AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MOLDFLOW CORPORATION
(A DELAWARE CORPORATION),
MOLDFLOW MERGER CORP.
(A DELAWARE CORPORATION),
ADVANCED CAE TECHNOLOGY, INC.
D/B/A C-MOLD
(A NEW YORK CORPORATION),
AND
THE STOCKHOLDERS OF ADVANCED CAE TECHNOLOGY, INC.
NAMED HEREIN
DATED AS OF FEBRUARY 11, 2000
TABLE OF CONTENTS
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SECTION 1. MERGER........................................................ 1
1.1 MERGER........................................................ 1
1.2 PROCEDURE FOR PAYMENT......................................... 4
1.3 INDEMNIFICATION ESCROW........................................ 5
1.4 EFFECTIVENESS; TIME AND PLACE OF CLOSING...................... 5
1.5 TRANSFER TAXES................................................ 6
1.6 FURTHER ASSURANCES............................................ 6
1.7 ITHACA REAL ESTATE............................................ 6
1.7 ITHACA REAL ESTATE............................................ 6
1.8 ALLOCATION OF PURCHASE PRICE.................................. 7
1.8 ALLOCATION OF PURCHASE PRICE.................................. 7
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 7
2.1 MAKING OF REPRESENTATIONS AND WARRANTIES...................... 7
2.2 ORGANIZATION AND QUALIFICATIONS OF THE COMPANY................ 7
2.3 CAPITAL STOCK OF THE COMPANY; BENEFICIAL OWNERSHIP............ 8
2.4 SUBSIDIARIES.................................................. 8
2.5 AUTHORITY OF THE COMPANY...................................... 8
2.6 REAL AND PERSONAL PROPERTY.................................... 9
2.7 FINANCIAL STATEMENTS.......................................... 11
2.8 TAXES......................................................... 12
2.9 COLLECTIBILITY OF ACCOUNTS RECEIVABLE......................... 13
2.10 ABSENCE OF CERTAIN CHANGES.................................... 13
2.11 ORDINARY COURSE............................................... 15
2.12 BANKING RELATIONS............................................. 15
2.13 INTELLECTUAL PROPERTY......................................... 16
2.14 CONTRACTS..................................................... 17
2.15 LITIGATION.................................................... 18
2.16 COMPLIANCE WITH LAWS.......................................... 18
2.17 INSURANCE..................................................... 19
2.18 WARRANTY OR OTHER CLAIMS...................................... 19
2.19 PERMITS; BURDENSOME AGREEMENTS................................ 19
2.20 CORPORATE RECORDS; COPIES OF DOCUMENTS........................ 19
2.21 TRANSACTIONS WITH INTERESTED PERSONS.......................... 19
2.22 EMPLOYEE BENEFIT PROGRAMS..................................... 20
2.23 ENVIRONMENTAL MATTERS......................................... 23
2.24 LIST OF DIRECTORS AND OFFICERS................................ 24
2.25 DISCLOSURE.................................................... 24
2.26 EMPLOYEES; LABOR MATTERS...................................... 24
2.27 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS......................... 25
2.28 YEAR 2000 COMPLIANCE.......................................... 25
SECTION 3. COVENANTS OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS....... 25
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3.1 MAKING OF COVENANTS AND AGREEMENTS............................ 25
3.2 CONDUCT OF BUSINESS........................................... 25
3.3 NOTICE OF DEFAULT............................................. 27
3.4 CONSUMMATION OF AGREEMENT..................................... 27
3.5 NO SOLICITATION OF OTHER OFFERS............................... 27
3.6 CONFIDENTIALITY............................................... 28
3.7 TAX RETURNS................................................... 28
3.8 BUSINESS REVIEW............................................... 28
3.9 PREPARATION OF SCHEDULES...................................... 29
3.10 FILING COOPERATION............................................ 29
3.11 STAY OF PROCEEDINGS........................................... 29
3.12 VOTING........................................................ 30
3.13 AUDITED FINANCIAL STATEMENTS.................................. 30
3.14 (a)SUBSIDIARIES............................................... 30
3.15 REAL PROPERTY................................................. 31
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.............. 31
4.1 MAKING OF REPRESENTATIONS AND WARRANTIES...................... 31
4.2 ORGANIZATION OF PURCHASERS.................................... 31
4.3 AUTHORITY OF PURCHASERS....................................... 31
SECTION 5. COVENANTS OF THE PURCHASERS................................... 32
5.1 MAKING OF COVENANTS AND AGREEMENT............................. 32
5.2 CONFIDENTIALITY............................................... 32
5.3 STAY OF PROCEEDINGS........................................... 33
5.4 FINANCING..................................................... 33
SECTION 6. CONDITIONS.................................................... 34
6.1 CONDITIONS TO THE OBLIGATIONS OF PURCHASERS................... 34
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE PRINCIPAL
STOCKHOLDERS.................................................. 36
6.3. POST-CLOSING OBLIGATION OF THE PARENT......................... 38
SECTION 7. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED................... 38
7.1 TERMINATION................................................... 38
7.2 EFFECT OF TERMINATION......................................... 38
7.3 RIGHT TO PROCEED.............................................. 39
SECTION 8. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.................. 39
8.1 SURVIVAL OF WARRANTIES........................................ 39
SECTION 9. INDEMNIFICATION............................................... 39
9.1 INDEMNIFICATION BY THE PRINCIPAL STOCKHOLDERS................. 39
9.2 Limitation on INDEMNIFICATION BY THE PRINCIPAL STOCKHOLDERS... 40
9.3 INDEMNIFICATION BY PARENT..................................... 41
9.4 LIMITATION ON INDEMNIFICATION BY PARENT....................... 41
9.5 NOTICE; DEFENSE OF CLAIMS..................................... 42
SECTION 10. MISCELLANEOUS................................................. 42
10.1 FEES AND EXPENSES............................................. 43
10.2 GOVERNING LAW................................................. 43
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10.3 NOTICES....................................................... 43
10.4 ENTIRE AGREEMENT.............................................. 44
10.5 ASSIGNABILITY; BINDING EFFECT................................. 44
10.6 CAPTIONS AND GENDER........................................... 44
10.7 EXECUTION IN COUNTERPARTS..................................... 44
10.8 AMENDMENTS.................................................... 44
10.9 PUBLICITY AND DISCLOSURES..................................... 45
10.10 DEFINITION OF KNOWLEDGE....................................... 45
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is entered into as
of February 11, 2000 by and among Moldflow Corporation, a Delaware corporation
("PARENT"), Moldflow Merger Corp., Inc., a Delaware corporation and wholly-owned
subsidiary of Parent ("MERGERSUB" and, together with Parent, the "PURCHASERS"),
Advanced CAE Technology, Inc. d/b/a C-Mold, a New York corporation (the
"COMPANY"), and Xxx-Xxxx Xxxx, a resident of New York, Ven-Xxxx Xxxx, a resident
of New York, Shan-Fu Shen, a resident of New York, Xxxxxx Xxxxx, a resident of
New York and Xxxxxxxxx X. Xxxxxx, a resident of New York (each, a "PRINCIPAL
STOCKHOLDER" and, collectively, the "PRINCIPAL STOCKHOLDERS").
W I T N E S S E T H
WHEREAS, the Purchasers and the Company desire to effect a combination
of their respective businesses through a merger of MergerSub, a subsidiary of
Parent, with and into the Company in accordance with applicable laws; and
WHEREAS, the Boards of Directors of the Purchasers and the Company each
have determined that it is in the best interests of their respective
stockholders for MergerSub to merge with and into the Company upon the terms in
and subject to the conditions of this Agreement.
NOW, THEREFORE, based upon the above premises and in consideration of
the mutual representations, warranties, covenants and agreements set forth
herein, the parties hereby agree as follows:
SECTION 1. MERGER.
1.1 MERGER.
(a) THE MERGER. On the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in SECTION 1.1(c)
hereof), in accordance with this Agreement, the Delaware General Corporation Law
(the "DGCL") and the New York Business Corporation Law (the "NYBCL"), MergerSub
shall merge with and into the Company (the "MERGER"), the separate existence of
MergerSub shall cease and the Company shall continue, as the surviving
corporation. The Company, in its capacity as the corporation surviving the
Merger, is sometimes referred to herein as the "SURVIVING CORPORATION".
(b) EFFECT OF THE MERGER. At and after the Effective Time,
the Merger shall have the effects set forth in Sections 259 and 261 of the DGCL,
in Section 906 of the NYBCL and all other applicable laws.
(c) CONSUMMATION OF THE MERGER. On the Closing Date (as
defined in Section 1.4 hereof), the parties hereto shall cause a Certificate of
Merger to be filed with the Secretary of State of New York, in such form as
required by, and executed in accordance with, Section 907 of the NYBCL. On the
Closing Date, the parties hereto shall also cause a Certificate of Merger to be
filed with the Secretary of State of Delaware, in such form as required by, and
executed in accordance with, Section 252 of the DGCL. The Merger shall be
effective as of the date of filing of the Articles of Merger (the "EFFECTIVE
TIME").
(d) ORGANIZATIONAL DOCUMENTS. From and after the Effective
Time, the Articles of Incorporation and By-Laws of MergerSub, as in effect
immediately prior to the Effective Time, shall be and become the Articles of
Incorporation and By-Laws, respectively, of the Surviving Corporation, and shall
thereafter continue in effect until amended as provided therein and in
accordance with the NYBCL.
(e) DIRECTORS AND OFFICERS. The directors and officers of
MergerSub holding office immediately prior to the Effective Time shall, from and
after the Effective Time, be the directors and officers of the Surviving
Corporation, until their respective successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
By-Laws.
(f) MERGER CONSIDERATION. The manner of converting or
canceling shares of Common Stock of the Company (the "COMPANY COMMON STOCK") and
any options, warrants, rights or other securities convertible into or
exercisable for shares of Common Stock of the Company ("CONVERTIBLE SECURITIES")
in the Merger shall be as follows:
(i) COMPANY COMMON STOCK. Subject to SECTIONS
1.1(f)(iii) and (vI), at the Effective Time, each share of Company
Common Stock that is issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger, and without the need for
any further action on the part of the holder thereof, be converted into
the right to receive the Per Share Consideration (as defined in SECTION
1.1(f)(vii) below) in cash from the Purchasers.
(ii) CONVERTIBLE SECURITIES. At the Effective
Time, each Convertible Security convertible into or exercisable for one
or more shares of Company Common Stock that is outstanding at the
Effective Time shall, with respect to each share of Company Common
Stock for which such Convertible Security is convertible or
exercisable, by virtue of the Merger and at the Effective Time, be
exchanged for the Per Share Consideration in cash, less the amount of
any applicable exercise price due upon the exercise or conversion of
such Convertible Security (the "EXERCISE PRICE") .
(iii) SHARES OF DISSENTING HOLDERS.
