MERCOR S.A.
The Management Board of Mercor S.A. with its registered office in Gdańsk ("Mercor S.A.") informs that on 10/07/2015, the company entered into a conditional purchase agreement ("Conditional Agreement"), whereby, upon fulfilment of the conditions provided for in the Conditional Agreement and occurrence of the deadline specified in the Conditional Agreement, Mercor S.A. shall purchase
100% of shares in the Hungarian law company operating under the name DUNAMENTI TŰZVÉDELEM Ipari, Szolgáltató és Kereskedelmi Zártkörűen Működő Részvénytársaság with its registered office in Göd, Hungary ("Dunamenti Tuzvedelem") ("Shares").
The Conditional Agreement has been concluded between Mercor S.A., as the purchase, and the Hungarian law company, DUNAMENTI VK Termelő és Szolgáltató Zártkörűen Működő Részvénytársaság with its registered office in Göd, Hungary ("Dunamenti VK"), the Hungarian law company ZÉTA Ipari, Kereskedelmi és Szolgáltató Korlátolt Felelősségű Társaság with its registered office in Budapest, Hungary ("Zeta"), and the following natural persons Zsiga Gábor, Sebestyén Tibor, Murvai Zoltán, Pirigyi József, Kasza János, Vajda Béla, Krámer Ferenc, Sás Tamás, Kovács Gábor, Nyikonyuk Péter, Szabó Béla, Selmeczy Pál, Struve Tibor and Saáry Zoltánné ("Natural Persons") (Natural Persons, Dunamenti VK and Zeta shall be referred to collectively as "Seller"). A party to the Conditional Agreement is Mr János Zellei, a person controlling Dunamenti VK and Zeta, who acts as a guarantor and trustee for some liabilities of Zeta ("Guarantor").
Dunamenti Tuzvedelem operates in the field of passive fire protection products - including in particular - construction fire protection solutions - and offers own high quality products. The Company operates in Hungary (where the manufacturing facility is also located) and has wholly owned subsidiaries in Poland, the Czech Republic, Slovakia and Ukraine.
The maximum sale price for 100% of shares in Dunamenti Tuzvedelem, which shall be paid by Mercor SA pursuant to the Conditional Agreement has been set at HUF 1,389,178,000 (one billion three hundred and eighty-nine million one hundred and seventy-eight thousand), (equivalent to PLN
18,537,191.23 according to the average NBP rate of 9 July 2015) on the so-called cash-free and debt- free basis and prior to the adjustment for changes in the working capital and debt of Dunamenti Tuzvedelem.
Of the maximum sale price, on the sale of shares, the amount of HUF 1,142,213,000 (one billion one hundred and forty-two million two hundred and thirteen thousand) (equivalent to PLN 15,241,690.27 according to the average NBP rate of 9 July 2015) ("Closing Price") is to be paid. The Closing Price, in accordance with the practice adopted for such transactions, will be adjusted for any changes in the working capital and the net debt of Dunamenti Tuzvedelem.
The remainder of the maximum sale price i.e. HUF 246,965,000 (two hundred and forty-six million nine hundred and sixty-five thousand) (equivalent to PLN 3,295,500.96, according to the average NBP rate of 9 July 2015) represents an additional payment (the so-called earn-out), which shall be paid by Mercor SA to the Sellers upon fulfilment of certain conditions concerning operations and financial results of Dunamenti Tuzvedelem, as set out in the Conditional Agreement and commonly used for such of agreements.
The Conditional Agreement provides for standard conditions precedent related, among others, to separation of the operations of Dunamenti Tuzvedelem, which are not of interest to Mercor SA, restructuring of collaterals on Dunamenti Tuzvedelem's assets or the provision of additional analyses on Dunamenti Tuzvedelem products. Conditions precedent should be fulfilled no later than by 30
November 2015. Once these conditions are met, the Conditional Agreement provides for use of the so- called escrow mechanism under which Mercor SA shall be obliged to transfer the Closing Price to a special account maintained for the Sellers, whilst the Sellers shall transfer the Shares to a special account maintained for Mercor SA. The escrow mechanism shall be supervised by the Hungarian bank K&H Bank Zrt. with its registered office in Budapest, Hungary. The transfer of the title to the Shares to Mercor SA and the payment of 75% of the Closing Prices shall take place by 29 February 2016 ("Financial Closing"). The use of this mechanism and the interval in the transaction stems from the need to implement or to solve certain obligations relating to Dunamenti Tuzvedelem, which are to assumed by Mercor SA. In the period from closing until the Financial Closing, the parties agree to apply a mechanism to prevent prejudice to the interests of Mercor SA by ensuring the obligation to reimburse any withdrawals from Dunamenti Tuzvedelem and its subsidiaries to the Sellers, members of the Dunamenti Tuzvedelem bodies and its subsidiaries as well as families and affiliates of these individuals (the so-called locked box mechanism) ("Locked Box").
