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EXHIBIT 10.21
EXECUTION COPY
DATED
APRIL 26, 2000
BY AND AMONG
MRV COMMUNICATIONS, INC.
AND
QUANTUM OPTECH INC.
AND
SHAREHOLDERS OF QUANTUM OPTECH INC.
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STOCK PURCHASE AGREEMENT
Relating to the sale and purchase of up to one hundred percent (100%) of the
Ordinary Shares in the capital of
QUANTUM OPTECH INC.
and the sale and purchase of certain number of
Ordinary Shares in the capital of
MRV COMMUNICATIONS, INC.
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XXXXX & XXXXXXXX
15th Floor, Xxxx Xxx Xxxxxx
000 Xxx Xxx Xxxxx Xxxx
Xxxxxx, Xxxxxx
0
TABLE OF CONTENTS
SECTION PAGE
1. Definitions...................................................................... 2
2. The Transaction.................................................................. 2
3. The Closing...................................................................... 5
4. Deliveries at the Closing........................................................ 5
5. Representations and Warranties of QOI and Selling Shareholders................... 6
6. Representations and Warranties of MRV........................................... 18
7. Pre-Closing Covenants........................................................... 19
8. Conditions Precedent to Closing................................................. 23
9. Post Closing Covenants.......................................................... 25
10. Indemnification and Escrow...................................................... 26
11. Termination..................................................................... 29
12. Transfer Restriction............................................................ 29
13. Miscellaneous................................................................... 29
SCHEDULES
1. List of Signing Shareholders and Shareholding
2. List of Subsidiaries of QOI
3. List of Equity Interests hold by QOI and its Subsidiaries
4. Financial Statements of QOI and its Subsidiaries
5. List of Warehouses
6. List of Liabilities
7. List of Material Changes
8. List of Real Properties
9. List of Tangible Personal Property
10. List of Intellectual Properties
11. List of License of any Intellectual Properties
12. List of Contracts
13. List of Permits
14. List of Non-Renewable Permit
15. List of Encumbrances
16. List of Litigation
17. List of Employee Benefits
18 List of Unemployment Compensation
19. List of Distributors
20. List of Suppliers
21. List of Related Party Transaction
22. List of Directors; Officers; Banks and Powers of Attorney
23. List of Insurance
24. List of Principal Employees
25. List of Patents and Intellectual Property to be Transferred to QOI
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26. List of Selling Shareholder Guarantees for Indebtedness of QOI
27. List of Pledged Shares
EXHIBITS
A. Form of Power of Attorney to be issued to Attorneys-in-Fact
B. Form of Power of Attorney to be issued to Closing Agent
C. Form of QOI's Bring-Down Certificate
D. Form of MRV's Bring-Down Certificate
E. Form of Employment Agreement
F. Form of Escrow Agreement
G. Letter of Consent for Principal Employees
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of this 26th
day of April, 2000 by and among Quantum Optech Inc., a corporation organized and
existing under the laws of the Republic of China ("QOI") with its principal
executive office located at Xx. 00-0 Xxxx 00, Xxx Xxx Xx., Xxx Xxx City, Hsinchu
Hsine, Taiwan, ROC, MRV Communications, Inc., a corporation organized and
existing under the laws of Delaware, U.S.A. with its principal executive office
located at 00000 Xxxxxxxx Xx., Xxxxxxxxxx, XX 00000 U.S.A.("MRV"), and each
person listed in the schedule of QOI shareholders attached hereto as Schedule 1
(individually, a "Signing Shareholder" and collectively the "Signing
Shareholders"), represented by their attorney-in-fact, Keh-xxxxx Xxx
("Attorney-in-Fact") (as evidenced by a Power of Attorney attached hereto as
Exhibit A). MRV, QOI and the Signing Shareholders are referred to herein
individually as the "Party" and collectively as the "Parties".
WHEREAS, the Signing Shareholders collectively own approximately
seventy-one percent (71%) of the issued and outstanding shares of the capital
stock of QOI (the "QOI Shares"), each of them in the respective amounts and
percentages set forth on Schedule 1;
WHEREAS, MRV is authorized to issue up to Five-Hundred-Fourteen Thousand,
Two Hundred Eighty Six (514,286) new common shares ("MRV Shares") prior to the
sale and transfer of QOI Shares to MRV contemplated by this Agreement;
WHEREAS, subject to the terms and conditions of this Agreement, (i) MRV
desires to by itself and/or its Subsidiaries or Affiliates purchase up to one
hundred percent (100%) but no less than seventy-five percent (75%) of QOI Shares
from the Signing Shareholders and other QOI shareholders (the Signing
Shareholders and other QOI shareholders selling their QOI Shares to MRV (and/or
its Subsidiaries/Affiliates) collectively the "Selling Shareholders"), and the
Signing Shareholders desire to, and will use their best efforts to cause other
Selling Shareholders to sell and transfer their QOI Shares to MRV (and/or its
Subsidiaries/Affiliates) in return for the consideration set forth herein; and
(ii) the Signing Shareholders desire to and will cause other Selling
Shareholders to aggregately purchase certain MRV Shares from MRV, and MRV
desires to sell the MRV Shares up to the same amount to Selling Shareholders in
return for the consideration set forth herein.
WHEREAS, the Signing Shareholders and QOI will use their best efforts to
obtain the consent of other Selling Shareholders to be a Party of this Agreement
and to be bound by the terms and conditions herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
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1. DEFINITIONS
1.1 Generally. As used in this Agreement, capitalized terms not otherwise
defined shall have the meanings specified in the text hereof or on Annex 1
hereto (which is incorporated herein by reference), which meanings shall be
applicable to both the singular and plural forms of the term defined.
2. THE TRANSACTION
2.1 At the Closing (as hereinafter defined), upon satisfaction of the terms and
conditions set forth herein:
2.1.1 Purchase and Sale of QOI Shares
(a) The Selling Shareholders shall sell, transfer, assign and deliver
to MRV (and/or its Subsidiaries/Affiliates) at the Closing, and
MRV (and/or its Subsidiaries/Affiliates) agrees to purchase and
acquire from the Selling Shareholders and pay therefor at the
Closing, all of their respective QOI Shares, free and clear of
any and all Encumbrances, consisting of up to one hundred percent
(100%) of the total number of issued and outstanding QOI Shares
as of the Closing Date, at and for an aggregate purchase price of
approximately Thirty Six Million United States Dollars
(US$ 36,000,000.00) for purchasing one hundred percent (100%) QOI
Shares (equaling Xxx Xxxxxx Xxxxxx Xxxxxx xxx Xxxxxx-Xxxx xxxxx
Xxxx Xxxxxx Xxxxxx Cents (US$1.895) per share). The foregoing
aggregate purchase price (the "MRV's Payment") shall be paid by
MRV (and/or its Subsidiaries/Affiliates) at the Closing by wire
transfer to a single bank account in Taiwan designated by the
Selling Shareholders to MRV (and/or its Subsidiaries/Affiliates)
in writing at least seven (7) Business Days prior to the Closing
(the "Taiwan Account"). Such Taiwan Account shall be agreed by
MRV. The MRV's Payment shall be divisible among the Selling
Shareholders pro rata in accordance with their percentage
shareholdings in QOI; PROVIDED, HOWEVER, that the MRV's Payment
shall not be released from the Taiwan Account to the Selling
Shareholders and be used as the payment due MRV for the MRV
Shares being purchased by the Selling Shareholders (as per
Section 2.1.2 below) and fully wired by the Selling Shareholders
via the Closing Agent (as hereinafter defined and discussed) on
their behalf to an account designated by MRV to the Selling
Shareholders in writing at least seven (7) Business Days prior to
the Closing (the "MRV Account"). Furthermore, the Selling
Shareholders shall be liable for (i) the 0.3% share transfer tax
imposed by Taiwan on the sale of QOI Shares by the Selling
Shareholders ("The Taiwan Stock Transfer Tax"); (ii) whatever
costs and fees charged relating to the Taiwan Account for the
wire transfer; and (iii) the Escrow Fees as described in Section
10.2.3 (c) below and in the Escrow Agreement (above (i), (ii),
and (iii) collectively referred to as the "Sellers' Costs").
(b) In the event that less than one hundred percent (100%) but not
less than seventy-five percent (75%) of QOI Shares are available
for sale, the MRV's
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Payment shall be adjusted down by the same percentage as those
shares not available for sale are as a percentage of the total
shares of outstanding shares on the date of execution of this
Agreement. If less than seventy-five percent (75%) of QOI Shares
are available for sale to MRV, MRV shall not be obligated to
complete the transactions contemplated in this Agreement.
2.1.2 Purchase and Sale of MRV Shares
(a) MRV shall issue and sell to the Selling Shareholders, and the
Selling Shareholders shall purchase from MRV pro rata in
accordance with their percentage shareholdings in QOI, the MRV
Shares, free and clear of any and all Encumbrances, at and for an
aggregate purchase price of Thirty Six Million United States
Dollars (US$36,000,000.00) (equaling Seventy United States
Dollars (US$70) per share). The foregoing aggregate purchase
price (the "Selling Shareholders' Payment") shall be paid by the
Selling Shareholders via the Closing Agent at the Closing by wire
transfer to the MRV Account. The wire transfer shall be effected
immediately upon receipt of each installment of MRV's Payment in
the Taiwan Account. In order to secure and assure the payment to
MRV of the Selling Shareholders' Payment, which shall be made
using a portion of the funds first wired by MRV to the Taiwan
Account, at least five (5) Business Days prior to the Closing,
the Selling Shareholders (or Attorney(s)-in-Fact or QOI in whose
name the Taiwan Account shall be registered) shall give the
Taiwan Account passbook, chops and a power-of-attorney in the
form attached as Exhibit B (Power of Attorney-Form B) to the law
firm of Xxxxx & XxXxxxxx, Taipei Office represented by Xxxxx Xxxx
as the Closing Agent of the Selling Shareholders (the "Closing
Agent") granting said Closing Agent the exclusive right to give
instructions to the bank with respect to the Taiwan Account.
(b) In the event that less than one hundred percent (100%) but not
less than seventy-five (75%) of QOI Shares are available for
sale, the number of MRV Shares to be sold to the Selling
Shareholders and the Selling Shareholders' Payment shall be
adjusted down by the same percentage as those QOI Shares not
available for sale are as a percentage of the total QOI Shares of
outstanding on the date of execution of this Agreement. The
Selling Shareholders shall advise MRV of the actual number of QOI
Shares being sold within one month of the execution of this
Agreement.
