in the calendar year preceding the year in which the Buyer has failed to employ the agreed number of workers. *Number of workers: Any delay in the employment of new workers or failure to maintain the agreed number of workers in terms of sustainability of the number of employed workers. *Number of months: The time lag expressed in the number of full months. Payment of penalties shall not release the Buyer from its obligation to employ new workers. In case that within the period provided for fulfillment of the obligation maintaining specific number of employees as provided hereunder (i.e. in the period provided for monitoring of fulfillment of employment obligations) at certain point of time there shall occur delay in fulfilling the same and that in another point of that period a bigger number of employees than being provided by the Agreement shall be employed, the Seller shall compensate penalties so that he shall not claim penalties for the part of delay provided by this provision of chapter 7.2. 8. PERFORMANCE BOND 8.1. Investment Guarantee. With regards to investment obligations the Buyer shall ensure to the Seller an unconditional and irrevocable Performance Bond Guarantee at the latest 15 days upon signing this Agreement, to the amount of KM The performance bond guarantee must ensure payment of any amount at the first request of the Seller should the Buyer fail to fulfill the Investment Obligation from the Business Plan. A copy in writing of the terms of the bank investment guarantee is given in Annex 5 (hereinafter referred to as Investment Guarantee). 8.2. Limitation. The obligations of the Buyer towards the Seller as per this Agreement shall in no way be limited by the investment guarantee, i.e. by the amount contained therein. 9. OBLIGATION TO INFORM 9.1. Obligation of the Buyer to Inform. The Buyer shall inform the Seller in writing on the failure to fulfill any of its obligations as per this Agreement and shall provide details and facts within 15 days from the occurrence of such failure. The Buyer shall also inform the Seller in writing of any facts and circumstances referring to the following events within 7 days from the event occurrence: (a) Change of the address of the Buyer, i.e. the Company (b) Change of the main telephone number, fax number, e-mail address of the Buyer, i.e. the Company (c) Buy-off, take-over or purchase of all or essentially all the shares of the Buyer, i.e. the Company, in accordance with provisions of this Agreement (d) Any bankruptcy initiated by or against the Buyer, i.e. the Company 9.2. Obligation of the Seller to Inform. The Seller shall inform the Buyer in writing on the following changes within 15 days: (a) Change of the address of the Seller, (b) Change of the main telephone number, fax number, e-mail address of the Seller, 6
(c) Any other change relevant to the implementation of this Agreement. PART III 10. REPRESENTATION AND GUARANTEES 10.1. Representation and Guarantees of the Seller. The Seller hereby confirms and guarantees to the Buyer as stated hereunder: 10.1.1. Organization. The Seller is duly organized and validly exists in accordance with the laws of the Federation of Bosnia and Herzegovina, having been legally empowered to sell the concerned Company/shares mentioned hereunder. 10.1.2. Validity of Agreement. According to the Seller s findings, this Agreement shall make the obligation of the Seller valid and binding. The execution and implementation of this Agreement and the execution of the transactions contained herein have been duly confirmed by all government actions and are effective towards the Seller and the Federation of Bosnia and Herzegovina. According to the findings of the Seller, the execution and implementation of this Agreement does not require agreement, approval or authorization, from any other person, public authority, or entity, therefore it is not in violation of, or in conflict with, or makes an omission by any law, rule or regulation of any authority stating that the shares of the Company cannot be privatized. 10.1.3. Ownership Rights over the Shares. The Seller has the right and authority to transfer the ownership right over the shares of the Company onto the Buyer on the date as envisaged in Part III, section 3.2. 10.1.4. Ownership Rights over the Real Property. Annex 6, as an attachment to the Agreement, provides a list of all the real property used for the operation of the Company as well as all other property owned, possessed, or rented by the Company. 10.1.5. Organization and Good Reputation of the Company. The Company is duly organized and validly exists in accordance with the laws of the Federation of Bosnia and Herzegovina, and, to the best of the Seller s knowledge, has the legal power, unlimited official licenses and corporative and other authorizations to dispose of the respective property and to manage the respective operation in the current way of doing it. 10.1.6. Information Provided by the Seller. To the best of the Seller s knowledge, based upon the information received from the Company, all information provided by the Seller to the Buyer during privatization negotiations is correct. 