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(1) Notwithstanding anything to the contrary
contained in this Agreement, any shares of Company Common
Stock which are held by stockholders of the Company who have
filed with the Company, before the taking of the vote of the
stockholders of the Company to approve this Agreement, written
objections to such approval stating their intention to demand
payment for such shares, and who have not voted such shares of
Company Common Stock in favor of the adoption of this
Agreement ("COMPANY DISSENTING SHARES") shall not be entitled
to receive any Merger Consideration pursuant to this SECTION
1.1(f), but will thereafter constitute only the right to
receive payment of the fair value of such shares in accordance
with the applicable provisions of the NYBCL (the "APPRAISAL
RIGHTS PROVISIONS"); PROVIDED, HOWEVER, that all shares held
by stockholders of the Company who shall have failed to
perfect or who effectively shall have withdrawn or lost their
rights to appraisal of such shares under the Appraisal Rights
Provisions shall thereupon be deemed to have been canceled and
retired and to have been converted, as of the Effective Time,
into the right to receive the Per Share Consideration, without
interest, in the manner provided in this SECTION 1.1(f).
(2) Each dissenting stockholder who becomes
entitled under the NYBCL to payment for Company Dissenting
Shares shall receive payment therefor after the Effective Time
from the Surviving Corporation (but only after the amount
thereof shall have been agreed upon or finally determined
pursuant to the NYBCL) and such shares of Company Common Stock
shall be canceled.
(3) The Company shall give the Purchasers
prompt notice of any objections received by the Company for
the payment of fair value for shares of Company Common Stock.
(iv) ADJUSTMENTS FOR CAPITAL CHANGES.
Notwithstanding the provisions of SECTION 1.1(f), if at any time after
the date this Agreement is duly executed by all parties and prior to
the Effective Time, the Company, subject to the terms of this
Agreement, recapitalizes, either through a subdivision (or stock split)
of any of its outstanding shares of Company Common Stock into a greater
number of such shares, or a combination (or reverse stock split) of any
of its outstanding shares of Company Common Stock into a lesser number
of such shares, or reorganizes, reclassifies or otherwise changes its
outstanding shares of Company Common Stock into the same or a different
number of shares of other classes (other than through a subdivision or
combination of shares provided for in the preceding clause), or
declares a dividend on its outstanding shares payable in shares of
Company Common Stock or in shares or securities convertible into or
exercisable for shares of Company Common Stock, then the purchase price
per share as set forth in SECTION 1.1(f)(i) will be proportionally and
equitably adjusted.
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(v) CONVERSION OF MERGERSUB CAPITAL STOCK. Each
share of common stock of MergerSub issued and outstanding immediately
prior to the Effective Time shall be converted into and exchangeable
for one validly issued, fully paid and nonassessable share of the
common stock of the Surviving Corporation.
(vi) SHARES HELD BY THE COMPANY. At the Effective
Time, each share of Company Common Stock held by the Company as
treasury stock or held by any Subsidiary of the Company immediately
prior to the Effective Time shall, by virtue of the Merger and without
any action on the part of Parent, MergerSub, the Company or the holder
thereof, be canceled, retired and cease to exist, and no consideration
shall be delivered with respect thereto.
(vii) DEFINITIONS.
"MERGER CONSIDERATION" shall be equal to Eleven
Million Dollars ($11,000,000).
"PER SHARE CONSIDERATION" shall mean the quotient
produced by dividing the Merger Consideration by the sum of
the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time, including as shares
of Company Common Stock deemed to be outstanding for purposes
of calculating the Per Share Consideration, without
duplication, shares issuable pursuant to any outstanding
Convertible Security; PROVIDED, HOWEVER, that with respect to
any outstanding Convertible Securities, the Per Share
Consideration shall be less the amount of any applicable
Exercise Price.
1.2 PROCEDURE FOR PAYMENT.
(a) In accordance with this Section 1, at the Effective Time,
Parent, subject to SECTION 1.3 and SECTION 1.7 hereof, shall pay by check to
each holder of shares of Company Common Stock (which shall include all of the
holders of Convertible Securities exercising such Convertible Securities at the
Effective Time) the Per Share Consideration to which such holder is entitled in
exchange for all of the certificates which immediately prior to the Effective
Time represented such holder's shares of Company Common Stock (the
"CERTIFICATES"). Subject to SECTION 1.1(f)(iii), until surrendered and exchanged
as contemplated by this SECTION 1.2, each Certificate (other than Certificates
representing shares of Company Common Stock held by the Company as treasury
stock or any Subsidiary of the Company) shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender an
amount equal to (i) the Per Share Consideration, multiplied by (ii) the number
of shares of Company Common Stock represented by such Certificate, as
contemplated by this SECTION 1.2.
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(b) In the event that any Certificate shall have been lost,
stolen or destroyed, Parent shall pay, upon the making of an affidavit of that
fact by the holder thereof in form and substance reasonably acceptable to
Parent, the proper Per Share Consideration as may be required pursuant to this
SECTION 1.2; PROVIDED, HOWEVER, that Parent may, in its discretion, require the
delivery of a suitable bond and/or indemnity.
(c) The Per Share Consideration paid upon the surrender for
exchange of shares of Company Common Stock in accordance with the terms hereof
shall be deemed to have been paid in full satisfaction of all rights pertaining
to such shares of Company Common Stock. There shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this SECTION 1. The Merger Consideration represents full
consideration for all outstanding capital stock of the Company and any
Convertible Securities convertible into or exercisable for capital stock or
other equity interests in the Company.
(d) Neither Parent nor the Company shall be liable to any
holder of shares of Company Common Stock for any Per Share Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(e) Any Certificates that are not delivered to Parent at or
prior to the Effective Time, may be delivered to Parent at the following
location: Moldflow Corporation, 00 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx
00000, Attn: Xxxx Xxxxxxxxx, Corporate Counsel. Any amounts remaining unclaimed
by holders of shares of Company Common Stock two years after the Effective Time
(or such earlier date immediately prior to such time as such amounts would
otherwise escheat to or become property of any governmental entity) shall, to
the extent permitted by applicable law, become the property of Parent free and
clear of any claim or interest of any Person previously entitled thereto.
1.3 INDEMNIFICATION ESCROW. On the Closing Date, the Purchasers shall
deposit an amount of cash equal to $2,200,000, which deposit shall be made from
such portion of the Merger Consideration payable to the Principal Stockholders
(the "CASH ESCROW AMOUNT") with Silicon Valley Bank or such other commercial
bank as may be selected by the Purchasers (the "Escrow Agent"), to be held,
invested and distributed by the Escrow Agent in accordance with the terms of an
escrow agreement in substantially the form attached hereto as EXHIBIT 1.3 (the
"ESCROW AGREEMENT").
1.4 EFFECTIVENESS; TIME AND PLACE OF CLOSING.
(a) This Agreement shall be effective as of the date that it
has been executed and delivered by all of the parties hereto; PROVIDED, HOWEVER,
that if within ten days after the Agreement is executed and delivered by any
party to the other parties hereto, the Agreement is
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not counter executed and delivered by such other parties, this Agreement shall
become null and void and have no effect.
(b) The closing of the transaction provided for in this
Agreement (the "CLOSING") shall be held at the offices of Xxxxxxx, Procter &
Xxxx LLP, Exchange Place, Boston, Massachusetts 02109-2881 on the date or time
following the satisfaction of the conditions precedent set forth in SECTION 6.1
and SECTION 6.2 of this Agreement as may be fixed by mutual agreement of the
Purchasers and the Company (the "CLOSING DATE); PROVIDED, HOWEVER, that the
closing may not occur later than May 31, 2000 without the mutual consent of the
Purchasers and the Company. If any of the conditions set forth in SECTION 6.1 or
SECTION 6.2 have not been satisfied or waived by or as of the Closing Date, then
the party hereto for whose benefit such conditions have been imposed may, in its
sole and absolute discretion, postpone such Closing Date, by written notice to
the other parties hereto specifying the condition(s) not so satisfied, until
five business days after such condition or conditions shall have been satisfied
or waived, which date shall then become the Closing Date. Notwithstanding the
preceding sentence, in no event shall the Company and the Principal Stockholders
be permitted to extend the Closing Date for more than 15 days following such
event, without the mutual consent of the Purchasers, the Company and the
Principal Stockholders.
1.5 TRANSFER TAXES. All sales and transfer taxes, fees and duties under
applicable law incurred in connection with this Agreement or the transactions
contemplated hereby will be borne and paid by the Principal Stockholders, and
the Principal Stockholders shall promptly reimburse the Purchasers for the
payment of any such tax, fee or duty which it is required to make under
applicable law.
1.6 FURTHER ASSURANCES. The Principal Stockholders shall from time to
time, after the Effective Time, at the request of Parent or the Surviving
Corporation and without further consideration, execute and deliver, or cause to
be executed and delivered all such proper deeds, assignments and assurances in
law and do all acts necessary or proper to vest, perfect or confirm of record or
otherwise in the Surviving Corporation title to and possession of any property
or rights in the Company and otherwise to carry out the purposes of this
Agreement.
1.7 ITHACA REAL ESTATE. Immediately prior to the Effective Time, for
consideration of the Real Estate Purchase Price (as defined below), the Company
shall convey to ACT Partnership (the "REAL ESTATE PARTNERSHIP") all of its
right, title and interest in and to the Company's ownership interest in the Real
Estate Partnership. For purposes of this SECTION 1.7, the Real Estate Purchase
Price will be an amount equal to the product of 28% multiplied by the net asset
value of the Real Estate Partnership (the "REAL ESTATE PURCHASE PRICE");
PROVIDED, HOWEVER, that for purposes of calculating such net asset value, the
value of the Ithaca Property shall be $900,000. The Principal Stockholders
acknowledge that the Real Estate Partnership, which holds title to that certain
real property located in Ithaca, New York (the "ITHACA PROPERTY"), is owned
entirely by the Company and certain Stockholders. At the
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Effective Time, Parent shall, in satisfaction of the Real Estate Purchase price,
reduce on a pro rata basis, in accordance with the percentage of such
Stockholders' ownership interest in the Real Estate Partnership, the Per Share
Consideration payable to each Stockholder that holds an ownership interest in
the Real Estate Partnership.
1.8 ALLOCATION OF PURCHASE PRICE. Parent has the right to allocate the
Merger Consideration based on the results of the Business Review (as herein
defined), as such allocation may mutually be agreed upon from time to time by
the Company and Parent.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
2.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to the Purchasers to enter into this Agreement and consummate the transactions
contemplated hereby, the Company and the Principal Stockholders hereby jointly
and severally make to Parent and MergerSub the representations and warranties
contained in this SECTION 2. None of the Principal Stockholders shall have any
right of indemnity or contribution from the Company with respect to the breach
of any representation or warranty hereunder.
2.2 ORGANIZATION AND QUALIFICATIONS OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York with full corporate power and authority to own or lease
its properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted or
proposed to be conducted. The copies of the Company's and each Subsidiary's (i)
Certificate of Organization as amended to date, certified by the Secretary of
State of the jurisdiction of organization, and (ii) by-laws, as amended to date,
certified by the Company's and each Subsidiary's Secretary, and delivered to the
Purchasers' counsel within ten (10) days of the date hereof, are complete and
correct, and no amendments thereto are pending. Neither the Company nor any
Subsidiary is in violation of any term of its Certificate of Organization or
By-laws. The Company and each Subsidiary is duly qualified to do business as a
foreign corporation in all jurisdictions where the ownership of its properties
or the conduct of its business requires such qualification, except where the
failure to be so qualified could not reasonably be expected to have a material
adverse effect on the business, assets, properties, results of operations, or
financial condition of the Company or any of its Subsidiaries. The Company has
made all required filings and done all things necessary in order to do business
under the name of "C-Mold."