2.1.3 The definite purchaser(s) of QOI Shares and its respective
purchasing volume of shares in QOI, and recipient(s) of the
Selling Shareholders' Payment shall be determined and advised by
MRV in writing to QOI and the Attorney-in-Fact at least Five (5)
Business Days prior to the Closing. In each of the above
transactions, the seller shall be liable to pay any applicable
taxes or duties on the issuance or sale of its shares of stock to
other party. Thus, the Selling Shareholders shall be liable for
the payment of the Taiwan Stock Transfer Tax, which shall be
deducted and paid from the Taiwan Account, as discussed above.
MRV shall be liable for the payment of the taxes or duties (if
any) on the issuance and sales of the MRV Shares to the Selling
Shareholders, which shall be paid by MRV within the
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period of time required by the laws of the State of Delaware.
2.1.4 The number of MRV Shares (514,286 shares) to be delivered shall
be determined according to the following (subject to a pro rata
deduction in case that less than 100% of the QOI Shares are
delivered on Closing):
(a) The value of 171,429 MRV Shares delivered upon Closing, valued at
the closing price of the MRV common stock as reported on NASDAQ
for the day of the signing of this Agreement, or, if NASDAQ is
not trading on such day, the earliest date preceding said date on
which NASDAQ was open for trading (the "Base Value"). In the
event that the value of the such number of MRV shares decreases
in value by more than One Million United States Dollars
(US$ 1,000,000) between the date of signing this Agreement and
the effective date of a registration statement filed with United
States Securities and Exchange Commission (the "SEC") registering
such shares, (the decrease to be determined by subtracting the
value of the shares (by reference to the closing price) on the
date of the SEC effective registration from the Base Value), MRV
shall issue to the Selling Shareholders, after the effective date
of the SEC registration, pro rata that number of additional
shares of common stock so that the aggregate amount of shares
shall equal as close an amount as possible to said Base Value,
without issuing any fractional interests in its shares. However,
MRV is not obligated to issue additional shares for any decrease
in the value of the shares below United States dollars One
Million.
(b) 171,428 MRV Shares, regardless of the value at the Closing Date
of said MRV Shares.
(c) 171,429 MRV Shares, to be placed with the Escrow Agent and held
under the terms of this Agreement and the Escrow and Pledge
Agreement attached hereto.
2.1.5 The Principal Employees listed in Schedule 24 shall be granted by
MRV the options to purchase the common stock of MRV. Such options
shall have an intrinsic value of Four Million United States
Dollars (US$4,000,000), based on the difference between the
exercise price and the fair market value of MRV common stock
valued at the same price as the closing price of the MRV common
stock as reported on NASDAQ immediately prior to the signing of
this Agreement. Such options shall vest and become exercisable in
equal installments at the rate of 1.667% per month commencing on
the last day of the first full month after the date of this
Agreement and shall be issued in exchange for equivalent options
such employees hold in QOI, if any. The exercise price for the
share options shall be between Six United States Dollars (US$6)
and Ten United States Dollars (US$10).
2.2 Notwithstanding the transaction mechanism described in Sections 2.1.1 and
2.1.2, MRV shall have the option to carry out a direct shares swap if MRV's
verification with the Taiwan authorities reveals that such direct shares
swap is feasible prior to
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the Closing.
2.3 The Parties agree that upon the successful completion of transfer of the
Selling Shareholders' Payment to the MRV's Account in accordance with the
provisions of this Agreement, the Closing Agent will thereupon be deemed to
have been released from any and all obligation arising hereunder or from
the Agreement. The Parties further agree any of them will not hold the
Closing Agent liable or responsible for any act it may do or omit to do in
the exercise of reasonable care, as prudent administrator, in good faith,
and in compliance with this Agreement. The Parties and the Closing Agent
agree that the Closing Agent will keep the Parties informed of the status
and the progress of the Closing matters handled by the Closing Agent.
3. THE CLOSING
3.1 The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the office of Xxxxx & XxXxxxxx, Taipei
office and be held over a five (5) day or longer period (given the
necessity of effecting international wire transfers and considering the
time differences involved), commencing five (5) Business Days after all
conditions to the closing of the transactions contemplated by this
Agreement have been satisfied or waived (the fourth or the last day of the
Closing being the "Closing Date"), but in any case not later than June 30,
2000 (the "Target Day") (unless the Parties shall agree upon a different
date or location).
4. DELIVERIES AT THE CLOSING
4.1 Deliveries by the Selling Shareholders
At the Closing, the Selling Shareholders shall deliver or cause to be
delivered to MRV:
(i) stock certificates evidencing QOI Shares, and duly executed stock
transfer documentation transferring thereof to MRV (including its nominees)
and/or its Subsidiaries/Affiliates; (ii) the Selling Shareholders' Payment,
(iii) QOI's Bring-Down Certificate (as defined and discussed below and
substantially in the form attached as Exhibit C); (iv) written consents and
the powers of attorney from the other Selling Shareholders as described in
Section 7.10 and (iv) such other instruments, certificates or documents as
MRV may reasonably request.
4.2 Deliveries by MRV
At the Closing Date, MRV shall deliver or cause to be delivered to the
Selling Shareholders (i) stock certificates evidencing MRV Shares; (ii)
MRV's Bring-Down Certificate (as defined and discussed below and
substantially in the form attached as Exhibit D); and (iii) such other
instruments, certificates or documents as the Selling Shareholders may
reasonably request.
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5. REPRESENTATIONS AND WARRANTIES OF QOI AND THE SELLING SHAREHOLDERS
QOI and the Signing Shareholders hereby and shall cause other Selling
Shareholders, unless otherwise indicated, jointly and severally, represent,
warrant and covenant to MRV as follows at the date hereof and again as of the
Closing Date as follows:
5.1 Power, Authority and Ownership
5.1.1 Each of the Selling Shareholders individually represents and
warrants that it has the absolute and unrestricted right, power
and authority to execute and deliver this Agreement and the
Powers of Attorney and to perform its obligations hereunder with
respect to its respective QOI Shares. The Attorneys-in-Fact have
been duly authorized by each of the Signing Shareholders and
shall obtain the authorization from the other Selling
Shareholders before the Closing to execute, deliver and perform
this Agreement and the transactions contemplated herein for and
on behalf of Selling Shareholders by valid Powers of Attorney
duly executed by the Selling Shareholders. This Agreement has
been duly executed and delivered by the Attorneys-in-Fact for and
on behalf of each of the Selling Shareholders and, assuming due
authorization, execution and delivery by MRV and QOI, constitutes
the legal, valid and binding obligation of each of the Selling
Shareholders enforceable against the Selling Shareholders in
accordance with its terms.
5.1.2 Each of the Selling Shareholders individually represents and
warrants that it own its respective QOI Shares of record
beneficially, free and clear of any Encumbrances or restrictions.
Provided that certain QOI Shares will be immediately eliminated
from such Encumbrances within twenty days after the execution of
this Agreement. Each of the Selling Shareholders has good title
to its respective Shares and at the Closing, each of the Selling
Shareholders shall deliver to MRV good title to its respective
Shares free and clear of all Encumbrances, security interests,
restrictions, and all other claims, rights and interests of third
parties.
5.1.3 QOI has full corporate power and authority, including all
necessary approvals of its directors and shareholders, to execute
and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
5.2 Organization and Capitalization
5.2.1 Each of QOI and its Subsidiaries as set forth on Schedule 2 is a
corporation duly organized, validly existing, and in good
standing under the laws of their respective jurisdictions of
their incorporation and has full corporate power and authority to
conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. Each of QOI
and its Subsidiaries has full corporate power and authority and
all material licenses, permits, and authorizations necessary to
carry on the business in which it is now being engaged and to own
and use the properties owned and used by it. Except as set forth
in Schedule 3 or in the Financial Statements,
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neither QOI nor its Subsidiaries hold any shares of the capital
stock or other equity interests of or investment in any other
Person (other than bank accounts). QOI has delivered to MRV
correct and complete copies of the charter and bylaws of QOI and
each of its Subsidiaries (as amended to date). QOI and each of
its Subsidiaries are not in default under or in violation of any
provision of its charter or bylaws.
5.2.2 The authorized capital stock of QOI consists of Thirty Million
(30,000,000) shares of common stock with a par value of NT$10 per
share, of which Nineteen Million (19,000,000) shares are issued
and outstanding. All issued shares have been duly authorized,
validly issued and are fully paid and non-assessable, with [no]
preemptive rights. There are no outstanding obligations, options,
warrants, preemptive rights or other agreements or commitments to
which QOI or any of the Selling Shareholders is a party, or by
which QOI or any of the Selling Shareholders is otherwise bound,
providing for the issuance of any additional shares or for the
repurchase of shares of QOI's capital stock. No shares of the
capital stock of QOI are reserved for future issuance provided
that only Nineteen Million (19,000,000) shares out of Thirty
Million (30,000,000) shares are outstanding and issued.
5.2.3 The Signing Shareholders listed in Schedule 1 own approximately
seventy-one percent (71%) of the issued and outstanding shares of
capital stock of QOI. All of the information set out in Schedule
1 is true, correct and complete.
5.3 Financial Condition
5.3.1 QOI has delivered or shall deliver to MRV within one month of the
execution of this Agreement consolidated financial statements of
QOI and its Subsidiaries, which are collectively attached hereto
as Schedule 4 consisting of (i) audited balance sheets and
statements of income for the fiscal years ended December 31, 1997
through 1999, (the "Financial Statements", the latest audited
balance sheet being the "Audited Balance Sheet"), and (ii)
unaudited balance sheet and statements of income for the fiscal
period ended March 31, 2000 (the "Latest Financial Statements",
said balance sheet being the "Latest Balance Sheet"). The
Financial Statements and the Latest Financial Statements
(including the notes thereto) have been prepared in accordance
with US GAAP applied on a consistent basis throughout the periods
covered thereby and the Financial Statements shall bear an
unqualified opinion from the auditors, and the Latest Financial
Statements shall bear a review report from the auditors. Except
as explained in the notes thereto, the Audited Financial
Statements and Latest Financial Statements fairly present the
financial condition, assets, liabilities, equity and results of
operations of QOI and each of its Subsidiaries as of their
respective dates and periods, are and will be correct and
complete in all material respects, and have been and will be
prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
involved.
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QOI has obtained or will obtain a written consent by the Closing
from the auditor (the "Auditor Consent") to include their opinion
on the Financial Statements in order to comply with MRV's
necessary filing with the SEC.
5.3.2 The inventories of each of QOI and its Subsidiaries are not
obsolete or damaged, are fit for their particular use, and are
not defective, such that they are of a quantity and quality
usable or saleable in the ordinary course of the business of QOI
and its Subsidiaries for the amounts reflected on the Latest
Balance Sheet, exclusive of any reserve allocable thereto,
subject only to changes in the Ordinary Course of Business. All
inventories reflected on the Latest Financial Statements are
stated at not more than the lower of cost or fair market value
thereof, with adjustments for obsolete, damaged or otherwise not
readily marketable items. Set forth on Schedule 5 hereto is a
complete list of the addresses of all warehouses or other
facilities in which inventories of each of QOI and its
Subsidiaries are located as of the date hereof.