The remaining 25% of the Closing Price shall be retained on the escrow account for up to two years after the Financial Closing date of ("Retained Amount") as as security for any claims of Mercor SA concerning, among others, the performance of Dunamenti Tuzvedelem, to the extent specified in the Conditional Agreement. A part of the Retained Amount shall be released to the Sellers after 10 months of the Closing.
The Conditional Agreement provides for the Mercor SA's right of withdraw, in the case of certain events relating to Dunamenti Tuzvedelem in the period until 30 November 2015 and in the period from 30 November 2015 to 29 February 2016. The events which entitle Mercor SA to withdraw from the agreement in the period until 30 November 2015 include the occurrence of an extraordinary change in the relationships, in accordance with the criteria defined in the Agreement Conditional, significant deterioration of financial results of Dunamenti Tuzvedelem or infringement significant representations and warranties made by the Sellers and, in the period from 30 November 2015 to 29
February 2016, among others, infringement by the Sellers of their warranties concerning the title to the Shares or the capacity or ability to enter into the Conditional Agreement, breach by the Sellers of their obligations regarding the management of Dunamenti Tuzvedelem upon conclusion of the Conditional Agreement or the occurrence of a situation, where Mercor SA shall be entitled to receive compensation under the Locked Box mechanism in excess of HUF 30 million (equivalent to PLN
400,320.00, according to the average NBP rate of 9 July 2015).
The Conditional Agreement provides for the obligation of the respective Sellers and the Guarantor to pay to Mercor SA the contractual penalties in the following cases: direct or indirect breach of non- competition clause by the Sellers in the field of activities pursued by Dunamenti Tuzvedelem or its subsidiaries within the period of 3 years from the conclusion of the Conditional Agreement (EUR 5 million) ; carrying out activities detrimental to the reputation or business of Dunamenti Tuzvedelem or its subsidiaries within the period of 3 years from the conclusion of the Conditional Agreement (EUR 2 million); and direct or indirect breach of the prohibition to employ the workers of Dunamenti Tuzvedelem or its affiliates within the period of 3 years from the conclusion of the Conditional Agreement (EUR 5 million). The payment of contractual penalties shall be without prejudice to the possibility to seek compensation under general rules of law.
In connection with the transaction, the parties will enter into additional agreements concerning, among others, Guarantor's further participation in managing the operations of Dunamenti Tuzvedelem for a specified period of time after the transaction. Given the need to secure other obligations of Mercor SA Capital Group, the Conditional Agreement provides for the obligation of the Guarantor and the Sellers to pay a contractual penalty of EUR 5 million to Mercor SA in the case of use by the Guarantor of its rights within Dunamenti Tuzvedelem to cause Dunamenti Tuzvedelem undertake the activities in the field of the fire partition solutions, as specified in the Conditional Agreement. The payment of this contractual penalty shall be without prejudice to the possibility to seek compensation under general rules of law.
The Conditional Agreement shall be governed by Hungarian laws.
The Supervisory Board of Mercor SA approved the conclusion of the Conditional Agreement by Mercor SA. The implementation of the Conditional Agreement does not require the approvals of the merger control authorities, since the appropriate conditions regarding the turnover of the Parties are not met.
Mercor SA shall inform about the fulfilment of the conditions set out in the Conditional Agreement and the transfer of the shares to Mercor SA in separate current reports.
The criterion for recognition of the Conditional Agreement as significant was the fact that in the opinion of the Management Board, the value of the Conditional Agreement and the transactions specified therein exceeds 10% of Mercor SA's equity.
Legal basis:
Section 5 paragraph 1 item 3 of the Regulation of the Minister of Finance on current and periodic information provided by issuers of securities and conditions for recognizing as equivalent information required by the law of a non-member state.
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