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2.3 CAPITAL STOCK OF THE COMPANY; BENEFICIAL OWNERSHIP.
SCHEDULE 2.3(a) hereto lists, as of the date of this
Agreement, all shareholders of the Company, the number of shares of capital
stock of the Company held beneficially and of record by each, the authorized
capital stock of the Company and the aggregate number of shares outstanding. All
of such shares are duly and validly issued, outstanding, fully paid and
non-assessable. Except as set forth in SCHEDULE 2.3(a), there are no outstanding
options, warrants, rights, commitments, preemptive rights or agreements of any
kind for the issuance or sale of, or outstanding securities convertible into,
any additional shares of capital stock of any class of the Company. None of the
Company's capital stock has been issued in violation of any federal or state
law. Except as set forth in SCHEDULE 2.3(b) attached hereto, there are no voting
trusts, voting agreements, proxies or other agreements, instruments or
undertakings with respect to the voting of the capital stock of the Company to
which the Company or any of the Stockholders is a party. The persons referenced
in SCHEDULE 2.3(a) (the "STOCKHOLDERS") own beneficially and of record, free and
clear of any liens, encumbrances or restrictions, all of the outstanding shares
of capital stock of the Company, which consists solely of the shares of Company
Common Stock issued and potentially to be issued immediately prior to the
Effective Time, and when delivered by the Stockholders to the Purchasers
pursuant to this Agreement will be duly authorized, validly issued, fully paid,
non-assessable and free and clear of any and all liens, encumbrances, charges or
claims. The Principal Stockholders own of record, on a fully diluted basis, no
less than 66-2/3% of the issued and outstanding shares of Company Common Stock.
2.4 SUBSIDIARIES. The Company's subsidiaries and investments in any
other corporation or business organization are listed in SCHEDULE 2.4 hereto
(collectively, the "SUBSIDIARIES" or individually, a "SUBSIDIARY"). Except as
disclosed in SCHEDULE 2.4, all of the outstanding shares of capital stock of
each Subsidiary are owned beneficially and of record by the Company free of any
lien, restriction or encumbrance and said shares have been duly and validly
issued and are outstanding, fully paid and non-assessable. Except as disclosed
in SCHEDULE 2.4, there are no outstanding warrants, options or other rights to
purchase or acquire any of the shares of capital stock of any Subsidiary, or any
outstanding securities convertible into such shares or outstanding warrants,
options or other rights to acquire any such convertible securities.
2.5 AUTHORITY OF THE COMPANY. The Company and the Principal
Stockholders have full right, authority and power to enter into this Agreement
and each agreement, document and instrument to be executed and delivered by the
Company and the Principal Stockholders pursuant to this Agreement and, subject
to the approval of this Agreement by the Stockholders of the Company, to carry
out the transactions contemplated hereby and thereby. The execution, delivery
and performance by the Company and the Principal Stockholders of this Agreement
and each such other agreement, document and instrument have been duly authorized
by all necessary action of the Company and the Principal Stockholders and,
subject to the approval of this Agreement by the Stockholders of the Company, no
other action on the part of the Company or the Principal Stockholders is
required in connection therewith.
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This Agreement and each agreement, document and instrument executed and
delivered by the Company and the Principal Stockholders pursuant to this
Agreement constitutes, or when executed and delivered will constitute, valid and
binding obligations of the Company and the Principal Stockholders enforceable in
accordance with their terms. The execution, delivery and performance by the
Company and the Principal Stockholders of this Agreement and each such
agreement, document and instrument:
(i) does not and will not violate any provision
of the charter or by-laws of the Company;
(ii) does not and will not violate any laws of
the United States, or any state or other jurisdiction applicable to the
Company or the Principal Stockholders or require the Company or the
Principal Stockholders to obtain any approval, consent or waiver of, or
make any filing with, any person or entity (governmental or otherwise)
that has not been obtained or made; and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which the Company or any
of the Principal Stockholders is a party or by which the property of
the Company or any of the Principal Stockholders is bound or affected,
or result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the
Company's, its Subsidiaries' or Principal Stockholders' assets or
capital stock of the Company or its Subsidiaries, except as
specifically identified on SCHEDULE 2.5.
2.6 REAL AND PERSONAL PROPERTY.
(a) REAL PROPERTY. All of the real property owned or leased by
the Company or any of its Subsidiaries is identified on SCHEDULE 2.6(a) hereto
(herein referred to as the "OWNED REAL PROPERTY" or the "LEASED REAL PROPERTY,"
as the case may be, or collectively as the "REAL PROPERTY.")
(i) TITLE. Each of the Company and its
Subsidiaries (including without limitation ACT Partnership) has good,
clear, record, marketable and sole title to (A) all Owned Real Property
and (B) enforceable leasehold interests in the Leased Real Property, in
each case, free and clear of all easements, covenants, restrictions,
leases, mortgages, liens, assessments, claims, rights, judgments,
encroachments or other matters affecting title (collectively,
"ENCUMBRANCES"), other than liens for Taxes (as defined in SECTION
2.8(a)) not yet due or delinquent or being contested in good faith by
appropriate means and statutory liens arising in the ordinary course of
business by
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operation of law that are not yet due or developed ("PERMITTED
ENCUMBRANCES"), except as set forth on SCHEDULE 2.6(a).
To the knowledge of the Company and the Principal Stockholders, the
lessors of Leased Real Property have good, clear, record and marketable
title to the Leased Real Property, and the Company and its Subsidiaries
have good, clear, record and marketable title to enforceable leasehold
interests in the Leased Real Property, in each case free and clear of
all Encumbrances other than Permitted Encumbrances, subject only to the
right of reversion of the lessor, except as set forth in SCHEDULE
2.6(a).
(ii) STATUS OF LEASES. All leases of Leased Real
Property are identified on SCHEDULE 2.6(a), and true and complete
copies thereof will be delivered to the Purchasers within fifteen (15)
days of the date hereof. Each of said leases has been duly authorized
and executed by the parties and is in full force and effect. Neither
the Company nor any of its Subsidiaries is in default under any of said
leases, nor has any event occurred which, with notice or the passage of
time, or both, would give rise to such a default. To the Company's and
the Principal Stockholders' knowledge, the other party to each of said
leases is not in default under any of said leases and there is no event
which, with notice or the passage of time, or both, would give rise to
such a default.
(iii) CONSENTS. Except as set forth in SCHEDULE
2.6(a), no consent or approval is required with respect to the
transactions contemplated by this Agreement from the other parties to
any lease of Leased Real Property, from the holder of any Encumbrance
on any Owned Real Property, or from any regulatory authority, no filing
with any regulatory authority is required in connection therewith, and
to the extent that any such consents, approvals or filings are
required, the Company or the Principal Stockholders will obtain or
complete them before the Closing.
(iv) CONDITION OF REAL PROPERTY. Except as set
forth in SCHEDULE 2.6(a), there are no material defects in the physical
condition of any land, buildings or improvements constituting part of
the Real Property, including without limitation, structural elements,
mechanical systems, parking and loading areas, and all such buildings
and improvements are in good operating condition and repair, ordinary
wear and tear excepted, and have been well maintained. None of the Real
Property is located in an area designated by any governmental authority
as being within a flood plain or subject to special flood or other
hazards. Access to the Real Property is by a public way or public
street. All water, sewer, gas, electric, telephone, drainage and other
utilities required by law or necessary for the current or planned
operation of the Real Property have been connected under valid permits
and pursuant to valid easements where required, and are sufficient to
service the Real Property and are in good operating condition.
10
(v) COMPLIANCE WITH THE LAW. Except as set forth
on SCHEDULE 2.5(a), neither the Company nor any Subsidiary has received
any notice from any governmental authority of any violation of any law,
ordinance, regulation, license, permit or authorization issued with
respect to any Real Property or improvements located on or constituting
part of the Real Property that has not been heretofore corrected and no
such violation existed or exists which could have an adverse affect on
the use, operation or value of any Real Property or improvements
located on or constituting part of the Real Property. No approval or
consent to the transactions contemplated by this Agreement is required
of any governmental authority with jurisdiction over any aspect of the
Real Property or its use or operations. Neither the Company nor any
Subsidiary has received any notice of any real estate tax deficiency or
assessment or is aware of any proposed deficiency, claim or assessment
with respect to any of the Real Property, or any pending or threatened
condemnation thereof.
(b) PERSONAL PROPERTY. A complete description of the machinery
and equipment of the Company and each of its Subsidiaries is contained in
SCHEDULE 2.6(b) hereto. Except as specifically disclosed in said Schedule or in
the Base Balance Sheet (as hereinafter defined), the Company and each of its
Subsidiaries has good and marketable title to all of its personal property. None
of such personal property or assets is subject to any mortgage, pledge, lien,
conditional sale agreement, security title, encumbrance or other charge except
as specifically disclosed in said Schedule or in the Base Balance Sheet. The
Base Balance Sheet reflects all personal property of the Company and each of its
Subsidiaries. Except as otherwise specified in SCHEDULE 2.6(b), all leasehold
improvements, furnishings, machinery and equipment of the Company and each of
its Subsidiaries are in good repair, ordinary wear and tear excepted, have been
well maintained, and substantially comply with all applicable laws, ordinances
and regulations, and such machinery and equipment is in good working order.
2.7 FINANCIAL STATEMENTS.
(a) The Company will deliver to the Purchasers the following
financial statements: Consolidated Balance Sheets of the Company and its
Subsidiaries for its fiscal years ending on September 30, 1997, September 30,
1998 and September 30, 1999, and for the quarter ending December 31, 1999 (the
Balance Sheet of the Company for the quarter ending December 31, 1999 is
hereinafter referred to as the "BASE BALANCE SHEET") and statements of income,
retained earnings and cash flows for the three years then ended, in each case
with appropriate footnotes and in the case of the September 30, 1997 and
December 31, 1999 statements, certified by V.W. Wang, the President and Chief
Executive Officer of the Company. Said financial statements have been prepared
in accordance with generally accepted accounting principles applied consistently
during the periods covered thereby, are complete and correct in all material
respects and present fairly in all material respects the financial condition of
the Company and each of its Subsidiaries at the dates of said statements and the
results of its operations for the periods covered thereby.