5.3.3 The accounts receivable of each of QOI and its Subsidiaries are
valid receivables, collectible to the extent of the excess
thereof over any reserves set forth on the Latest Balance Sheet,
and are subject to no defenses, counterclaims or set-offs.
5.4 Absence of Undisclosed Liabilities. Each of QOI and its Subsidiaries has no
liabilities or obligations (whether absolute, accrued, contingent or
otherwise and whether due or to become due, including liabilities for taxes
and interest and penalties thereon) except (i) the liabilities set forth on
the Latest Balance Sheet and (ii) the liabilities and obligations set forth
in Schedule 6 hereto.
5.5 Tax Returns
5.5.1 Each of QOI and its Subsidiaries has filed with the appropriate
governmental agencies all required tax returns, is not in default
with respect to any such filing, is not delinquent in payment of
any taxes shown to be due on any such tax return or claimed to be
due by any taxing authority, and has paid or made on the Latest
Balance Sheet adequate provision or reserves for all taxes
(including but not limited to, all income, withholding,
corporate, excise, and value added taxes, real and personal
property taxes, occupation taxes, social security taxes, and
interest and penalties) payable by it, or attributable to all
periods ending on or prior to the date of the Latest Balance
Sheet. Each of QOI and its Subsidiaries has not given any waiver
or extension of any period of limitation governing the time of
assessment or collection of any tax. No deficiency in any tax
payment is claimed by any tax authority for any taxable years of
QOI and its Subsidiaries. There are no tax audits currently
pending with respect to QOI and its Subsidiaries. To the best
knowledge of any of the Selling Shareholders and QOI, there is no
basis for assessment of any deficiency in any income taxes or any
other taxes or governmental charges against each of QOI and its
Subsidiaries.
5.5.2 Neither QOI nor its Subsidiaries is a party to, and is not bound
by, any tax indemnification agreement, tax sharing agreement or
tax allocation
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agreement with any other person, firm, corporation or other
entity, and neither QOI nor its Subsidiaries is responsible for
any tax obligation or liability of any such other person, firm,
corporation or other entity.
5.5.3 Neither QOI nor any of its Subsidiaries has, or has at any time
had, a taxable presence or permanent establishment in any country
other than the Republic of China, the PRC or each jurisdiction
where it is incorporated, under the Applicable Laws of such
country or under any Income Tax Treaty between that country and
the Republic of China.
5.6 Absence of Certain Changes. Except as disclosed in Schedule 7 attached
hereto, since the date of the Latest Balance Sheet, there has not been:
(a) any material adverse change in the financial condition, assets,
liabilities, equity, operations, business or prospects of QOI and
or any of its Subsidiaries;
(b) any obligation or liability incurred by QOI or any of its
Subsidiaries other than obligations and liabilities incurred in
the Ordinary Course of Business;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially or adversely affecting any material asset
of QOI and its Subsidiaries;
(d) any Encumbrance placed on , or any claim, right or interest of
any third party of any nature whatsoever asserted against, any
material asset of QOI and its Subsidiaries;
(e) any purchase or sale or other disposition, or any agreement or
other arrangement for the purchase or sale or other disposition,
of any material asset of QOI and its Subsidiaries;
(f) any material change in the compensation or benefits payable or to
become payable by QOI or its Subsidiaries to any of its employees
or agents or any new bonus payment or arrangement or employee
benefit made to or with any of them;
(g) any material change with respect to the management or supervisory
personnel of QOI or any of its Subsidiaries;
(h) any dividend declared or paid or any other stockholder payment or
distribution with respect to the QOI Shares or a purchase or
redemption of any of the securities of QOI or any of its
Subsidiaries or the execution of any agreement or commitment to
do so; or
(i) any other event or condition of any character that may materially
and adversely affect the financial condition , assets,
liabilities, equity, operations, business or prospects of QOI or
any of its Subsidiaries.
5.7 Real Property. Schedule 8 sets forth a complete list of all real property
owned or leased by either QOI or its Subsidiaries. Each of QOI and its
Subsidiaries has valid
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legal rights to, or in the case of leased property, has valid leasehold
interests, in all real properties. QOI or any of its Subsidiaries has valid
and outstanding leasehold interests in all real property that it leases
from others and the improvements situated thereon, all of which are listed
and identified on the Schedule 8 hereto. All such real estate and
improvements (including all buildings, or portions thereof, and all
fixtures) are in good repair and operating condition, normal wear and tear
and required maintenance (which has heretofore been regularly performed)
excepted, are suitable and fit for the purposes for which they are
currently being used, and are sufficient to conduct the business of QOI or
any of its Subsidiaries as it is presently conducted. True , correct and
complete copies of all leases, evidence of QOI interest in the real
property, and all other instruments of title, or those of any of QOI's
Subsidiaries and QOI's interest therein, with respect to all real property,
leaseholds or other interests owned or held by QOI or any of its
Subsidiaries have been delivered to MRV. The use and occupation of such
real property and the improvements thereon by QOI or any of its
Subsidiaries comply in all material respects with Applicable Law including
zoning regulations and building codes.
5.8 Tangible Personal Property. QOI and any of its Subsidiaries has good and
marketable title to all of the tangible personal property which it owns, as
reflected on the Latest Balance Sheet and Schedule 9 hereto (except as sold
or otherwise disposed of or acquired in the Ordinary Course of Business or
otherwise consistent with this Agreement). All machinery, equipment,
furniture and fixtures, and computer hardware and software used by QOI or
any of its Subsidiaries are in good operating condition and repair, normal
wear and tear and required maintenance (which has heretofore been regularly
performed) excepted, are suitable and fit for the purposes for which they
are currently being used.
5.9 Intellectual Properties. Schedule 10 hereto lists all of the Intellectual
Properties, specifying in each case whether such Intellectual Properties
rights are owned or used under license, as well as specifying whether QOI
or any of its Subsidiaries act as licensor of any such Intellectual
Properties Rights. All license agreements and all other instruments
relating to licenses of any Intellectual Property Rights are described in
Schedule 11, and true and complete copies thereof have been provided to
MRV. None of the Intellectual Properties have been held or stipulated to be
invalid in any litigation which has been concluded and the validity of none
of the Intellectual Properties has been questioned in any litigation
currently pending or, to the best knowledge of any Selling Shareholders and
QOI, threatened. QOI and any of its Subsidiaries owns or possesses the
Intellectual Properties necessary to manufacture and sell its products,
and, to the best knowledge of any Selling Shareholders and/or QOI, such
manufacture and sale does not infringe any rights of any other Person. QOI
or any of its Subsidiaries, has not received any notice of conflict thereof
with the asserted rights of any other Person, firm, corporation or other
entity, and QOI or any of its Subsidiaries has the right to bring an action
for any infringement of any of the Intellectual Properties.
5.10 Contracts. There is no Contract:
(a) extending for a period of time longer than 12 months;
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(b) involving expenditures or receipts by QOI or any of its
Subsidiaries in excess of US$ One-Hundred Thousand (US$100,000);
(c) relating to the borrowing of money or guarantying any obligation
for borrowed money or otherwise, other than endorsements for
collection;
(d) with any insider or any affiliate;
(e) prohibiting or substantially restricting QOI or any of its
Subsidiaries from freely engaging in business in any part of the
world;
(f) with a sales agent or representative, dealer, or distributor; or
(g) any other contract, commitment or lease outside of the usual and
Ordinary Course of Business,
except such Contracts listed in Schedule 12 attached hereto.
5.11 Permits. QOI and any of its Subsidiaries holds all of the Permits required
by Applicable Law to own any and all of its assets, and to operate its
business as that business is now conducted. Schedule 13 hereto contains a
true and complete list of all such Permits. Except as specified on Schedule
14, all Permits are renewable in the Ordinary Course of Business and will
remain in full force and effect following the Closing pursuant to this
Agreement.
5.12 Compliance with Applicable Law and Permits. QOI and any of its Subsidiaries
are conducting, and has conducted, the business in compliance with all
Applicable Laws and Permits, and has received no notice that it is in
breach of any such Applicable Law or Permit. QOI or any of its Subsidiaries
have not processed, stored, disposed, transported, handled, emitted,
discharged, or released any Waste Material, whether on or off the real
estate. Neither of Selling Shareholders has any knowledge or information or
reason to believe that any Waste Material, tanks, containers, cylinders,
drums or cans were buried on the real estate by QOI or any of its
Subsidiaries or any other party during or preceding QOI or any of its
Subsidiaries ownership or leasing of any real estate. QOI and any of its
Subsidiaries have delivered to MRV copies of all internal or external
environmental audit reports prepared by or for QOI or any of its
Subsidiaries.
5.13 No Conflict. Neither the entering into nor the delivery of this Agreement
nor the performance of the transactions contemplated therein by Selling
Shareholders and QOI will result in the violation of:
(a) any of the provisions of the Articles of Incorporation, By-Laws
and other constitutional documents of QOI ;
(b) any Contract to which QOI or any Selling Shareholders, including
QOI, is a party; or
(c) any Applicable Law or Permit.
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Except for satisfaction of any conditions specified in this Agreement,
neither the Selling Shareholders nor QOI are required to give prior notice
to, or obtain any consent, approval or authorization of, or make any
declaration or filing with, any governmental authority, or any other
person, firm, corporation or other entity in connection with the execution
or delivery of this Agreement or the consummation of the transactions
contemplated hereby.
5.14 No Encumbrances. Except as set forth in Schedules 15 hereto, QOI and each
of its Subsidiaries have good title to all of its assets which they owns,
free and clear of all Encumbrances or any other claims, rights or interests
of any other Person, firm, corporation or other entity of any nature
whatsoever.
5.15 No Defaults. QOI and any of its Subsidiaries has performed, or has taken
all actions reasonably necessary to enable it to perform when due, all
material obligations under all Contracts and Permits, all of which are in
full force and effect, and there has not occurred any material default or
other event which with the lapse of time or giving of notice or both may
become a material default under any such Contract or Permit.
5.16 Litigation. Except as set forth on Schedule 16 hereto, there are no claims,
actions, suits or proceedings pending or, to the best knowledge of QOI and
each of its Subsidiaries, threatened by or against QOI and each of its
Subsidiaries or affecting it in any court or before any governmental or
administrative authority. QOI or any of its Subsidiaries is subject to no
decree, judgment, order or notice of any kind which enjoins or restrains it
from taking any action of any kind whatsoever.