10.1.7. Litigation. According to the findings of the Seller, there is neither official investigation nor interrogation, ongoing or impending, on the Company, its property, assets, activities and operations which could prevent the Seller to enter this Agreement. Evident court cases (based upon information from the Company) are given in Annex 7. 10.1.8. Financial Statements. The financial statements have been prepared in accordance with the accounting standards of the Federation of Bosnia and Herzegovina. As part of this Agreement, financial statements of the Company for the period ending December 31, 2004 are given in Annex 8. According to the findings of the Seller, as of January 01, 2005 the Company operates only within its usual scope of business and all potential changes fall under the told scope of daily business activities. 10.2. Representation and Guarantees of the Buyer. The Buyer hereby confirms and guarantees to the Seller as stated hereunder: 7
10.2.1. Organizational-Legal Status. The Buyer is a company duly organized, validly existing, with a good reputation, registered in according to the laws of, with all corresponding legal power and empowerment to buy shares of the Company as envisaged in this Agreement. Official documents on the registration of the Buyer, officially translated, but not older than 6 months from the date of signing the Agreement are given in Annex 9. 10.2.2. Legal Validity of the Agreement. This Agreement represents a valid, binding and lawful obligation to the Buyer. The Buyer guarantees that the execution and implementation of this Agreement and the execution of transactions contained herein have been properly approved by an authorized body of the Buyer and no other agreement, approval, or authorization from any other person, any other Buyer s body, public authority or legal entity is required for the execution of this Agreement. 10.2.3. Failures. The execution and implementation of this Agreement by the Buyer and the execution of its obligations as per this Agreement do not represent a violation or disruption, nor are they in conflict with, or make omission by any law, rule or regulation of any government authority or court, i.e. the provisions or regulations on partnership, or the Statute of the Buyer, i.e. any agreement, license, or any other act, written or oral, with the Buyer being one of the parties involved. 10.2.4. Litigation. On the date of signing this Agreement, there are no procedures, disputes, court procedures or government investigation, i.e. interrogations, either ongoing or impeding, on the Buyer, which according to the Buyer s knowledge threaten the Buyer or any of its affiliations, i.e. their respective property, assets, activities and operations tending to prevent the execution of the transactions foreseen in this Agreement. 10.2.5. Financing. The Buyer hereby gives assurances it has enough financial means, i.e. ensured credit lines, to effect payment of the purchase price, investments, and other transactions envisaged in this Agreement, including but not limiting to the execution of the intended activities. The statement of funds from the Buyer is given in Annex 10. PART IV 11. ECOLOGY 11.1. Ecology Compensation Under no circumstances shall the Seller be deemed responsible for ecological damage. Any such responsibility shall be transferred to the Buyer (on the Closing Date the Agreement). 11.2. Responsibility of the Buyer. The Buyer shall be fully responsible for the management of the Company s assets and the assets of its affiliations in accordance with law and applicable regulations, and in accordance with the conditions and authorizations required for such assets and activities. The Buyer shall be responsible to the Federation of Bosnia and Herzegovina for all ecological damage stemming from the management of the assets owned by the Company and its affiliations after signing the Agreement and for activities that violate standing ecological laws. 12. RESPONSIBILITY, FORCE MAJEURE 12.1. Responsibility. The Buyer and the Seller are responsible for the execution of the obligations as per this Agreement and the regulations of the Federation of Bosnia and Herzegovina. 12.2. Force Majeure. Force majeure implies any event that could not have been foreseen and prevented by the Parties, and which prevents the execution of obligations as per this Agreement. Such 8