11
(b) As of the date of the Base Balance Sheet, the date hereof
and as of the Closing neither the Company nor any Subsidiary had or will have
any liabilities of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown (including without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others, liabilities for taxes due or then accrued or to become due, liabilities
in respect of legal, accounting, tax or other professional services rendered on
behalf of the Company or any of its Subsidiaries in connection with the
Litigations (as defined in SECTION 3.11 hereof) or otherwise, or contingent or
potential liabilities relating to activities of the Company or any Subsidiary or
the conduct of their business prior to the date of the Base Balance Sheet, the
date hereof or as of the Closing, as the case may be, regardless of whether
claims in respect thereof had been asserted as of such date), except liabilities
(i) stated or adequately reserved against on the Base Balance Sheet, or (ii)
since the date of the Base Balance Sheet, incurred in the ordinary course of
business of the Company or any Subsidiary consistent with the terms of this
Agreement.
(c) The Base Balance Sheet contains separate line items that
set forth the amount of any and all liabilities in respect of legal, accounting,
tax or other professional services rendered on behalf of the Company, which line
items shall specifically identify the amount of any such liabilities related to
the Litigations.
2.8 TAXES.
(a) The Company and each of its Subsidiaries has paid or
caused to be paid all federal, state, local, foreign, and other taxes, including
without limitation, income taxes, estimated taxes, alternative minimum taxes,
excise taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
franchise taxes, capital stock taxes, employment and payroll-related taxes,
withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or in
part by net income, and all deficiencies, or other additions to tax, interest,
fines and penalties owed by it (collectively, "TAXES"), required to be paid by
it through the date hereof whether disputed or not.
(b) The Company has filed in accordance with applicable law
all federal, state, local and foreign tax returns required to be filed by it
through the date hereof, and all such returns correctly and accurately set forth
the amount of any Taxes relating to the applicable period. A list of all
federal, state, local and foreign income tax returns filed with respect to the
Company and its Subsidiaries for taxable periods ended on or after December 31,
1993 is set forth in SCHEDULE 2.8 hereto, and said Schedule indicates those
returns that have been audited or currently are the subject of an audit. For
each taxable period of the Company and its Subsidiaries ended on or after
December 31, 1993, the Company will have, within 10 days of the date hereof,
delivered to Purchasers correct and complete copies of all federal, state, local
and foreign income tax returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company or any of its
Subsidiaries.
12
(c) Neither the Internal Revenue Service nor any other
governmental authority is now asserting or, to the knowledge of the Company or
either Stockholder, threatening to assert against the Company or any Subsidiary
any deficiency or claim for additional Taxes. No claim has ever been made by an
authority in a jurisdiction where the Company or any Subsidiary does not file
reports and returns that the Company or such Subsidiary is or may be subject to
taxation by that jurisdiction. There are no security interests on any of the
assets of the Company or any Subsidiary that arose in connection with any
failure (or alleged failure) to pay any Taxes. Neither the Company nor any
Subsidiary has ever entered into a closing agreement pursuant to Section 7121 of
the Internal Revenue Code of 1986, as amended (the "CODE").
(d) Except as set forth in SCHEDULE 2.8, there has not been
any audit of any tax return filed by the Company, no such audit is in progress,
and neither the Company nor any Subsidiary has been notified by any tax
authority that any such audit is contemplated or pending. Except as set forth in
SCHEDULE 2.8, no extension of time with respect to any date on which a tax
return was or is to be filed by the Company or any Subsidiary is in force, and
no waiver or agreement by the Company or any Subsidiary is in force for the
extension of time for the assessment or payment of any Taxes.
(e) Neither the Company nor any Subsidiary has ever been or
has ever had any liability for unpaid Taxes because it once was a member of an
"affiliated group" (as defined in Section 1504(a) of the Code). Except as set
forth in SCHEDULE 2.8, neither the Company nor any Subsidiary has ever filed,
nor has ever been required to file, a consolidated, combined or unitary tax
return with any other entity. Except as set forth in SCHEDULE 2.8, neither the
Company nor any Subsidiary owns nor has ever owned a direct or indirect interest
in any trust, partnership, corporation or other entity. Except as set forth in
SCHEDULE 2.8, neither the Company nor any Subsidiary is a party to any tax
sharing agreement.
(f) For purposes of this Agreement, all references to Sections
of the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal, state, local or foreign law.
2.9 COLLECTIBILITY OF ACCOUNTS RECEIVABLE. All of the accounts
receivable of the Company shown or reflected on the Base Balance Sheet or
existing at the date hereof (less the reserve for bad debts set forth on the
Base Balance Sheet) are or will be at the Closing valid and enforceable claims,
fully collectible and subject to no set off or counterclaim. Neither the Company
nor any Subsidiary has any accounts or loans receivable from any person, firm or
corporation which is affiliated with the Company or any Subsidiary or from any
director, officer or employee of the Company or any Subsidiary, except as
disclosed on SCHEDULE 2.9 hereto, and all accounts and loans receivable from any
such person, firm or corporation shall be paid in cash prior to the Closing.
2.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 2.10
hereto, since the date of the Base Balance Sheet there has not been:
13
(a) Any change in the financial condition, properties, assets,
liabilities, prospects, or business or operations of the Company or any of its
Subsidiaries, which change by itself or in conjunction with all other such
changes, whether or not arising in the ordinary course of business, has been
materially adverse with respect to the Company or any of its Subsidiaries;
(b) Any contingent liability incurred by the Company or any of
its Subsidiaries as guarantor or otherwise with respect to the obligations of
others or any cancellation of any material debt or claim owing to, or waiver of
any material right of, the Company or any of its Subsidiaries;
(c) Any mortgage, encumbrance or lien placed on any of the
properties of the Company or any of its Subsidiaries which remains in existence
on the date hereof or will remain on the Closing Date;
(d) Any obligation or liability of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, known or
unknown, incurred by the Company or any of its Subsidiaries other than
obligations and liabilities incurred in the ordinary course of business
consistent with the terms of this Agreement (it being understood that product or
service liability claims shall not be deemed to be incurred in the ordinary
course of business);
(e) Any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company or any of its Subsidiaries other than in the
ordinary course of business;
(f) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of the Company or any of its Subsidiaries;
(g) Except with respect to any agreement of the Company made
prior to the date hereof for the purchase or redemption of any option for shares
of Common Stock of the Company issued by the Company prior to the date hereof,
any declaration, setting aside or payment of any dividend by the Company or any
of its Subsidiaries, or the making of any other distribution in respect of the
capital stock of the Company, or any direct or indirect redemption, purchase or
other acquisition by the Company or any of its Subsidiaries of its own capital
stock;
(h) Any labor trouble or claim of unfair labor practices
involving the Company; any change in the compensation payable or to become
payable by the Company or any of its Subsidiaries to any of its officers,
employees, agents or independent contractors other than normal merit increases
in accordance with its usual practices; or any bonus payment or arrangement made
to or with any of such officers, employees, agents or independent contractors;
14
(i) Any change with respect to the officers or management of
the Company or any of its Subsidiaries;
(j) Any payment or discharge of a material lien or liability
of the Company or any of its Subsidiaries which was not shown on the Base
Balance Sheet or incurred in the ordinary course of business thereafter;
(k) Any obligation or liability incurred by the Company or any
of its Subsidiaries to any of its officers, directors, stockholders or
employees, or any loans or advances made by the Company or any of its
Subsidiaries to any of its officers, directors, stockholders or employees,
except normal compensation and expense allowances payable to officers or
employees;
(l) Any change in accounting methods or practices, credit
practices or collection policies used by the Company or any of its Subsidiaries;
(m) Any other transaction entered into by the Company or any
of its Subsidiaries other than transactions in the ordinary course of business;
or
(n) Any agreement or understanding whether in writing or
otherwise, for the Company to take any of the actions specified in paragraphs
(a) through (m) above.
2.11 ORDINARY COURSE. Since the date of the Base Balance Sheet, the
Company and each of its Subsidiaries have conducted its business only in the
ordinary course and consistently with its prior practices.
2.12 BANKING RELATIONS. All of the arrangements which the Company or
any of its Subsidiaries has with any banking institution are completely and
accurately described in SCHEDULE 2.12 attached hereto, indicating with respect
to each of such arrangements the type of arrangement maintained (such as
checking account, borrowing arrangements, safe deposit box, etc.) and the person
or persons authorized in respect thereof.
15
2.13 INTELLECTUAL PROPERTY.
(a) Except as described in SCHEDULE 2.13, the Company and each
of its Subsidiaries has exclusive ownership of, or exclusive license to use, all
patent, copyright, trade secret, trademark, or other proprietary rights
(including without limitation, rights in respect of the name "C-Mold")
(collectively, "INTELLECTUAL PROPERTY") used or to be used in the business of
the Company and each Subsidiary as presently conducted or contemplated. All of
the rights of the Company and its Subsidiaries in such Intellectual Property are
freely transferable. There are no claims or demands of any other person
pertaining to any of such Intellectual Property and no proceedings have been
instituted, or are pending or threatened, which challenge the rights of the
Company or any Subsidiary in respect thereof. The Company and each of its
Subsidiaries has the right to use, free and clear of claims or rights of other
persons, all customer lists, designs, manufacturing or other processes, computer
software, systems, data compilations, research results and other information
required for or incident to its products or its business as presently conducted
or contemplated. Neither the Company nor any of its Subsidiaries has knowledge
of any infringement by any party of any of its Intellectual Property rights.
(b) All patents, patent applications, trademarks, trademark
applications, service marks, trade names, franchises, permits, Internet domain
names, software and registrations and registered copyrights which are owned by
or licensed to the Company or any of its Subsidiaries or used or to be used by
the Company or any of its Subsidiaries in their businesses as presently
conducted or contemplated, and all other items of Intellectual Property which
are used in the business or operations of the Company or any of its
Subsidiaries, are listed in SCHEDULE 2.13. All of such patents, patent
applications, trademark registrations, trademark applications and registered
copyrights have been duly registered in, filed in or issued by the United States
Patent and Trademark Office, the United States Register of Copyrights, or the
corresponding offices of other jurisdictions as identified on said Schedule, and
have been properly maintained and renewed in accordance with all applicable
provisions of law and administrative regulations of the United States and each
such jurisdiction. The trademark "C-Mold" has been registered by the Company
with the United States Patent and Trademark Office and such registration is in
full force and effect.
(c) All licenses or other agreements under which the Company
is granted rights in Intellectual Property are listed in SCHEDULE 2.13. All said
licenses or other agreements are in full force and effect, there is no material
default by any party thereto, and, except as set forth on SCHEDULE 2.13, all of
the rights of the Company or any Subsidiary thereunder are freely assignable. To
the knowledge of the Company and the Principal Stockholders, the licensors under
said licenses and other agreements have and had all requisite power and
authority to grant the rights purported to be conferred thereby. True and
complete copies of all such licenses or other agreements, and any amendments
thereto, will be provided to the Purchasers within 15 days of the date hereof.
16
(d) All licenses or other agreements under which the Company
or any of its Subsidiaries has granted rights to others in Intellectual Property
owned or licensed by the Company or such Subsidiary are listed in SCHEDULE 2.13.
All of said licenses or other agreements are in full force and effect, there is
no material default by any party thereto, and, except as set forth on SCHEDULE
2.13, all of the rights of Company or any Subsidiary thereunder are freely
assignable. True and complete copies of all such licenses or other agreements,
and any amendments thereto, will be provided to the Purchasers within 15 days of
the date hereof.