5.17 Employee and Labor Matters. To the best knowledge of any Selling
Shareholders and QOI, none of the key employees, and no group of employees
of QOI or any of its Subsidiaries, plans to terminate his, her or their
employment with QOI or any of its Subsidiaries. QOI and each of its
Subsidiaries are not a party to any collective bargaining or union
agreement. QOI and each of its Subsidiaries is in compliance in all
material respects with all Applicable Law respecting employment and
employment practices, terms and conditions of employment, and wages and
hours. Since its incorporation, QOI or any of its Subsidiaries has
experienced no significant union organization attempts and no material work
stoppage due to any labor disagreement with respect to its business. There
is no unfair labor practice charge or complaint against QOI or any of its
Subsidiaries pending or, to the best knowledge of any Selling Shareholders
and QOI, threatened, in any court or before any governmental or
administrative authority. There is no labor strike, request for
representation, slowdown or stoppage actually pending or, to the best
knowledge of them, threatened against or affecting QOI or any of its
Subsidiaries.
5.18 Employee Benefits.
5.18.1 QOI and each of its Subsidiaries have no employment, consulting,
agency, commission, retirement, severance pay, non-competition,
profit-sharing, deferred compensation or pension agreements or
plans, or related practice, whether written or oral, formal or
informal, other than as identified on Schedule 17 hereto (true,
correct and complete copies of which have been delivered to MRV,
including reasonably detailed summaries of any
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unwritten plans, arrangements or practices). All obligations of
QOI and each of its Subsidiaries, whether arising by operation of
law, by contract or by past custom, for payments by it with
respect to unemployment compensation benefits, pension and
retirement benefits, social security benefits, or other benefits
for employees of QOI and any of its Subsidiaries, including but
not limited to, those set forth on Schedule 19, in respect of
periods prior to the Closing have been paid in full, or adequate
provision therefor has been made in the Latest Balance Sheet.
5.18.2 Upon termination by QOI or any of its Subsidiaries of the
employment of any employee, QOI or any of its Subsidiaries shall
not incur any liability for any severance or termination pay or
other similar payment except as required by law expressly
provided in the agreements or plans set forth on, or otherwise
disclosed in Schedule 18.
5.18.3 QOI or any of its Subsidiaries does not maintain, contribute to
or have any liability under any funded or unfunded, medical,
health or life insurance plan or arrangement for present or
future retirees or present or future terminated employees except
group insurance and as required by the Labor Insurance Act and
the National Health Insurance Act.
5.19 Sufficient Assets. The assets identified in this Agreement or on the Latest
Balance Sheet constitute all of the tangible and intangible rights and
assets necessary for the conduct of, or used or held by QOI and each of its
Subsidiaries in connection with, its business and operations as they are
presently being conducted.
5.20 Customers, Distributors and Suppliers. Schedule 19 hereto contains a true,
correct and complete list of all distributors, representatives and agents
of QOI and any of its Subsidiaries and a description of the terms of their
relationships with QOI or with any of its Subsidiaries and a true, correct
and complete list of all other persons to whom QOI and each of its
Subsidiaries sold goods or services in the twelve months ended as of the
date of this Agreement and by whom QOI or any of its Subsidiaries has been
paid or who have committed to pay QOI NT$500,000 or more since the
beginning of said period. Schedule 20 contains a true, correct and complete
list of all persons who provided goods or services to QOI or any of its
Subsidiaries in the twelve months ended as of the date of this Agreement to
which QOI or any of its Subsidiaries has paid or is committed to pay
NT$500,000 or more since the beginning of said period. The relations of QOI
and each of its Subsidiaries with the foregoing persons are good, and there
are no disputes between QOI or any of its Subsidiaries and any of such
persons pending or, to the best knowledge of any Selling Shareholder and
QOI or any of its Subsidiaries, threatened. True, correct and complete
copies of all contracts with all of the foregoing persons have been
delivered to MRV and are in full force and effect in accordance with their
terms, and there are no defaults or allegations or claims of default
thereunder.
5.21 Related Party Transactions. Except as set forth in Schedule 21 hereto or as
contemplated by this Agreement, no the Selling Shareholder and no officer,
or director of QOI or any of its Subsidiaries has any interest in any of
the assets used or held by QOI in the conduct of its business or operations
or is a party to any contract with QOI or any of its Subsidiaries or
affecting the business or operations of QOI or
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any of its Subsidiaries.
5.22 Directors; Officers; Banks; and Powers of Attorney. Schedule 22 hereto is a
true and complete list showing: (a) the names of all of directors and
officers of QOI and each of its Subsidiaries; (b) the name of each bank in
which QOI and each of its Subsidiaries has an account or safety deposit
box, and the names of all persons authorized to draw thereon or to have
access thereto; and (c) the names of all persons holding powers of attorney
from QOI and each of its Subsidiaries together with a summary statement of
the terms thereof.
5.23 Insurance. Schedule 23 hereto sets forth all existing insurance policies
held by QOI and each of its Subsidiaries relating to its business. Each
such policy is in full force and effect, is with responsible insurance
carriers and is in an amount and scope customary for persons engaged in
businesses and having assets similar to those of QOI and each of its
Subsidiaries. All claims arising under such policies and all premiums that
are due and payable thereunder have been paid in full.
5.24 Disclosure. No representation or warranty by the Selling Shareholders
and/or QOI in this Agreement, and no certificate or statement furnished or
to be furnished to MRV pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or shall contain any untrue
statement of material fact, or omits or shall omit to state a material fact
necessary in order to make the statements contained herein and therein not
misleading. There is no fact known to a Selling Shareholder or QOI which
materially adversely affects, or in the future may (so far as can now be
reasonably foreseen) materially adversely affect, QOI or any of its
Subsidiaries, its financial condition its business or its prospects which
has not been set forth in this Agreement or other information or material
provided in writing by QOI to MRV.
5.25 Representations and Warranties Regarding Acquisition of MRV Shares. Each of
the Selling Shareholders represents and warrants to MRV as follows:
5.25.1 Disclosure; Access to Information. Each of the Selling
Shareholders has received or will receive prior to the Closing
all documents, records, books and other information pertaining to
such Selling Shareholder's investment in MRV that have been
requested by such Selling Shareholder, including the opportunity
to ask questions and receive answers. MRV is subject to the
periodic reporting requirements of the United States Securities
Exchange Act of 1934 (the "Exchange Act"), and each of the
Selling Shareholders has reviewed or received copies of any such
reports filed by MRV with the SEC under the Exchange Act that
have been requested by such Selling Shareholder.
5.25.2 Manner of Sale. At no time were any of the Selling Shareholders
presented with or solicited by or through any leaflet, public
promotional meeting, television advertisement or any other form
of general solicitation or advertising.
5.25.3 Registration or Exemption Requirements. Each of the Selling
Shareholders further acknowledges and understands that the MRV
Shares
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may not be transferred, resold or otherwise disposed of in the
United States except in a transaction registered under the United
States Securities Act of 1933 (the "Securities Act") and any
applicable state securities laws, or unless an exemption from
such registration is available.
5.25.4 No Legal, Tax or Investment Advice. Each of the Selling
Shareholders understands that nothing in this Agreement or any
other materials presented to the Selling Shareholders in
connection with the purchase of MRV Shares constitutes legal, tax
or investment advice. The Selling Shareholders have relied on,
and have consulted with, such legal, tax and investment advisors
as they, in their sole discretion, have deemed necessary or
appropriate in connection with their purchase of the MRV Shares.
5.25.5 No Registration, Review or Approval. Each Selling Shareholder
acknowledges and understands that the offering and sale of MRV
Shares pursuant to this Agreement has not been reviewed or
approved by the SEC or by any state or other securities
commission, authority or agency, and is not registered under the
Securities Act or under the securities or "blue sky" laws, rules
or regulations of any state. Each Selling Shareholder
acknowledges, understands and agrees that the MRV Shares are
being offered and sold hereunder pursuant to an offshore offering
exemption to the registration provisions of the Securities Act
pursuant to Regulation S promulgated under such Act. Each Selling
Shareholder understands that MRV is relying upon the truth and
accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Selling Shareholder
set forth herein in order to determine the applicability of such
exemptions and the suitability of each Selling Shareholder to
acquire the MRV Shares.
5.25.6 Investment Intent. Without limiting its ability to resell the MRV
Shares pursuant to an effective registration statement, or an
exemption from such registration, each Selling Shareholder is
acquiring the MRV Shares solely for its own account and not with
a view to the distribution, assignment or resale to others. Each
Selling Shareholder understands and agrees that it may bear the
economic risk of its investment in the MRV Shares for an
indefinite period of time.
5.25.7 Offering Outside the United States. Each Selling Shareholder is
not a "U.S. Person" as defined in Regulation S (as the same may
be amended from time to time) promulgated under the Securities
Act. At the time the buy order for this transaction was
originated, each Selling Shareholder was outside the United
States and no offer to purchase the MRV Shares was made in the
United States. Each Selling Shareholder agrees not to reoffer or
sell the MRV Shares, or to cause any transferee permitted
hereunder to reoffer or sell the MRV Shares, within the United
States, or for the account or benefit of a U.S. Person, (i) as
part of the distribution of the MRV Shares at any time, or (ii)
otherwise, only in a transaction meeting the requirements of
Regulation S under the Securities Act, including without
limitation, where the offer (i) is not made to a person in the
United States
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and either (A) at the time the buy order is originated, the Buyer
is outside the United States or MRV and any person acting on its
behalf reasonably believe that the buyer is outside the United
States, or (B) the transaction is executed in, on or through the
facilities of a designated offshore securities market and neither
the seller nor any person acting on its behalf knows that the
transaction has been pre-arranged with a buyer in the United
States, and (ii) no direct selling efforts shall be made in the
United States by the buyer, an affiliate or any person acting on
their behalf, or in a transaction registered under the Securities
Act or pursuant to an exemption from such registration.
5.25.8 Regulation S Offering Transfer Restrictions. The transaction
restrictions in connection with this offshore offer and sale
restrict each Selling Shareholder from offering and selling to
U.S. Persons, or for the account or benefit of a U.S. Person, for
a period of time (the "Distribution Compliance Period"). The
Distribution Compliance Period for the MRV Shares is one (1) year
from the Closing.