events can include war, international embargo, civil uprising, natural disasters, large-scale fire, act of terrorism, etc. as envisaged by law (the origin of which is force majeure by its nature). Strikes shall not be included in such events. 13. CESSATION OF AGREEMENT 13.1. Finishing of Agreement. This Agreement shall be finished with the fulfillment of obligations of both parties i.e. after expiration of the period envisaged for the fulfillment of the contractual obligations. 13.2. Termination of Agreement. Should the Agreement be terminated due obligations failure: (a) Termination of the Agreement by the Agency due to the Buyer s failure to fulfill its obligations. The Seller has the right to retain the deposit and all other payments effected by the Buyer as compensation as well as claim compensation for potentially caused damage to the Seller. (b) Due to the Seller s failure to fulfill its obligations, the Buyer has the right to request a refund. PART V 14. JURISDICTION 14.1. Litigation. The parties agree to put maximum effort into solving any disagreement, i.e. dispute in connection with this Agreement through discussion and mutual compromise. 14.2. Court of Jurisdiction. Any dispute or disagreement, including but not limiting to anything that refers to or is connected to the interpretation of the Agreement, its validity or invalidity, its termination or whether a Party has fulfilled its obligations as per the Agreement, that cannot be solved through good will negotiations of the parties shall be solved by the court of jurisdiction in the place of the conclusion of this Agreement. 15. CLOSING PROVISIONS 15.1. Confidentiality. Prior to the transfer of shares, the Buyer shall keep in confidence all the information and documents received from the Seller and the Company, and the Buyer agrees not to disclose such information to any other person (apart from its employees, agents, and representatives in order to perform due diligence examination in connection with the purchase foreseen in this Agreement). In case the purchase foreseen by this Agreement does not materialize, the Buyer shall return to the Seller and the Company all received documented information (including copies). 15.2. Whole Agreement. This Agreement and all enclosures, indicators, maps, addendums, and annexes, if any, constitute the whole Agreement of the parties with regards to the transactions foreseen herein that supersede all previous agreements and arrangements regarding this Agreement, either written or oral. 15.3. Alterations and Amendments. Alterations and amendments to this Agreement shall not be valid unless made in writing and signed by the parties involved. 15.4. Transfer. This Agreement, as well as the rights and obligations thereof, shall not be transferred on by either party without prior written consent from the other party, apart from that foreseen in the Agreement. 15.5. Obligations Commitment. Representations, warranties, contractual obligations, and compensations determined in this Part, including the liability for the fees as per this Agreement 9
referring to such representations, warranties, contractual obligations and compensations, shall be unconditional and shall remain in effect for the period of their duration, i.e. implementation. 15.6. Severability. Should any of the provisions of this Agreement be or will become invalid, the validity of the other provision of this Agreement shall not be affected. In such case the invalid provision should be replaced with a legally valid provision which will be as close to the invalid provision as possible in terms of economic effect. 15.7. Applicable Law. This Agreement shall be governed by and interpreted in accordance with the laws of the Federation of Bosnia and Herzegovina. 15.8. Costs and Fees. All costs and fees arising from the conclusion and execution of this Agreement, especially without limitation, public notary costs, registration fees, shall be solely at the expense of the Buyer. Each Party shall bear their own costs related to legal and other consultancy services. 15.9. Communication. All notifications, requests and other communication of the information that one party needs to send to the other as per this Agreement shall be in writing and shall be delivered through courier or by mail with certified receipt on the following addresses: Federal Agency for Privatization (Seller) Alipašina 41, Sarajevo, Bosnia and Herzegovina e-mail: apfbih@bih.net.ba apftbiro@bih.net.ba Telephone: ++387 33 218 551, 212 884, 212 885 Fax: ++387 33 212 883 Buyer: Address, phone, fax, etc. 15.10. Copies. This Agreement is made in four identical copies, in Bosnian and English language. Each party shall receive two full copies of the Agreement with each page initialed. In case of discrepancies while interpreting the Agreement, the version in Bosnian language shall prevail. AGREED AND ACCEPTED Place and date: SELLER Name, title and signature: BUYER 10
LIST OF ANNEXES: ANNEX 1. - Copy of Authorization of Buyer's Signature ANNEX 1.1. - Copy of Buyer s Authorization ANNEX 2. - Business Plan ANNEX 3. - Investment Plan ANNEX 4. - Employment Plan ANNEX 5 - Copy of Performance Bond Investment Guarantee ANNEX 6. - List of Company Real Property ANNEX 7. - Litigation ANNEX 8. - Company s Financial Statements ANNEX 9. - Legal Status of Buyer (Registration) ANNEX 10. - Buyer s Declaration of Funds 11