(e) Except as set forth on SCHEDULE 2.13, the present and, to
the knowledge of the Company and the Principal Stockholders after diligent
investigation, the contemplated business, activities and products of the Company
and its Subsidiaries do not infringe any Intellectual Property of any other
person. Except as set forth on SCHEDULE 2.13, no proceeding charging the Company
or any of its Subsidiaries with infringement of any adversely held Intellectual
Property has been filed or is threatened to be filed. To the Company's
knowledge, there exists no unexpired patent or patent application which includes
claims that would be infringed by or otherwise adversely affect the products,
activities or business of the Company. Neither the Company nor any of its
Subsidiaries is making unauthorized use of any confidential information or trade
secrets of any person, including without limitation, any former employer of any
past or present employee of Company or any of its Subsidiaries. Except as set
forth in SCHEDULE 2.13, neither the Company nor any Subsidiary nor, to the
knowledge of the Company and the Principal Stockholders, any of their employees
have any agreements or arrangements with any persons other than the Company or
its Subsidiaries related to confidential information or trade secrets of such
persons or restricting any such employee's ability to engage in business
activities of any nature. The activities of the Company's or any of its
Subsidiaries' employees on behalf of the Company or any Subsidiary do not
violate any such agreements or arrangements known to the Company.
2.14 CONTRACTS. Except for contracts, commitments, plans, agreements
and licenses described in SCHEDULE 2.14 (true and complete copies of which have
been delivered to the Purchasers), neither the Company nor any of its
Subsidiaries is a party to or subject to:
(a) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments, profit
sharing, collective bargaining or the like, or any contract or agreement with
any labor union;
(b) any employment contract or contract for services which is
not terminable within 30 days by the Company or a Subsidiary without liability
for any penalty or severance payment;
(c) any contract or agreement for the purchase of any
commodity, material or equipment, except purchase orders in the ordinary course
for less than $10,000 each, such orders not exceeding $50,000 in the aggregate;
17
(d) any other contracts or agreements creating any obligations
of the Company or any of its Subsidiaries of $50,000 or more with respect to any
such contract or agreement not specifically disclosed elsewhere under this
Agreement;
(e) any contract or agreement providing for the purchase of
all or substantially all of its requirements of a particular product from a
supplier;
(f) any contract or agreement which by its terms does not
terminate or is not terminable without penalty by the Company or a Subsidiary or
their successors within one year after the date hereof;
(g) any contract or agreement for the sale or license of its
products not made in the ordinary course of business;
(h) any contract with any sales agent or distributor of
products of the Company or any of its Subsidiaries;
(i) any contract containing covenants limiting the freedom of
the Company or any of its Subsidiaries to compete in any line of business or
with any person or entity;
(j) any contract or agreement for the purchase of any fixed
asset for a price in excess of $10,000 whether or not such purchase is in the
ordinary course of business;
(k) any license agreement (as licensor or licensee), other
than the standard license agreement used for the Company's software products, a
form copy of which will be provided to the Purchasers within 10 days after the
date hereof;
(l) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money; or
(m) any contract or agreement with any officer, director,
employee or stockholder of the Company or any of its Subsidiaries or with any
persons or organizations controlled by or affiliated with any of them.
Neither the Company nor any of its Subsidiaries is in default under any
such contracts, commitments, plans, agreements or licenses described in said
Schedule or has any knowledge of conditions or facts which with notice or
passage of time, or both, would constitute a default.
2.15 LITIGATION. SCHEDULE 2.15 hereto lists all currently pending
litigation and governmental or administrative proceedings or investigations to
which the Company or any of its Subsidiaries is a party.
18
2.16 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 2.16 hereto,
the Company and each of its Subsidiaries is in compliance in all material
respects with all applicable statutes, ordinances, orders, judgements, decrees,
rules and regulations promulgated by any federal, state, municipal entity,
agency, court or other governmental authority which apply to the Company or any
Subsidiary or to the conduct of its business, and neither the Company nor any of
its Subsidiaries has received notice of a violation or alleged violation of any
such statute, ordinance, order, rule or regulation.
2.17 INSURANCE. The physical properties and assets of the Company and
its Subsidiaries are insured to the extent disclosed in SCHEDULE 2.17 attached
hereto and all such insurance policies and arrangements are disclosed in said
Schedule. Said insurance policies and arrangements are in full force and effect,
all premiums with respect thereto are currently paid, and the Company and each
of its Subsidiaries is in compliance in all material respects with the terms
thereof. Said insurance is adequate and customary for the business engaged in by
the Company and each Subsidiary and is sufficient for compliance by the Company
and each Subsidiary with all requirements of law and all agreements and leases
to which the Company or any Subsidiary is a party.
2.18 WARRANTY OR OTHER CLAIMS. There are no existing or, to the
knowledge of the Company and the Principal Stockholders, threatened product
liability, warranty or other similar claims, or any facts upon which a material
claim of such nature could be based, against the Company or any of its
Subsidiaries for products or services which are defective or fail to meet any
product or service warranties except as disclosed in SCHEDULE 2.18 hereto.
2.19 PERMITS; BURDENSOME AGREEMENTS. SCHEDULE 2.19 hereto lists all
permits, registrations, licenses, franchises, certifications and other approvals
(collectively, the "APPROVALS") required from federal, state or local
authorities in order for the Company and each of its Subsidiaries to conduct its
business. The Company and each of its Subsidiaries has obtained all such
Approvals, which are valid and in full force and effect, and is operating in
compliance therewith. Such Approvals include, but are not limited to, those
required under federal, state or local statutes, ordinances, orders,
requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety, buildings,
highways or zoning. Except as disclosed in SCHEDULE 2.19 or in any other
Schedule hereto, neither the Company nor any of its Subsidiaries is subject to
or bound by any agreement, judgment, decree or order which may materially and
adversely affect its business or prospects, its condition, financial or
otherwise, or any of its assets or properties.
2.20 CORPORATE RECORDS; COPIES OF DOCUMENTS. The corporate record books
of the Company and its Subsidiaries accurately record all corporate action taken
by their respective stockholders and boards of directors and committees. The
copies of the corporate records of the Company and each of its Subsidiaries, as
made available to the Purchasers for review, are true and complete copies of the
originals of such documents.
2.21 TRANSACTIONS WITH INTERESTED PERSONS.
19
(a) Except as set forth in SCHEDULE 2.21(a) hereto, none of
the Company, any of its Subsidiaries, any Stockholder, officer, supervisory
employee or director of the Company or, to the knowledge of Company and the
Principal Stockholders, any of their respective spouses or family members, owns
directly or indirectly on an individual or joint basis any material interest in,
or serves as an officer or director or in another similar capacity of, any
competitor or supplier of Company, or any organization which has a material
contract or arrangement with the Company or any of its Subsidiaries.
(b) Except as set forth in SCHEDULE 2.21(b) hereto, each
Stockholder who is employed by the Company is not a party to any
non-competition, trade secret or confidentiality agreement with any third party
other than the Company or a Subsidiary. There are no agreements or arrangements
not contained herein or disclosed in a Schedule hereto, to which any Stockholder
is a party relating to the business of the Company or any Subsidiary or to such
Stockholder's rights and obligations as a stockholder, director or officer of
the Company or any Subsidiary.
2.22 EMPLOYEE BENEFIT PROGRAMS.
(a) SCHEDULE 2.22 hereto lists every Employee Program (as
defined below) that has been maintained (as defined below) by the Company or any
of its Subsidiaries or Affiliates (as defined below) at any time during the
six-year period ending on the Closing date.
(b) Each Employee Program which has ever been maintained by
the Company or any of its Subsidiaries or Affiliates and which has at any time
been intended to qualify under Section 401(a) or 501(c)(9) of the Code has
received a favorable determination or approval letter from the Internal Revenue
Service ("IRS") regarding its qualification under such section and has, in fact,
been qualified under the applicable section of the Code from the effective date
of such Employee Program through and including the Closing (or, if earlier, the
date that all of such Employee Program's assets were distributed). No event or
omission has occurred which would cause any Employee Program to lose its
qualification or otherwise fail to satisfy the relevant requirements to provide
tax-favored benefits under the applicable Code Section (including without
limitation Code Sections 105, 125, 401(a) and 501(c)(9)). Each asset held under
any such Employee Program may be liquidated or terminated without the imposition
of any redemption fee, surrender charge or comparable liability. No partial
termination (within the meaning of Section 411(d)(3) of the Code) has occurred
with respect to any Employee Program.
(c) The Company does not know and has no reason to know, of
any failure of any party to comply with any laws applicable to the Employee
Programs that have been maintained by the Company or any of its Subsidiaries or
Affiliates. With respect to any Employee Program ever maintained by the Company
or any of its Subsidiaries or Affiliates, there has occurred no "prohibited
transaction", as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code,
20
or breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly, in any taxes, penalties or
other liability to the Company, any Subsidiary, or the Purchasers. No
litigation, arbitration, or governmental administrative proceeding (or
investigation) or other proceeding (other than those relating to routine claims
for benefits) is pending or threatened with respect to any such Employee
Program. All payments and/or contributions required to have been made (under the
provisions of any agreements or other governing documents or applicable law)
with respect to all Employee Programs ever maintained by the Company or any
Affiliate, for all periods prior to the Closing Date, either have been made or
have been accrued (and all such unpaid but accrued amounts are described on
SCHEDULE 2.22).
(d) None of the Company, any Subsidiary or any Affiliate (as
defined below) (i) has ever maintained any Employee Program which has been
subject to title IV of ERISA (including, but not limited to, any Multiemployer
Plan (as defined below)) or (ii) has ever provided health care or any other
non-pension benefits to any employees after their employment is terminated
(other than as required by part 6 of subtitle B of title I of ERISA) or has ever
promised to provide such post-termination benefits.
(e) With respect to each Employee Program maintained by the
Company or any Subsidiary within the three years preceding the Closing, complete
and correct copies of the following documents (if applicable to such Employee
Program) will be delivered to the Purchasers within 10 days of the date hereof:
(i) all documents embodying or governing such Employee Program, and any funding
medium for the Employee Program (including, without limitation, trust
agreements) as they may have been amended; (ii) the most recent IRS
determination or approval letter with respect to such Employee Program under
Code Sections 401 or 501(c)(9), and any applications for determination or
approval subsequently filed with the IRS; (iii) the six most recently filed IRS
Forms 5500, with all applicable schedules and accountants' opinions attached
thereto; (iv) the summary plan description for such Employee Program (or other
descriptions of such Employee Program provided to employees) and all
modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such Employee Program; (vi) any documents
evidencing any loan to an Employee Program that is a leveraged employee stock
ownership plan; and (vii) all other materials reasonably necessary for Parent
and the Company or any Affiliate to perform any of its responsibilities with
respect to any Employee Program subsequent to the Closing (including, without
limitation, health care continuation requirements).