5.25.9 Legend. A legend substantially in the following form will be
placed on any certificates or other documents evidencing the MRV
Shares so as to restrict the resale, pledge, hypothecation or
other transfer thereof in accordance with the provisions hereof
and the provisions of Regulation S promulgated under the
Securities Act:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (TOGETHER
WITH THE REGULATIONS PROMULGATED THEREUNDER, THE "SECURITIES
ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED,
PLEDGED OR HYPOTHECATED WITHIN THE UNITED STATES (AS THAT TERM IS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT) OR
TO A U.S. PERSON (AS THAT TERM IS DEFINED IN REGULATION S) IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. HEDGING TRANSACTIONS
INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE (THE "SHARES") MAY
NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR ANY MANNER
DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF CERTAIN STOCK
PURCHASE AGREEMENT AND ESCROW AND PLEDGE AGREEMENT (COLLECTIVELY
THE "AGREEMENTS") BETWEEN MRV COMMUNICATIONS, INC. (THE
"COMPANY") AND THE REGISTERED HOLDER OF THE SHARES (OR THE
PREDECESSOR IN INTEREST TO THE SHARES) (COLLECTIVELY THE
"HOLDER") (AND, IN THE CASE OF THE ESCROW AND PLEDGE
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AGREEMENT, THE LAW FIRM OF XXXXX & XXXXXXXX, TAIPEI OFFICE AS
ESCROW AGENT). THE AGREEMENTS GRANT CERTAIN RIGHTS IN FAVOR OF
THE COMPANY, INCLUDING HAVING THE SHARES PLACED IN ESCROW WITH
ESCROW AGENT UNDER THE ESCROW AND PLEDGE AGREEMENT AND CREATING A
FIRST PRIORITY PLEDGE AND SECURITY INTEREST IN THE SHARES TO
SECURE OBLIGATIONS OF THE HOLDER TO THE COMPANY ARISING OUT OF
THE ESCROW AND PLEDGE AGREEMENT AND SECTION 10 OF THE STOCK
PURCHASE AGREEMENT. THE SECRETARY OF THE COMPANY WILL UPON
WRITTEN REQUEST FURNISH A COPY OF THE AGREEMENTS TO A HOLDER OR
AN INTERESTED PARTY WITHOUT CHARGE."
5.25.10 Permitted Offers and Sales. Offers and sales of MRV Shares prior
to the expiration of the Distribution Compliance Period (or the
effective date of the Registration Statement) may be made (only
if otherwise so permitted by this Agreement) pursuant to the
following conditions:
(a) The purchaser of the MRV Shares, other than a distributor,
certifies that it is not a U.S. Person and is not acquiring
the MRV Shares for the account or benefit of any U.S. Person
or is a U.S. Person who purchased the MRV Shares in a
transaction that did not require registration under the
Securities Act;
(b) The Purchaser of the MRV Shares agrees to sell such
securities only in accordance with Regulation S as
promulgated under the Securities Act, pursuant to
registration under the Securities Act, or pursuant to an
available exemption from registration; and agrees not to
engage in hedging transactions with regard to such MRV
Shares unless in compliance with the Securities Act; and
(c) The MRV Shares contain a legend, substantially in the form
of Section 5.25.9 herein, to the effect that transfer of the
MRV Shares is prohibited except in accordance with
Regulation S, pursuant to registration under the Securities
Act, or pursuant to an available exemption from
registration; and that hedging transactions involving those
MRV Shares may not be conducted unless in compliance with
the Securities Act.
5.25.11 No Hedging. Selling Shareholders agree not to engage in hedging
transactions with respect to the MRV Shares prior to the
expiration of the Distribution Compliance Period. For offers and
sales of the MRV Shares prior to the expiration of the
Distribution Compliance Period, such offering materials must
state that hedging transactions involving those securities may
not be conducted unless in compliance with the Securities Act and
Regulation S promulgated thereunder.
5.26 Brokers' Fees. Selling Shareholders shall be responsible to pay any fees or
commissions to any broker or finder, with respect to the transactions
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contemplated by this Agreement for which the Selling Shareholders
could be liable or obligated. MRV and the Escrow Agent shall not
be responsible whatsoever with respect to such fees or
commission.
6. REPRESENTATIONS AND WARRANTIES OF MRV
MRV represents and warrants to QOI and the Selling Shareholders that the
statements contained in this Section 6 are correct and complete as of the date
of this Agreement and as of the Closing Date.
6.1 Organization of MRV. MRV and its Subsidiaries/Affiliates are corporations
duly organized, validly existing, and in good standing under the laws of
the jurisdiction of their incorporation.
6.2 Authorization of Transaction. MRV and its Subsidiaries/Affiliates have full
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform their obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of MRV and
its Subsidiaries/Affiliates, enforceable in accordance with its terms and
conditions. MRV and its Subsidiaries/Affiliates need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement other than the filings required
by the Xxxx-Xxxxx-Xxxxxx Act.
6.3 Brokers' Fees. MRV has no Liability or obligation to pay any fees or
commissions to any broker or finder with respect to the transactions
contemplated by this Agreement for which MRV could become liable or
obligated.
6.4 No Conflicts. Neither the execution and delivery of this Agreement nor the
consummation by MRV of the transactions contemplated hereby will (i)
violate any of the provisions of the by-law of MRV, (ii) violate any
provision of Applicable Law, rule or regulation which violation would
prevent MRV from being able to consummate the transactions contemplated by
this Agreement, or (iii) conflict with or result in a breach of, require
consent under, give rise to a right of termination of, or accelerate the
performance required by the terms of any judgement, court order or consent
decree, or any agreement, indenture, mortgage or instrument to which MRV is
a party or to which either of its property is subject, or constitute a
default thereunder.
6.5 Capitalization; Validity of Securities. As of the date hereof and as of the
Closing Date, all issued and outstanding ordinary shares of MRV are and
will be duly authorized, validly issued, fully paid and non-assessable. The
MRV Shares when issued and paid for in accordance with the terms and
conditions of this Agreement, will be validly authorized, legally issued,
fully paid and non-assessable, and the delivery to the Selling Shareholders
pursuant to this Agreement shall vest in them good and marketable title
thereto, free of any Encumbrances, except for restrictions on transfers set
forth herein or imposed by law and except for any Encumbrance created by
the Selling Shareholders themselves.
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6.6 Reporting Company. MRV is a reporting company under Section 12 of the
Exchange Act required to file periodic reports pursuant to Section 13 or 15
of the Exchange Act and has timely filed all such periodic reports with the
SEC during the past 12 months.
6.7 Approvals. No consent, approval, order, or authorization of, or
registration, qualification, designation, declaration, or filing with, any
governmental authority is required on the part of MRV in connection with
the execution and delivery of this Agreement, the offer, issuance, sale,
and delivery of the MRV Shares, or the other transactions to be consummated
at the Closing, as contemplated by this Agreement, except such filings as
shall have been made prior to and shall be effective on and as of the
Closing (except for filings required under the Xxxx-Xxxxx-Xxxxxx Act or the
United States securities laws or regulations or the regulations of the
NASDAQ Stock Market or the Applicable Laws). Based on the representations
made by the Selling Shareholders in Section 5 of this Agreement, the offer
and sale of the MRV Shares to Selling Shareholders will be in compliance
with applicable U.S. Federal and state securities laws.
6.8 Compliance. MRV is, in all material respects, in compliance with all laws,
regulations, and orders applicable to its present business and has all
permits and licenses required thereby where the failure to so be in
compliance or to have such permits or licenses would be reasonable likely
to materially adversely affect, the business, prospects, condition
(financial or otherwise), affairs, or operations of MRV and its
subsidiaries taken as a whole.
7. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the execution of
this Agreement and the Closing:
7.1 General. Each of the Parties will use its best efforts to take all action
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 8 below).
7.2 Approvals, Notices and Consents. Each of the Parties will shall use their
best efforts to satisfy all Conditions Precedent to the Closing and will
give any necessary notices to third parties, and will use its best efforts
to obtain any necessary third party consents, that MRV reasonably may
request in connection with the matters referred to in Section 5 above. Each
of the Parties will (and will cause to) give any notices to, make any
filings with, and use its best efforts to obtain any authorizations,
consents, and all necessary Approvals. Without limiting the generality of
the foregoing, the Selling Shareholders shall report the transfer of the
QOI Shares to the SFC.
7.3 Operation of Business. QOI and each of its Subsidiaries will not engage in
any practice or take any action outside the Ordinary Course of Business of
or which results in a material adverse change in the business, financial
condition, operations or results of operations of, except for actions to
which MRV has given its prior consent.
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7.4 Preservation of Business. QOI and each of its Subsidiaries will keep its
business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
7.5 Reserved Matters
Between the date hereof and Closing, the Selling Shareholders and QOI shall
cause the managing team (directors, supervisors and Principal Employees of
QOI) to procure that QOI and each of its Subsidiaries shall not without the
prior consent in writing of MRV:
(a) enter into any transaction or incur any obligation or liability
(absolute or contingent), except for current liabilities
incurred, and contracts and transactions entered into, in the
Ordinary Course of Business;
(b) dispose of or acquire any assets or properties or cancel any
debts or claims, except in each case in the Ordinary Course of
Business;
(c) increase any benefits to employees under pension, insurance or
other employee benefit programs or enter into any deferred
compensation agreement with any of its directors, officers or
employees except for increase in compensation for employees and
probationary employees for which QOI or any of its Subsidiaries
is contractually bound to give;
(d) enter into an agreement to do any of the things described in
Section 5.10;
(e) cease to pay its creditors in the Ordinary Course of Business;
(f) repay any loan capital in whole or in part (other than
indebtedness to its bankers) or become bound or liable to be
called upon to repay prematurely any loan capital or borrowed
moneys;
(g) declare any dividend or pass any resolutions or do anything in
the conduct or management of the affairs of either QOI or any of
its Subsidiaries which would be likely materially to reduce the
value of the business;
(h) suffer any material adverse change in its financial condition,
assets, business, properties, liabilities, earnings, operations,
affairs or prospects;
(i) waive or release any right of a material or substantial value
howsoever arising;
(j) incur any capital expenditure or make any capital commitment of
an amount in excess of US$1.0 million (US$1,000,000) or dispose
of any fixed assets having a value of more than US$1.0 million
(US$1,000,000) in aggregate;
(k) make any purchase or sale or introduce any method of management
or operation in respect of the business except in a manner
consistent with proper prior practice;
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(l) discharge or satisfy any lien or encumbrance or any other
obligation or liability (absolute or contingent) other than
liabilities in the Ordinary Course of Business;
(m) pass any resolution the result of which would be its winding up,
liquidation or receivership, or make any composition or
arrangement with creditors;
(n) carry on any business other that the business or otherwise change
the nature or geographical area of its business;
(o) enter into any partnership or joint venture arrangement or set up
any subsidiary or associated company;
(p) create any fixed or floating charge, lien (other than a lien
arising by operation of law) or other encumbrance over the whole
or any part of its undertaking, property or assets;
(q) undertake anything which would require accounting treatment by
way of provision, reserve or extraordinary item;
(r) make, amend or terminate any contract, loan, guarantee or other
arrangement with any Selling Shareholders or any of their
respective Affiliates;
(s) make, amend or terminate any long-term, unusual or onerous
contract (long-term meaning a contract under which the
obligations of any party thereto may remain outstanding for more
than twelve (12) months) or take any action which could, as a
consequence of any action taken by another party, result in any
of the same.