(f) Each Employee Program required to be listed on SCHEDULE
2.22 may be amended, terminated, or otherwise modified by the company to the
greatest extent permitted by applicable law, including the elimination of any
and all future benefit accruals under any Employee Program and no employee
communications or provision of any Employee Program document has failed to
effectively reserve the right of the Company or the Subsidiary or Affiliate to
so amend, terminate or otherwise modify such Employee Program.
21
(g) Each Employee Program ever maintained by the Company or
any of its Subsidiaries or Affiliates (including each non-qualified deferred
compensation arrangement) has been maintained in compliance with all applicable
requirements of federal and state securities laws including (without limitation,
if applicable) the requirements that the offering of interests in such Employee
Program be registered under the Securities Act of 1933 and/or state "Blue Sky"
laws.
(h) Each Employee Program ever maintained by the Company or
any of its Subsidiaries or Affiliates has complied with the applicable
notification and other applicable requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985, Health Insurance Portability and
Accountability Act of 1996, the Newborns' and Mothers' Health Protection Act of
1996, the Mental Health Parity Act of 1996, and the Women's Health and Cancer
Rights Act of 1998.
(i) For purposes of this Section:
(i) "EMPLOYEE PROGRAM" means (A) all employee
benefit plans within the meaning of ERISA Section 3(3), including, but
not limited to, multiple employer welfare arrangements (within the
meaning of ERISA Section 3(40)), plans to which more than one
unaffiliated employer contributes and employee benefit plans (such as
foreign or excess benefit plans) which are not subject to ERISA; (B)
all stock option plans, bonus or incentive award plans, severance pay
policies or agreements, deferred compensation agreements, supplemental
income arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in (A) above,
including without limitation, any arrangement intended to comply with
Code Section 120, 125, 127, 129 or 137; and (C) all plans or
arrangements providing compensation to employee and non-employee
directors. In the case of an Employee Program funded through a trust
described in Code Section 401(a) or an organization described in Code
Section 501(c)(9), or any other funding vehicle, each reference to such
Employee Program shall include a reference to such trust, organization
or other vehicle.
(ii) An entity "MAINTAINS" an Employee Program if
such entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide
benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity, or
their spouses, dependents, or beneficiaries.
(iii) An entity is an "AFFILIATE" of the Company
or a Subsidiary if it would have ever been considered a single employer
with the Company or any of its Subsidiaries under ERISA Section 4001(b)
or part of the same "controlled group" as the Company or any of its
Subsidiaries for purposes of ERISA Section 302(d)(8)(C).
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(iv) "MULTIEMPLOYER PLAN" means a (pension or
non-pension) employee benefit plan to which more than one employer
contributes or which is maintained pursuant to one or more collective
bargaining agreements.
2.23 ENVIRONMENTAL MATTERS.
(a) Except as set forth in SCHEDULE 2.23 hereto, (i) neither
the Company nor any of its Subsidiaries has ever generated, transported, used,
stored, treated, disposed of, or managed any Hazardous Waste (as defined below);
(ii) no Hazardous Material (as defined below) has ever been or is threatened to
be spilled, released, or disposed of at any site presently or formerly owned,
operated, leased, or used by the Company or any of its Subsidiaries, or has ever
been located in the soil or groundwater at any such site; (iii) no Hazardous
Material has, to the knowledge of the Company or any of the Principal
Stockholders, ever been transported from any site presently or formerly owned,
operated, leased, or used by the Company or any of its Subsidiaries for
treatment, storage, or disposal at any other place; (iv) neither the Company nor
any of its Subsidiaries presently owns, operates, leases, or uses, nor has it
previously owned, operated, leased, or used any site on which underground
storage tanks are or were located; and (v) no lien has ever been imposed by any
governmental agency on any property, facility, machinery, or equipment owned,
operated, leased, or used by the Company or any of its Subsidiaries in
connection with the presence of any Hazardous Material.
(b) Except as set forth in SCHEDULE 2.23, (i) neither the
Company nor any of its Subsidiaries has any liability under, nor has it ever
violated, any Environmental Law (as defined below); (ii) the Company and each of
its Subsidiaries, any property owned, operated, leased, or used by any of them,
and any facilities and operations thereon, are presently in compliance with all
applicable Environmental Laws; (iii) neither the Company nor any of its
Subsidiaries has ever entered into or been subject to any judgment, consent
decree, compliance order, or administrative order with respect to any
environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law; and (iv) neither the
Company nor any of its Subsidiaries has any reason to believe that any of the
items enumerated in clause (iii) of this subsection will be forthcoming.
(c) Except as set forth in SCHEDULE 2.23, no site owned,
operated, leased (provided that with respect to sites leased by the Company or
its Subsidiaries outside the United States of America this representation shall
be made as to the Company's and the Principal Stockholders' knowledge), or used
by the Company or any of its Subsidiaries contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs, or any urea formaldehyde foam insulation.
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(d) For purposes of this SECTION 2.23, (i) "HAZARDOUS
MATERIAL" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant,
contaminant, or other substance which may pose a threat to the environment or to
human health or safety, as defined or regulated under any Environmental Law;
(ii) "HAZARDOUS WASTE" shall mean and include any hazardous waste as defined or
regulated under any Environmental Law; (iii) "ENVIRONMENTAL LAW" shall mean any
environmental or health and safety-related law, regulation, rule, ordinance, or
by-law at the foreign, federal, state, or local level, whether existing as of
the date hereof, previously enforced, or subsequently enacted; and (iv)
"COMPANY" shall mean and include the Company, each of its Subsidiaries and all
other entities for whose conduct the Company or any of its Subsidiaries is or
may be held responsible under any Environmental Law.
2.24 LIST OF DIRECTORS AND OFFICERS. SCHEDULE 2.24 hereto contains a
true and complete list of all current directors and officers of the Company and
each of its Subsidiaries. In addition, SCHEDULE 2.24 contains a list of all
managers, employees and consultants of the Company. In each case such Schedule
includes the current job title and aggregate annual compensation of each such
individual.
2.25 DISCLOSURE. The representations, warranties and statements
contained in this Agreement and in the certificates, exhibits and schedules
delivered by the Company and the Principal Stockholders to the Purchasers
pursuant to this Agreement do not contain any untrue statement of a material
fact, and, when taken together, do not omit to state a material fact required to
be stated therein or necessary in order to make such representations, warranties
or statements not misleading in light of the circumstances under which they were
made. There are no facts which presently or may in the future have a material
adverse affect on the business, properties, prospects, operations or condition
of the Company or any of its Subsidiaries which have not been specifically
disclosed herein or in a Schedule furnished herewith, other than general
economic conditions affecting the industries in which the Company or any of its
Subsidiaries operates.
2.26 EMPLOYEES; LABOR MATTERS. The Company and its Subsidiaries
generally enjoys good employer-employee relationships. Neither the Company nor
any of its Subsidiaries is delinquent in payments to any of its employees for
any wages, salaries, commissions, bonuses or other direct compensation for any
services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Except as set forth in SECTION 6.2(d) hereof, upon
termination of the employment of any of said employees, neither the Company, any
of its Subsidiaries nor the Purchasers will by reason of the transactions
contemplated under this Agreement or anything done prior to the Closing be
liable to any of said employees for so-called "severance pay" or any other
payments, except as set forth in SCHEDULE 2.26. Neither the Company nor any of
its Subsidiaries has any policy, practice, plan or program of paying severance
pay or any form of severance compensation in connection with the termination of
employment, except as set forth in said Schedule. The Company and each of its
Subsidiaries is in compliance with all applicable laws and regulations
respecting labor, employment, fair employment practices, work place safety and
health, terms and conditions of employment, and
24
wages and hours. Neither the Company nor any of its Subsidiaries has received
any information indicating that any of its employment policies or practices is
currently being audited or investigated by any federal, state or local
government agency. The Company and each of its Subsidiaries is, and at all times
since November 6, 1986 has been, in compliance with the requirements of the
Immigration Reform Control Act of 1986.
2.27 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. SCHEDULE 2.27(a) sets forth
any customer, sales representative or distributor (whether pursuant to a
commission, royalty or other arrangement) which accounts for more than 5% of the
sales of the Company and its Subsidiaries on a consolidated basis for the twelve
months ended December 31, 1999 (collectively, the "CUSTOMERS AND DISTRIBUTORS").
SCHEDULE 2.27(b) lists all of the suppliers of the Company and each of its
Subsidiaries to whom during the twelve months ended December 31, 1999 the
Company or its Subsidiary made payments aggregating $10,000 or more showing,
with respect to each, the name, address and dollar volume involved (the
"SUPPLIERS"). The relationships of the Company and each of its Subsidiaries with
its Customers, Distributors and Suppliers are good commercial working
relationships.
2.28 YEAR 2000 COMPLIANCE. All computer applications, programs and
products including those of its suppliers and vendors that are material to the
Company and its Subsidiaries are able to perform properly date-sensitive
functions for all dates before and after January 1, 2000.
SECTION 3. COVENANTS OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS.
3.1 MAKING OF COVENANTS AND AGREEMENTS. The Company and the Principal
Stockholders jointly and severally hereby make the covenants and agreements set
forth in this SECTION 3 and the Principal Stockholders agree to cause the
Company and its Subsidiaries to comply with such agreements and covenants. No
Principal Stockholder shall have any right of indemnity or contribution from the
Company or any Subsidiary with respect to the breach of any covenant or
agreement hereunder.
3.2 CONDUCT OF BUSINESS. Between the date of this Agreement and
the Closing Date, the Company and each of its Subsidiaries will:
(a) Conduct its business only in the ordinary course and
refrain from changing or introducing any method of management or operations
except in the ordinary course of business and consistent with prior practices;
(b) Refrain from making any purchase, sale or disposition of
any asset or property other than in the ordinary course of business, from
purchasing any capital asset costing more than $10,000 and from mortgaging,
pledging, subjecting to a lien or otherwise encumbering any of its properties or
assets other than in the ordinary course of business;
25
(c) Refrain from incurring any contingent liability as a
guarantor or otherwise with respect to the obligations of others, and from
incurring any other contingent or fixed obligations (including obligations for
borrowed money) or liabilities except in the ordinary course of business;
(d) Refrain from making any change or incurring any obligation
to make a change in its charter, bylaws or authorized or issued capital stock;
(e) Except with respect to any agreement of the Company made
prior to the date hereof for the purchase or redemption of any option for shares
of Common Stock of the Company issued by the Company prior to the date hereof,
refrain from declaring, setting aside or paying any dividend, making any other
distribution in respect of its capital stock or making any direct or indirect
redemption, purchase or other acquisition of its stock;
(f) Refrain from entering into any employment contracts, or
making any change in the compensation payable or to become payable to any of its
officers, employees, agents or independent contractors, other than with respect
to Xxxxxxx Ran on terms negotiated in the ordinary course of business;
(g) Refrain from prepaying any loans (if any) from its
stockholders, officers or directors or making any change in its borrowing
arrangements;
(h) Except with respect to any agreement of the Company made
prior to the date hereof for the purchase or redemption of any option for shares
of Common Stock of the Company issued by the Company prior to the date hereof,
refrain from issuing any equity securities;
(i) Refrain from entering into any transaction of the type
described in SECTION 2.21 hereof;
(j) Use its best efforts to prevent any change with respect to
its management and supervisory personnel and banking arrangements;
(k) Use its best efforts to keep intact its business
organization, to keep available its present officers and employees and to
preserve the goodwill of all suppliers, customers, independent contractors and
others having business relations with it;
(l) Have in effect and maintain at all times all insurance of
the kind, in the amount and with the insurers set forth in the SCHEDULE 2.17
hereto or equivalent insurance with any substitute insurers approved in writing
by Parent; and
(m) Furnish the Purchasers with unaudited monthly balance
sheets and statements of income and retained earnings and cash flows of the
Company and each of its
26
Subsidiaries on a consolidated basis within 15 days after each month end for
each month ending more than 15 days before the Closing.