7.6 Full Access. QOI and each of its Subsidiaries will permit representatives
of MRV to have full access on a confidential basis at all reasonable times,
and in a manner so as not to interfere with the normal business operations
of, to all premises, properties, personnel, books, records (including Tax
records), contracts, and documents of or pertaining to QOI and each of its
Subsidiaries;
7.7 Notice of Developments. QOI and each of its Subsidiaries will give prompt
written notice to MRV of any material adverse development causing a breach
of any of the representations and warranties in Section 5 above. Each Party
will give prompt written notice to the others of any material adverse
development causing a breach of any of its own representations and
warranties in Sections 5 and 6 above.
7.8 Exclusivity. QOI and each of its Subsidiaries will not solicit, initiate,
or encourage the submission of any proposal or offer from any other Person
relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets, of QOI (including any
acquisition structured as a merger, consolidation or share exchange).
7.9 Supervisor. QOI and Selling Shareholders agree that they will fully
cooperate with MRV to have one of the existing supervisor of QOI being
replaced by a person
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designated by MRV ("Nominee Supervisor") for purpose of conducting the
special shareholders meeting to elect the new directors and supervisors and
to conduct other necessary corporate actions after the Closing. MRV agrees
that it shall cause Nominee Supervisor to resign from its position in the
event that the Closing is not completed prior to Target Date or any other
date as agreed by the Parties.
7.10 QOI and Selling Shareholders agree to confirm to MRV in writing within one
month of execution of this Agreement the definite list of the name and
number of shares of Selling Shareholders and shall cause all the Selling
Shareholders to agree to be a Party of this Agreement and bear the same
obligations and liabilities as the Signing Shareholders under this
Agreement and Escrow Agreement and issue a Power of Attorney in the form
attached as Exhibit A to authorize the Attorneys-in-Fact to sign this
Agreement and perform their obligations hereunder on their behalf in
connection with their respective QOI Shares.
7.11 The Parties shall each use their best efforts to procure the fulfillment of
the conditions set forth in Section 8 hereof on or before the Closing, and
in particular, shall furnish such information, supply such documents, and
do all such acts and things as may be required to enable such conditions to
be fulfilled.
7.12 The Selling Shareholders and QOI shall cause any personal or corporate
guarantors who provide Guaranties on the indebtedness or other obligations
of QOI or any of its Subsidiaries to continually provide guaranties over
the same after the execution of this Agreement in accordance with the
current terms thereof. MRV shall use good faith efforts to determine and
take suitable measures for relieving or indemnifying the personal or
corporate guarantors who provide Guaranties on the indebtedness of QOI or
any of its Subsidiaries as listed in Schedule 26 as soon as practicable
after Closing.
7.13 At least five (5) Business Days prior to the Closing, the Selling
Shareholders (or Attorney(s)-in-Fact or QOI in whose name the Taiwan
Account shall be registered) shall give the Taiwan Account passbook, chops
and the Power-of-Attorney-Form B to Closing Agent.
7.14 The Selling Shareholders shall sign through their duly authorized
representative (i) an Escrow Agreement with the Escrow Agent as described
in Section 10.2.3; and (ii) any other documents required in this Agreement
or in the Escrow Agreement.
7.15 The Selling Shareholders (or Attorney(s)-in-Fact or QOI in whose name the
Taiwan Account shall be registered) shall, prior to five (5) Business Days
prior to the Closing, give the Taiwan Account passbook, chops and a Power
of Attorney-Form B to the law firm of Xxxxx & XxXxxxxx, Taipei Office as
the Closing Agent of Selling Shareholders (the "Closing Agent") granting
said Closing Agent the exclusive right to give instructions to the bank
with respect to the Taiwan Account.
7.16 Within twenty (20) days after the execution of this Agreement, QOI and the
Selling Shareholders shall be responsible to implement and provide a list
of Principal Employees (as defined and discussed below) which shall include
the key employees in the technical team of QOI and each of its
Subsidiaries. Such list shall be incorporated into this Agreement as
Schedule 24. QOI and the Signing
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Shareholders shall be responsible to implement and provide any other
necessary information to be contained in the Schedules relating to the
warranties and representations described in Section 5 of this Agreement.
7.17 QOI and the Selling Shareholders shall cause Mr. Nang-Wang Wang and other
employees of QOI to assign and transfer, at no charge, title to all patents
and other Intellectual Property rights (including, but not limited to, all
registrations and applications for such patents and other Intellectual
Property rights registered with or applied to the Intellectual Property
Office of the Republic of China) set forth in Schedule 25 hereto to QOI,
within twenty (20) days of execution of this Agreement.
7.18 MRV shall provide the Attorney-in-Fact copies of its most recent public
filings with the SEC (including MRV's most recent available financial
statements) within two weeks of the execution of this Agreement.
7.19 Both Parties agree to discuss and identify a mutually acceptable manner by
which MRV can support QOI, up to Xxx Xxxxxxx, Xxxxx-Xxxxxxx Xxxxxxxx Xxxxxx
Xxxxxx Dollars (US$1,300,000), for the balance of payment for two Type
APS1104 Vacuum Coating System machines, during the period between execution
of this Agreement and Closing. If the Parties are able to agree on a manner
for MRV to provide said support, it shall be a condition precedent to
Closing that MRV provide such support in accordance with the agreed terms.
8. CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions to Obligation of MRV. The obligation of MRV to consummate the
transactions to be performed by it in connection with the Closing is
subject to satisfaction of the following conditions:
8.1.1 QOI and the Selling Shareholders shall have complied with all of
their respective agreements and covenants contained herein to be
performed at or prior to the Closing, and all their
representations and warranties contained herein shall be true and
accurate on and as of the Closing Date with the same effect as
though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified
date shall continue on the Closing Date to have been true as of
the specified date, and MRV shall have received a certificate of
the Selling Shareholders and QOI, dated as of the Closing Date,
substantially in the form of Exhibit C certifying as to the
fulfillment of the condition set forth in this Section 8.1.1 (the
"QOI's Bring-Down Certificate").
8.1.2 MRV shall have received the written agreement (in the form
attached as Exhibit E) of the "Principal Employees" of QOI and
each of its Subsidiaries to continue in the employment of said
companies for a period of at least two (2) years after the
Closing Date on mutually agreed upon salary and benefit terms
(including the stock option plan) and on such other terms as MRV
normally requires of its employees. In any event, their salary
and other cash benefits shall be based on those of the year of
1999. For this purpose, the
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following individuals are deemed to be "Principal Employees" of
QOI and its Subsidiaries: Wang Xxxx Xxxx, Keh-xxxxx Xxx, Wen-Xxxx
Xxxxxx, Xxxx-Xxxxx Xxx and any other Principal Employees whose
names are shown in Schedule 24.
8.1.3 No statute, rule or regulation, or order of any court or
administrative agency shall be in effect which restrains or
prohibits from consummating the transaction contemplated hereby.
8.1.4 No material action, suit or proceeding before any court or any
governmental body or authority against the Selling Shareholders,
either QOI or its Subsidiaries, or pertaining to the transactions
contemplated by this Agreement or their consummation, shall have
been instituted on or before the Closing Date.
8.1.5 The Approvals and all necessary agreements and consents of any
third parties for which QOI is required to obtain shall have been
obtained, and true and complete copies thereof delivered to MRV.
8.1.6 Each Encumbrance or obligation to create any Encumbrance, if any,
on QOI Shares shall have been terminated and released prior to
the Closing Date, and the Selling Shareholders shall have
provided evidence, in form and substance satisfactory to MRV, of
such termination and release.
8.1.7 During the Closing, there shall not have occurred any event or
condition materially and adversely affecting the assets or the
financial condition, results of operations or business prospects
of QOI or any of its Subsidiaries from those reflected in the
Financial Statements, except as disclosed in this Agreement or
the Schedules hereto.
8.1.8 Selling Shareholders and QOI shall have delivered to MRV at the
Closing each agreement, instrument, certificate and document
required by this Agreement and the Financial Statements, the
Latest Financial Statements, and the Auditor Consent as required
by Section 5.3.1 of this Agreement, and Selling Shareholders'
Payment shall be received by MRV during the Closing.
8.1.9 QOI Shares available for sale to MRV in accordance with the terms
of this Agreement shall be not less than seventy-five percent
(75%).
8.1.10 All final due diligence results on QOI and its Subsidiaries are
satisfactory to MRV.
8.1.11 QOI and Selling Shareholders shall confirm, within two weeks from
the execution of this Agreement, whether Fair Trade Commission
(FTC) approval is required. If FTC approval is required, all
Parties shall cooperate to obtain such approval. If required,
obtaining such approval shall be a condition precedent to
Closing.
MRV may waive any condition specified in this Section 8.1 if it executes a
writing
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so stating at or prior to the Closing.
8.2 Conditions to Obligation of the Selling Shareholders. The obligation of the
Selling Shareholders to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:
8.2.1 MRV and its Subsidiaries/Affiliates shall have complied with all
of their agreements and covenants contained herein to be
performed at or prior to the Closing, and all their
representations and warranties contained herein shall be true and
accurate on and as of the Closing Date with the same effect as
though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified
date shall continue on the Closing Date to have been true as of
the specified date and Selling Shareholders shall have received a
certificate dated as of the Closing Date, substantially in the
form of Exhibit D certifying as to the fulfillment of the
condition set forth in this Section (the "MRV's Bring-Down
Certificate").
8.2.2 No statute, rule or regulation, or order of any court or
administrative agency shall be in effect which restrains or
prohibits the Parties from consummating the transaction
contemplated hereby.
8.2.3 The Approvals and all necessary agreements and consents of any
third parties shall have been obtained and true and complete
copies thereof delivered to Selling Shareholders
8.2.4 MRV's' Payment shall, via Closing Agent, be made to
Attorneys-in-Fact for and on behalf of Selling Shareholders
during the Closing.
8.2.5 MRV and MRV Subsidiary shall have delivered to Selling
Shareholders at the Closing each agreement, instrument,
certificate and document required by this Agreement.
Selling Shareholders may waive any condition specified in this Section 8.2
if it executes a writing so stating at or prior to the Closing.
9. POST CLOSING COVENANTS
9.1 QOI and the Selling Shareholders agree that they will fully cooperate with
MRV to convene all necessary corporate actions including but not limited to
holding the shareholders meetings and the directors meetings to elect the
new directors and Supervisors and to amend the article of incorporation, if
necessary.
9.2 QOI and the Selling Shareholders agree that they will fully cooperate with
MRV to manage the operation and business conducted by QOI and each of its
Subsidiaries within one year of Closing.
9.3 QOI and Selling Shareholders agree that they will fully cooperate with MRV
and use their best efforts to obtain further additional consents from the
auditors on the Financial Statements to include auditor's reports in other
filing to be made by MRV
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with the SEC as necessary from time to time.