(n) Refrain from acquiring any rights, assets, intangible
property or liabilities currently owned or controlled by any Stockholder from
such Stockholder, including without limitation the Principal Stockholders, or,
other than in the ordinary cause of business, from any other third-party,
without the prior written consent of Parent.
(o) Refrain from, other than in the ordinary cause of
business, transferring from the Company or any of its Subsidiaries any rights,
assets, intangible property or liabilities to any Stockholder (including without
limitation the Principal Stockholders) or any other third party, without the
prior written consent of Parent.
3.3 NOTICE OF DEFAULT. Promptly upon the occurrence of, or promptly
upon the Company, any Subsidiary or a Principal Stockholder becoming aware of
the impending or threatened occurrence of, any event which would cause or
constitute a breach or default, or would have caused or constituted a breach or
default had such event occurred or been known to the Company, any Subsidiary or
such Stockholder prior to the date hereof, of any of the representations,
warranties or covenants of the Company or the Principal Stockholders contained
in or referred to in this Agreement or in any Schedule or Exhibit referred to in
this Agreement, the Company or the Principal Stockholders shall give detailed
written notice thereof to the Purchaser and the Company and the Principal
Stockholders shall use their best efforts to prevent or promptly remedy the
same.
3.4 CONSUMMATION OF AGREEMENT. The Company and each of the Principal
Stockholders shall use their best efforts to perform and fulfill all conditions
and obligations on their parts to be performed and fulfilled under this
Agreement, and shall cooperate with all reasonable requests of the Purchasers
and their counsel in connection therewith, to the end that the transactions
contemplated by this Agreement shall be fully carried out. To this end, the
Company will obtain prior to the Closing all necessary authorizations or
approvals of its Stockholders and Board of Directors.
3.5 NO SOLICITATION OF OTHER OFFERS. None of the Company, its
Subsidiaries, the Principal Stockholders, nor any of their representatives will,
directly or indirectly, solicit, encourage, assist, initiate discussions or
engage in negotiations with, provide any information to, or enter into any
agreement or transaction with, any person, other than the Purchasers, relating
to the possible acquisition of any capital stock of the Company or its
Subsidiaries, or any of their assets, except for the sale of assets in the
ordinary course of business of the Company or its Subsidiaries consistent with
the terms of this Agreement.
27
3.6 CONFIDENTIALITY. The Company and the Principal Stockholders agree
that, unless and until the Closing has been consummated, each of the Company,
its Subsidiaries, the Principal Stockholders and their officers, directors,
agents and representatives will hold, and will cause the other Stockholders of
the Company to hold, in strict confidence, and will not use, any confidential or
proprietary data or information obtained from the Purchasers with respect to
their business or financial condition except for the purpose of evaluating,
negotiating and completing the transaction contemplated hereby. If the
transactions contemplated by this Agreement are not consummated, the Company,
its Subsidiaries and the Principal Stockholders will return to the Purchasers
(or certify that they have destroyed) all copies of such data and information,
including but not limited to financial information, customer lists, business and
corporate records, worksheets, test reports, tax returns, lists, memoranda, and
other documents prepared by or made available to the Company, its Subsidiaries
or the Principal Stockholders in connection with the transaction.
3.7 TAX RETURNS. The Company and the Principal Stockholders shall
cooperate with the Purchasers to permit the Company and its Subsidiaries in
accordance with applicable law to promptly prepare and file on or before the due
date or any extension thereof all federal, state and local tax returns required
to be filed by the Company and its Subsidiaries with respect to taxable periods
ending on or before the Closing.
3.8 BUSINESS REVIEW. The Purchasers and each of their authorized
representatives, attorneys, accountants and consultants shall have the
opportunity to conduct a full and complete due diligence investigation of the
business, financial condition and operations of the Company and its
Subsidiaries, which investigation shall include a customary legal due diligence
review (the "BUSINESS REVIEW").
In connection with the Business Review, the Company, its Subsidiaries
and the Principal Stockholders shall permit the Purchasers and their authorized
representatives (including without limitation their counsel and independent
public accountants) access to all of the books and records of the Company and
its Subsidiaries, and the opportunity to inspect, review or copy the same. The
Company, its Subsidiaries and the Principal Stockholders shall also permit the
Purchasers and their authorized representatives, including any engineers,
environmental engineers or consultants retained by the Purchasers, upon
reasonable prior notice and subject to any reasonable rules or regulations
pertinent to the applicable facilities, access to the Owned Real Property or the
Leased Real Property for inspection. The Company, its Subsidiaries and the
Principal Stockholders shall, and shall cause their employees, agents and
representatives to, cooperate with the Purchasers in the conduct of the Business
Review.
28
3.9 PREPARATION OF SCHEDULES. The Company, its Subsidiaries and the
Principal Stockholders acknowledge that the Schedules contemplated by this
Agreement have not been attached hereto as of the date hereof, and the Company,
its Subsidiaries and the Principal Stockholders shall use best efforts to
prepare, negotiate and finalize the Schedules as soon as practicable following
execution and delivery of this Agreement, but in no event later than 30 days
following the date hereof. On the date on which the Schedules have been
finalized, the Company, its Subsidiaries and the Principal Stockholders shall
execute and deliver an amendment to this Agreement acknowledging and agreeing to
the incorporation of the Schedules into this Agreement effective as of the date
hereof, and true and complete copies of the Schedules shall be attached to such
amendment (the "SCHEDULE AMENDMENT").
3.10 FILING COOPERATION. In connection with any filings to be made by
Parent under the Securities Act of 1933, as amended (the "SECURITIES ACT") or
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the
Company and the Principal Stockholders shall (a) provide for inclusion therein
or filing therewith the financial, business and other information and documents
reasonably requested for inclusion therein by Parent, (b) consider promptly
Parent's reasonable requests for any additional information or documents and use
commercially reasonable efforts to make such available, and (c) generally
cooperate with Parent and its representatives and agents in connection
therewith. The Principal Stockholders shall not have an obligation to incur any
personal expense in order to comply with this SECTION 3.10, however, the
Principal Stockholders shall comply with this SECTION 3.10 so long as any such
expense is paid for by Parent.
3.11 STAY OF PROCEEDINGS. Commencing upon the date hereof and
continuing until the Closing or the earlier termination of this Agreement, the
Company and the Principal Stockholders agree to use commercially reasonable best
efforts to cause all parties who are (x) defendants in that certain litigation
pending in United States District Court for the Northern District of New York
(the "NEW YORK COURT"), case No. 99-CV-216 (the "NEW YORK LITIGATION") and (y)
plaintiffs in that certain litigation pending in Jefferson Circuit Court,
Division One in Jefferson County, Kentucky (the "KENTUCKY COURT"), case
No.98-CI-03901 (the "KENTUCKY LITIGATION" and together with the New York
Litigation, the "LITIGATIONS") to (i) stay all actions and proceedings related
to the Litigations, (ii) refrain from filing any motions, conducting any
depositions, serving any interrogatories, engaging in discovery proceedings, or
performing, conducting or engaging in any actions or proceedings related
thereto, and (iii) file with the New York Court and the Kentucky Court any and
all necessary documents, instruments and certificates as may be required by such
courts to effect such stay of the Litigations. Nothing herein shall be construed
to affect in any way the Preliminary Injunction entered by the United States
District Court for the Northern District of New York on February 28, 1999, and
reaffirmed by that Court on January 11, 2000, which shall remain in full force
and effect during the pendency of this Agreement.
29
3.12 VOTING. The Principal Stockholders hereby agree to vote all of the
shares of Company Common Stock held by them in favor of the transactions
contemplated by this Agreement.
3.13 AUDITED FINANCIAL STATEMENTS. The Company and the Principal
Stockholders shall, at the Purchasers' expense, cause to be delivered to the
Purchasers on the date hereof the following financial information, in each case
audited by PricewaterhouseCoopers LLP: Consolidated Balance Sheets of the
Company and its Subsidiaries for its fiscal years ending on September 30, 1998
and September 30, 1999 and statements of income, retained earnings and cash
flows for the two years then ended.
3.14 SUBSIDIARIES. (a) Subject to SECTION 3.14(b), the Company and the
Principal Stockholders hereby acknowledge that the transactions contemplated by
this Agreement include the acquisition by the Purchasers of all of the capital
stock of the Subsidiaries of the Company, including without limitation, AC
Technology Europe B.V. (BV), Plastic Moulding Consultants, Ltd., C-Mold
Scandinavia AB, Advanced CAE Technology Pacific (Pacific) ("ACTP"), and C-Mold
Singapore PTE LTD.
(b) The Company and the Principal Stockholders shall, on or prior to
the Closing Date, cause each owner (other than the Company) of capital stock of
ACTP to deliver to Parent certificates in respect of such capital stock
accompanied by stock powers duly executed in blank by such owner, pursuant to
which such owners shall assign, transfer and set over to Parent or its nominee
all of such owner's right, title and interest in such certificate and any
ownership of capital stock of ACTP evidenced thereby. If required by any
jurisdiction in which ACTP is organized or is conducting business, Parent shall
cause such certificates to be transferred into the name or names of its nominee
or nominees, such that Parent will be in compliance with any legal requirement
in effect in such jurisdiction(s) with respect to the ownership of capital stock
of ACTP. Upon such assignment and transfer by such owner to Parent of such
owner's interest in the capital stock of ACTP, Parent agrees to hold each such
owner harmless from any liability relating to such owner's interest in such
capital stock.
(c) The Company and the Principal Stockholders shall, prior to the
Closing Date, obtain all necessary consents, authorizations, or approvals from
any applicable third parties, execute and deliver all necessary documents,
instruments and certificates and perform all other acts necessary such that the
Company (and to the extent set forth in SECTION 3.14(b), any nominee or nominees
of Parent) will, on the Closing Date, own, beneficially and of record, all of
the outstanding shares of capital stock of the Subsidiaries free of any lien,
restriction or encumbrance.
(d) The Company and the Principal Stockholders shall, on or prior to
the Closing Date, cause the liquidation and dissolution of AC Technology
Enterprise Ltd. (LTD), evidence of which shall be provided to Purchasers.
30
(e) The Company and the Principal Stockholders jointly and severally
represent, and based solely on such representation the Purchasers hereby
acknowledge, that Ven-Xxxx Xxxx and Xxx-San Xxx each hold a 2.5% ownership
interest in the joint venture known as Beijing-Beihang Haier.