9.4 MRV shall promptly provide certificates or documents to QOI and Selling
Shareholders, should the government of ROC or Applicable Law require QOI or
the Selling Shareholders to submit the same.
9.5 MRV agrees to file a registration statement with the U.S. Securities and
Exchange Commission (the "SEC") within appropriate days as reasonably
determined by MRV following the Closing to register the MRV Shares to be
issued to the Selling Shareholders under the transaction hereunder and
exercise its best efforts to obtain as soon as practicable an effective
registration statement aimed to release the Selling Shareholders from the
resale restriction imposed by the Regulation S under the Securities Act of
1933, as amended. Provided however, MRV does not guarantee the successful
registration and the time period required to obtain such successful
registration.
10. INDEMNIFICATION, PLEDGE AND ESCROW
10.1 Survival of Representations and Warranties
All of the representations and warranties contained in Sections 5 and 6
above, shall survive the Closing hereunder (even if the other Party knew or
had reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect for a period of two
(2) years thereafter (subject to any applicable statutes of limitations).
Provided however, QOI's liabilities concerning the said representations and
warranties may be waived under the discretion of MRV without releasing the
liabilities of the Signing Shareholders.
10.2 Indemnification Provisions
10.2.1 MRV shall indemnify, defend and hold harmless the Selling
Shareholders against any and all losses that any of them may
suffer, sustain or become subject to as a result of any breach by
MRV of its warranties, representations, agreements or covenants
set forth in this Agreement.
10.2.2 In the event that QOI or any of the Selling Shareholders breaches
any of their covenants in Sections 7 and 9 above or any of its
representations and warranties in Section 5 above or any other
obligations set forth in this Agreement other than those
contained in Section 13.18 for which the relevant Party shall be
responsible, and, if there is an applicable survival period
pursuant to Section 10.1 above, provided that MRV makes a written
claim for indemnification against the Selling Shareholders and/or
QOI, then the Selling Shareholders (or, in the case of Section
13.18, the relevant responsible Party only) and QOI agree to
jointly and severally indemnify MRV from and against the entirety
of any Adverse Consequences MRV may suffer through and after the
date of the claim for indemnification (including any Adverse
Consequences MRV may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in
the nature of, or caused by the breach. The Parties further agree
that MRV shall
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first look to the Escrow Shares to satisfy any indemnity claim.
The Parties agree that the maximum indemnification of liabilities
of each Selling Shareholder shall be capped at the value of MRV
Shares each Selling Shareholder received, determined by the
closing price for MRV Shares on the date SEC registration of the
shares (as referred to in Section 9.5) becomes effective;
provided, however, that in no event shall the value per share for
the purposes of determining the cap exceed Seventy United States
Dollars (US$70) per share, nor shall the value for said purpose
fall below Fifty-Eight United States Dollars per share.
10.2.3 Pledge and Escrow. The Parties agree the following:
(a) the representations, warranties, covenants and obligations
of the Selling Shareholders shall be secured by placing
One-Hundred-Seventy-One Thousand, Four-Hundred Twenty-Nine
(or the appropriate pro rata share thereof in the case that
less than 100% of the QOI Shares are delivered) of the MRV
Shares owned by the Selling Shareholders in escrow (the
"Escrowed Shares") under an Escrow Agreement in the form
attached hereto as Exhibit F (the "Escrow Agreement") and
pledge the Escrowed Shares to the Escrow Agent (defined
below) in favor of MRV. Schedule 27 sets out the names of
the Selling Shareholders and their respective ownership
interest in the Escrowed Shares. In the event that payment
is required to MRV as a result of invocation of the
indemnification clauses of this Agreement, the Escrowed
Shares shall be taken from the escrow account and delivered
to MRV pro rata to the shareholding of the Selling
Shareholders in MRV Shares or as shall otherwise be agreed
among the Selling Shareholders.
Notwithstanding the above, in the event that less than 100%
of QOI Shares sold and delivered to MRV, the number of
Escrowed Shares shall be adjusted down by the same
percentage as those QOI Shares not available for sale are as
a percentage of the total QOI Shares of outstanding on the
date of execution of this Agreement.
(b) The Parties shall appoint the firm of Xxxxx & XxXxxxxx,
Taipei office, with Xxxxx X. Xxxx as its representative, as
escrow agent (the "Escrow Agent") to proceed pursuant to the
Escrow Agreement.
(c) The relevant escrow fees ("Escrow Fees") as described in the
Escrow Agreement shall be borne equally by the Selling
Shareholders and MRV. The Selling Shareholders and MRV shall
each pay their portion, in cash, on the Closing Date.
10.3 Matters Involving Third Parties
10.3.1 If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other
Party (the
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"Indemnifying Party") under this Section 10, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that 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
thereby is prejudiced.
10.3.2 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 fifteen (15) days after the Indemnified Party
has given notice of the Third Party Claim that the Indemnifying
Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences 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 of the
Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
10.3.3 So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 10.3.2 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 or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnifying Party, and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written
consent of the Indemnified Party.
10.3.4 In the event any of the conditions in Section 10.3.2 above is or
becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, the Third Party Claim in any
manner it reasonably may 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
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(including reasonable attorneys' fees and expenses), and (C) the
Indemnifying Parties will remain responsible for any Adverse
Consequences 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
10.
11. TERMINATION.
11.1 Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
11.1.1 The Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing; and
11.1.2 Either party to this Agreement may terminate this Agreement by
giving written notice to the other party if the Closing shall not
have occurred on or before Target Day, except that the right to
terminate this Agreement pursuant to this Section 11 shall not be
available to (A) QOI or the members of the Selling Shareholders
if the failure to consummate the Closing on or before such date
was caused by or resulted from the failure of any member of
Selling Shareholders or QOI to fulfill any of its obligations
under this Agreement or (B) MRV if the failure to consummate the
Closing on or before such date was caused by or resulted from
MRV's failure to fulfill any of its obligations under this
Agreement.
11.2 Effect of Termination. If any Party terminates this Agreement pursuant to
Section 11.1 above, all further obligations of the Parties hereto shall
become null and void and no party shall have any liability to any other
party, unless the basis for such termination was the failure by such party
to fulfill its covenants and agreements set forth herein. In the event that
the Closing is not completed, either Party will destroy or return to the
other Party the Confidential Information of the other Party.
12. TRANSFER RESTRICTION
Each of the Selling Shareholders agree that the Selling Shareholders shall not
sell the MRV Shares in a group at one time more than one hundred thousand
(100,000) shares. Such grouped sales shall be further restricted to a total of
one hundred thousand (100,000) shares in any given month. This restriction does
not apply if a Selling Shareholder is selling the MRV Shares alone and not in
concert in any way with any other Selling Shareholders.
13. MISCELLANEOUS
13.1 Press Releases and Public Announcements
No Party shall issue any press release or make any public announcement
relating to the subject matter of this Agreement prior to the Closing
without the prior written
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approval of the other Parties; provided, however, that any Party may make
any public disclosure it believes in good faith is required by Applicable
Law or any listing or trading requirement concerning its publicly-traded
securities (in which case the disclosing Party will notify the other
Parties of such disclosure forty-eight (48) hours prior to making the
disclosure).
13.2 No Third-Party Beneficiaries. This Agreement shall not confer any rights or
remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
13.3 Notices
All notices and other communications required or permitted under this
Agreement shall be in writing and shall be sent by facsimile transmission
to the other parties at the fax number set forth below for MRV (in the case
of a notice to be sent to MRV) or for QOI (in the case of notices to be
sent to QOI or the Selling Shareholders prior to the Closing--after the
Closing they shall designate a representative and provide a fax number for
this purpose), with a copy sent by first class mail or express courier to
said parties at the address provided to the other parties, or to such other
fax number and/or address as a party may hereinafter designate by notice to
the other. Notice shall be effective on the date it is sent by facsimile
transmission if the facsimile transmission report confirms receipt by the
receiving fax.
- To QOI
Attention: Keh-xxxxx Xxx
Fax: (000-0) 000-0000
- To MRV
Attention: Xxxx Xxxxx
Fax: (0-000) 000-0000
- To Selling Shareholders
Attention: Keh-xxxxx Xxx
Fax: (000-0) 000-0000
13.4 Headings
The headings contained in this Agreement (including but not limited to the
titles of the Schedules and Exhibits hereto) have been inserted for
convenience of reference only, and neither such headings nor the placement
of any term hereof under any particular heading shall in any way restrict
or modify any of the terms or provisions hereof. Terms used in the singular
shall be read in the plural, and vice versa, and terms used in the
masculine gender shall be read in the feminine or neuter gender when the
context so requires.
13.5 Schedules, Exhibits and Annexes
All Schedules, Exhibits and Annexes attached to this Agreement constitute
an integral part of this Agreement as if fully rewritten herein.
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13.6 Entire Agreement
This Agreement (including the documents referred to herein) constitutes the
entire agreement among the Parties and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or oral, to
the extent they related in any way to the subject matter hereof.
13.7 Succession and Assignment
This Agreement shall be binding upon and inure to the benefit of the
Parties named herein and their respective successors and permitted assigns.
No Party may assign either this Agreement or any of its rights, interests,
or obligations hereunder without the prior written approval of the other
Parties; provided, however, that MRV may (i) assign any or all of its
rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases MRV nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
13.8 Counterparts
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together will constitute one
and the same instrument.
13.9 GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF TAIWAN, THE REPUBLIC OF CHINA.
13.10 Amendments and Waivers
No amendment of any provision of this Agreement shall be valid unless the
same shall be in writing and signed by the Parties. No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall 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 occurrence.
13.11 Severability
Any term or provision of this Agreement that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation
or in any other jurisdiction.
13.12 Cost and expenses
Except this Agreement provides otherwise, each of the Parties shall bear
its own
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costs and expenses (including but not limiting to legal fees and expenses)
incurred in connection with this Agreement and the transactions
contemplated hereby.
13.13 Construction
The Parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation. The Parties
intend that each representation, warranty, and covenant contained herein
shall have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect, the
fact that there exists another representation, warranty, or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
13.14 Specific Performance
Each of the Parties acknowledges and agrees that the other Parties would be
damaged irreparably in the event any of the provisions of this Agreement
are not performed in accordance with their specific terms or otherwise are
breached. Accordingly, each of the Parties agrees that, the other Parties
shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court
of Taiwan, the Republic of China or any other state thereof having
jurisdiction over the Parties and the matter, in addition to any other
remedy to which they may be entitled, at law or in equity.
13.15 Submission to Jurisdiction
Any dispute relating to the validity, performance, construction or
interpretation of this Agreement that cannot be resolved amicably among the
Parties shall be submitted to the jurisdiction of the Taipei District Court
in any action or proceeding arising out of or relating to this Agreement
and agrees that all claims in respect of the action or proceeding may be
heard and determined in such court. Each Party further agrees not to bring
any action or proceeding arising out of or relating to this Agreement in
any other court. Each of the Parties waives any defense of inconvenient
forum to the maintenance of any action or proceeding so brought and waives
any bond, surety, or other security that might be required of any other
Party with respect thereto. Any Party may make service on any other Party
by sending or delivering a copy of the process to the Party to be served at
the address and in the manner provided for the giving of notices in Section
13.3 above. Nothing in this Section 13.15, however, shall affect the right
of any Party to serve legal process in any other manner permitted by law or
at equity. Each Party agrees that a final judgment in any action or
proceeding so brought shall be conclusive and may be
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enforced by suit on the judgment or in any other manner provided by law or
at equity.
13.16 Attorney's Fees
In the event that a party to this Agreement commences any legal action
under this Agreement to enforce any of its rights hereunder, or to recover
damages for any breach or default by the other party or parties hereto of
any of its (their) obligations hereunder, the prevailing party in any such
legal action shall be entitled to recover from the other party all of its
costs and expenses incurred in connection with such legal action, including
reasonable attorneys' fees,
13.17 Confidential Information
QOI and each of Selling Shareholders and MRV shall:-
(a) not use or disclose to any person Confidential Information; and
(b) use all reasonable endeavours to prevent the use or disclosure of
Confidential Information by any person.
This Section 13.17 does not apply to:-
(a) use or disclosure of Confidential Information required to be
disclosed by law, regulation or any revenue authority;
(b) disclosure of Confidential Information to professional advisers
for the purpose of advising MRV or QOI; or
(c) Confidential Information which is in the public domain other than
as a consequence of a breach of this Section 13.17.
13.18 Non-Competition
13.18.1 The Selling Shareholders hereby jointly and severally undertake
(except as otherwise agreed in writing with MRV) not to, either
solely or jointly with any other Person (either on their own
account or as the agent of any other Person):-
(a) for a period of one (1) year from Closing carry on or be
engaged or concerned or (except as the holder of shares in a
listed company which confer not more than two per cent. of
the votes which can generally be cast at a general meeting
of the company), interested, or hold more than ten percent
of the shares directly or indirectly in a business which
competes with the type of business carried on by QOI or its
Subsidiaries at Closing in the world; provided, however,
that in the event QOI ceases to conduct a type of business
during the one year period, said business shall be removed
from this restriction;
(b) for a period of two (2) years from the Closing solicit or
accept the
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custom of any person in respect of goods or services
competitive with those manufactured or supplied by QOI
during the period of 12 months prior to Closing, such person
having been a customer of QOI in respect of such goods or
services during such period; provided, however, that in the
event QOI ceases to sell a type of goods or services during
the two year period, said goods or services shall be removed
from this restriction;
(c) for a period of two (2) years from the Closing induce,
solicit or endeavour to entice to leave the service or
employment of any employee of QOI or its Subsidiaries,
likely (in the opinion of MRV) to be:-
(i) in possession of confidential information relating to;
or
(ii) able to influence the customer relationships or
connections of QOI or its Subsidiaries; or
(iii) use any trade or domain name or e-mail address used by
QOI at any time during the two (2) years immediately
preceding the date of this agreement or any other name
intended or likely to be confused with any such trade
or domain name or e-mail address.
13.18.2 Selling Shareholders shall use best efforts to cause the
Principal Employees to undertake, not to, within two years after
the termination of their employment with QOI or its Subsidiaries
either solely or jointly with other Person (either on their own
account or as the agent of any other Person) conduct any
behaviors provided in Section 13.18.1. In the case that any
Principal Employee breaches any obligations contained in the
Principal Employee's Letter of Consent (Exhibit G), the Escrowed
Shares belonging to such breaching Principal Employee and the
unexercised stock options of the breaching Principal Employee
referred to in Article 2.1.5 shall be forfeited and shall be
redistributed among non-breaching Principal Employees by MRV on a
pro rata basis or other methods deemed appropriate by MRV.
13.18.3 Selling Shareholders agree that the undertakings contained in
this Section 13.18 are reasonable and are entered into for the
purpose of protecting the goodwill of the business of QOI and its
Subsidiaries and that accordingly the benefit of the undertakings
may be assigned by MRV and its successors in title without the
consent of the Selling Shareholders.
13.18.4 Each undertaking contained in this Section 13.18.3 is and shall
be construed as separate and severable and if one or more of the
undertakings is held to be against the public interest or
unlawful or in any way an unreasonable restraint of trade or
unenforceable in whole or in part for any reason the remaining
undertakings or parts thereof, as appropriate, shall continue to
bind Selling Shareholders.
13.18.5 If any undertaking contained in this Section 13.18 shall be held
to be void
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but would be valid if deleted in part or reduced in application,
such undertaking shall apply with such deletion or modification
as may be necessary to make it valid and enforceable. Without
prejudice to the generality of the foregoing, such period (as the
same may previously have been reduced by virtue of this Section
13.18.4) shall take effect as if reduced by six months until the
resulting period shall be valid and enforceable.
13.19 Both Parties shall promptly determine the appropriate measures to deal
with the share split which may be approved by the shareholders meeting of
MRV to be held in May 2000.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
MRV COMMUNICATIONS, INC.
/s/ XXXX XXXXX
--------------------------------
By: Xxxx Xxxxx
Title: President & CEO
QUANTUM OPTECH INC.
/s/ KEH-XXXXX XXX
--------------------------------
By: Keh-xxxxx Xxx
Title: Vice-Chairman
SIGNING SHAREHOLDERS
/s/ KEH-XXXXX XXX
--------------------------------
Represented by: Keh-xxxxx Xxx
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ANNEX 1
DEFINITIONS
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"AFFILIATE" means in relation to any Party, any company, other commercial entity
or person which directly or indirectly controls, or is controlled by, under
common control with, any Party or any of the Parties' directors, supervisors or
management personnel.
"APPROVALS" means (i) the approval granted by the Hsinchu Science-based
Industrial Park Administration of the acquisition by MRV of QOI Shares
contemplated by this Agreement so that, after the Closing, QOI shall be deemed
to be a foreign invested company with foreign investment approval (an "FIA
company"), (ii) the approval required under Xxxx-Xxxxx-Xxxxxx Act, and (iii) any
other governmental or regulatory approvals of the transactions contemplated
hereunder which may be required by Applicable Law (if any).
"APPLICABLE LAW" shall include all laws, ordinances, rules, regulations,
administrative or judicial orders, injunctions, notices, approvals or judgment
of any federal, national, state, provincial or local government or governmental
department, agency, or instrumentality.
"BUSINESS DAY" means any day on which banks in both New York and Taiwan are open
for business.
"CLOSING" has the meaning set forth in Section 3.
"CLOSING DATE" has the meaning set forth in Section 3.
"CLOSING AGENT" shall have the meaning set forth in Section 2.1.1 (a).
"CONFIDENTIAL INFORMATION" means any information concerning the transactions
contemplated in this Agreement and is not already generally available to the
public.
"CONTRACT" means any agreement, contract, obligation, promise, or understanding
(whether written or oral and whether express or implied) that is legally binding
on either QOI or any of its Subsidiaries.
"ENCUMBRANCE" means any security interest, lien, claim, option, warrant,
easement, limitation, restriction, royalty, charge, pledge, preemptive or other
right, restraint on alienation, voting trust or arrangement, proxy, shareholders
agreement, mortgage or other encumbrance.
"ESCROW AGENT" shall have the meaning set out in Section 10.2.3.
"ESCROW AGREEMENT" means an Escrow Agreement to be signed by and among MRV,
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Escrow Agent and Signing Shareholders in connection with Escrowed Shares on the
same date of this Agreement.
"ESCROWED SHARES" shall have the meaning as defined in Section 10.2.3.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 5.3.1.
"GUARANTIES" means any guaranty or other surety provided by a Person Company in
respect of any indebtedness or other obligation.
"XXXX-XXXXX-XXXXXX ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
"INDEMNIFIED PARTY" has the meaning set forth in Section 10.3.1 below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 10.3.1 below.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LATEST BALANCE SHEET" shall name the meaning set out in Section 5.3.1.
"LATEST FINANCIAL STATEMENTS" shall have the meaning set out in Section 5.3.1.
"LOSS" shall mean any liability, loss, damage, claim, cost, deficiency,
delegation, or expense (including any penalty and any reasonably legal fees and
costs) incurred by a party.
"LIABILITY" means any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"NEW TAIWAN DOLLARS" or "NT$" shall mean the lawful currency of the Republic of
China.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
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consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" has the meaning set forth in the preface above.
"PERMIT" means all governmental licenses, registrations, authorizations,
permits, and approvals, and all applications therefor.
"PERSON" means an individual, a partnership, a corporation, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"POWER OF ATTORNEY" means a Power of Attorney in the form of Exhibit A attached
hereto, duly executed by each Selling Shareholder in favor of the
Attorneys-in-Fact, by which each Selling Shareholder appoints and authorizes the
Attorneys-in-Fact, jointly and severally, to execute for and on behalf of the
Selling Shareholder this Agreement, and any and all other documents in
connection with the performance by Selling Shareholder of its/his/her
obligations hereunder, and to take all actions necessary or appropriate for the
performance of the transaction contemplated herein for and on behalf of the
Selling Shareholder.
"SUBSIDIARY", as it relates to any Person, means a corporation or other type of
entity of which such Person owns (or has the right to acquire either by contract
or exercise of outstanding options, warrants or other convertible instruments)
50% or more of the capital stock or equity interest.
"TARGET DAY" shall have the meaning set out in Section 3.1.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIM" has the meaning set forth in Section 10.3.1.
"US GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"U.S. PERSON" means: (i) any natural person resident in the United States, (ii)
any partnership or corporation organized or incorporated under the laws of the
United States, (iii) any estate of which any executor or administrator is a U.S.
Person, (iv) any trust of which any trustee is a U.S. Person, (v) any agency or
branch of a foreign entity located in the United States, (vi) any
non-discretionary account or similar account (other than an estate or trust)
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held by a dealer or other fiduciary for the benefit or account of a U.S. Person,
(vii) any discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated, or, if an
individual resident, in the United States, or (viii) any partnership or
corporation, if organized under the laws of any foreign jurisdiction and formed
by any U.S. Person principally, for the purpose of investing in securities and
registered under the Securities Act, unless it is organized or incorporated and
owned by accredited Selling Shareholders (as defined in Rule 501(a) under the
Securities Act who are not natural persons, estates or trusts.
"WASTE MATERIAL" shall mean any pollutant, contaminant, hazardous or toxic
material or other material produced, discharged or emitted by QOI or any of its
Subsidiaries other than products intended to be sold in the Ordinary Course of
Business.
4