3.15 REAL PROPERTY. (a) The Company and the Principal Stockholders
hereby acknowledge that the transactions contemplated by this Agreement include
the acquisition by the Purchasers of sole right, title and interest in and to
all Owned Real Property (other than the Real Estate Partnership). The Company
and the Principal Stockholders shall, prior to the Closing Date obtain all
necessary consents, authorizations or approvals from any applicable third
parties, execute and deliver all necessary documents, instruments and
certificates and perform all other acts necessary such that the Company will, on
or prior to the Closing Date have good, clear, record, marketable and sole title
to all Owned Real Property in each case free and clear of all Encumbrances other
than Permitted Encumbrances.
(b) The Purchasers, the Company and the Principal Stockholders hereby
agree to negotiate in good faith a Lease Renewal and Purchase Option Agreement,
the key terms of which are attached hereto as EXHIBIT 3.15(b), to be executed
and delivered by the Company and the Real Estate Partnership prior to or at the
Closing.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
4.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to the Company and the Principal Stockholders to enter into this Agreement and
consummate the transactions contemplated hereby, the Purchasers hereby jointly
and severally make the representations and warranties to the Company and the
Principal Stockholders contained in this SECTION 4.
4.2 ORGANIZATION OF PURCHASERS. Each of Parent and MergerSub is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware with full corporate power to own or lease its properties and to
conduct its business in the manner and in the places where such properties are
owned or leased or such business is conducted by it.
4.3 AUTHORITY OF PURCHASERS. Each of Parent and MergerSub has full
right, authority and power to enter into this Agreement, and each agreement,
document and instrument to be executed and delivered by it pursuant to this
Agreement and to carry out the transactions contemplated hereby. The execution,
delivery and performance by each of Parent and MergerSub of this Agreement, and
each such other agreement, document and instrument have been duly authorized by
all necessary corporate action of Parent and MergerSub and no other action on
the part of either Parent or MergerSub is required in connection therewith. This
Agreement and each other agreement, document and instrument executed and
delivered by each of Parent and MergerSub pursuant to this Agreement constitute,
or when executed and delivered will constitute, valid and binding obligations of
Parent and MergerSub enforceable in
31
accordance with their terms. The execution, delivery and performance by Parent
and MergerSub of this Agreement and each such agreement, document and
instrument:
(a) does not and will not violate any provision of the charter or
bylaws of either Parent or MergerSub;
(b) does not and will not violate any laws of the United States or of
any state or any other jurisdiction applicable to either Parent or MergerSub or
require either Parent or MergerSub to obtain any approval, consent or waiver of,
or make any filing with, any person or entity (governmental or otherwise) which
has not been obtained or made; and
(c) does not and will not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of termination
of any indenture, loan or credit agreement, or other agreement mortgage, lease,
permit, order, judgment or decree to which Parent or MergerSub is a party and
which is material to the business and financial condition of Parent and
MergerSub and its affiliated organizations on a consolidated basis.
SECTION 5. COVENANTS OF THE PURCHASERS.
5.1 MAKING OF COVENANTS AND AGREEMENT. The Purchasers hereby make the
covenants and agreements set forth in this SECTION 5.
5.2 CONFIDENTIALITY
(a) Each of Parent and MergerSub agrees that, unless and until the
Closing has been consummated, each of Parent and MergerSub and its officers,
directors, agents and representatives will hold in strict confidence, and will
not use any confidential or proprietary data or information obtained from the
Company, its Subsidiaries or the Principal Stockholders with respect to the
business or financial condition of the Company and its Subsidiaries except for
the purpose of evaluating, negotiating and completing the transaction
contemplated hereby. Information generally known in the industries of the
Company or its Subsidiaries or which has been disclosed to Parent and MergerSub
by third parties which have a right to do so shall not be deemed confidential or
proprietary information for purposes of this agreement. If the transaction
contemplated by this Agreement is not consummated, each of Parent and MergerSub
will return to the Company (or certify that it has destroyed) all copies of such
data and information, including but not limited to financial information,
customer lists, business and corporate records, worksheets, test reports, tax
returns, lists, memoranda, and other documents prepared by or made available to
Parent and MergerSub in connection with the transaction.
32
(b) The Company and the Principal Stockholders hereby acknowledge that
(i) Parent has filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-1 (the "REGISTRATION STATEMENT") under the
Securities Act and (ii) pursuant to applicable law (including without limitation
the Securities Act and the rules promulgated thereunder), Parent is obligated to
disclose the existence and substance of this Agreement in the Registration
Statement. Accordingly, notwithstanding SECTION 5.2(a) hereof, Parent shall be
permitted to disclose such information about the Company, its Subsidiaries, its
stockholders and the transaction contemplated hereby (i) as may be legally
required, and otherwise reasonably necessary, in the preparation, filing and
distribution of such reports, filings and other documents required by the
Securities Act or the Exchange Act, or the rules promulgated thereunder or (ii)
as may be required by any underwriter of shares of the Company's Common Stock to
be registered under the Securities Act pursuant to the Registration Statement.
Purchasers will use commercially reasonable efforts to provide the Company with
any information relating to the Company to be contained in such filing in
advance of such filing with the SEC. Notwithstanding the preceding sentence, the
Company and the Principal Stockholders acknowledge that neither the Company nor
any of the Principal Stockholders shall have any right to object to such
proposed disclosure.
5.3 STAY OF PROCEEDINGS. Commencing upon the date hereof and continuing
until the Closing or the earlier termination of this Agreement, the Parent
agrees to use commercially reasonable best efforts to cause all parties who (x)
are plaintiffs in the New York Litigation, and (y) are defendants in the
Kentucky Litigation to (i) stay all actions and proceedings related to the
Litigations, (ii) refrain from filing any motions, conducting any depositions,
serving any interrogatories, engaging in discovery proceedings, or performing,
conducting or engaging in any actions or proceedings related thereto, and (iii)
file with the New York Court and the Kentucky Court any and all necessary
documents, instruments and certificates as may be required by such courts to
effect such stay of the Litigations. Nothing herein shall be construed to affect
in any way the Preliminary Injunction entered by the United States District
Court for the Northern District of New York on February 28, 1999, and reaffirmed
by that Court on January 11, 2000, which shall remain in full force and effect
during the pendency of this Agreement.
5.4 FINANCING. The Purchasers shall use commercially reasonable efforts
to obtain, on terms and conditions satisfactory to them in their sole and
absolute discretion, such financing as may be necessary to consummate the
transactions contemplated by this Agreement. Upon the reasonable request of the
Company and the Principal Stockholders, the Purchasers shall (i) apprise the
Company and the Principal Stockholders of the status of such financing, and (ii)
solely for the purpose of confirming such status, provide the Company and the
Principal Stockholders with reasonable access to any reasonably potential source
of such financing.
33
SECTION 6. CONDITIONS.
6.1 CONDITIONS TO THE OBLIGATIONS OF PURCHASERS. The obligation of the
Purchasers to consummate this Agreement and the transactions contemplated hereby
are subject to the fulfillment, prior to or at the Closing, of the conditions
precedent listed in this SECTION 6.1 (all or any of which may be waived in whole
or in part by the Purchasers in their sole and absolute discretion):
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the representations
and warranties of the Company and the Principal Stockholders contained in
SECTION 2 shall be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms as to
materiality, which representations and warranties as so qualified shall be true
in all respects) as of the date of this Agreement and, except for the
representation set forth in SECTION 2.10(a), as of the Closing Date as though
made on and as of the Closing, after giving effect to the Schedules described in
SECTION 3.9; and the Company and each of the Principal Stockholders shall, on or
before the Closing, have performed all of their obligations, and fulfilled all
their covenants hereunder which by the terms hereof are to be performed on or
before the Closing.
(b) [**Intentionally Omitted.**]
(c) CERTIFICATE FROM OFFICERS. The Principal Stockholders shall have
delivered to the Purchasers a certificate of the Company's President and Chief
Financial Officer dated as of the Closing to the effect that the statements set
forth in paragraph (a) and (b) above in this SECTION 6.1 are true and correct.
(d) NO LITIGATION. There shall have been no determination by the
Purchasers, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become inadvisable or impracticable by reason
of the institution or threat by any person or any federal, state or other
governmental authority of litigation, proceedings or other action against the
Purchasers, the Company, its Subsidiaries or any stockholder of the Company.
(e) CONSENTS. The Company and the Principal Stockholders shall have
made all filings with and notifications of governmental authorities, regulatory
agencies and other entities required to be made by the Company or the Principal
Stockholders in connection with the execution and delivery of this Agreement,
the performance of the transactions contemplated hereby and the continued
operation of the business of the Company by Parent subsequent to the Closing.
The Company, the Principal Stockholders, Parent and MergerSub shall have
received all authorizations, waivers, consents and permits, in form and
substance reasonably satisfactory to Parent and MergerSub (the "REQUIRED
CONSENTS"), from all third parties required to permit the continuation of the
business of the Company and its Subsidiaries and the consummation of the
transactions contemplated by this Agreement, and to avoid a breach, default,
termination, acceleration or modification of any material indenture, loan or
credit agreement or any other material agreement, contract, instrument,
mortgage, lien, lease,
34
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award as a result of, or in connection with, the execution and
performance of this Agreement.
(f) FINANCING. The Purchasers shall have obtained proceeds from
financing sources in an aggregate amount adequate to finance the transactions
contemplated hereby on terms and conditions satisfactory to them in their sole
and absolute discretion.
(g) OPINION OF COUNSEL. The Company shall have delivered to the
Purchasers a legal opinion delivered by counsel for the Company and the
Principal Stockholders, substantially in the form attached hereto as EXHIBIT
6.1(g).
(h) NON-COMPETITION AGREEMENTS.
(i) Each of the Principal Stockholders, each other Stockholder of
the Company owning two percent (2%) or more of the Common Stock of the
Company on a fully diluted basis, and the officers and directors of the
Company, as shall be determined by the Purchasers in their reasonable
discretion, shall have executed and delivered to the Purchasers a
Non-Competition and Release Agreement in substantially the form annexed
hereto as EXHIBIT 6.1(h)(i)(a).
(ii) The Principal Stockholders shall have used their best
efforts to cause each of the employees of the Company and its Subsidiaries
whose employment with the Company or any of its Subsidiaries is being
terminated, as shall be determined by the Purchasers in their reasonable
discretion, to execute and deliver to the Purchasers a Non-Competition and
Release Agreement in substantially the form annexed hereto as EXHIBIT
6.1(h)(i)(a).
(iii) The Company shall have used its best efforts to cause each
of the employees of the Company and its Subsidiaries, as shall be
determined by the Purchasers in their reasonable discretion, to have
executed and delivered to the Purchasers a Non-Competition Agreement in
substantially the form annexed hereto as EXHIBIT 6.1(h)(I)
(i) RESIGNATIONS. The Company shall have delivered to the Purchasers
the resignations of (i) all of the directors and officers of the Company and
each Subsidiary, and (ii) such employees of the Company and its Subsidiaries as
shall be determined by the Purchasers in their reasonable discretion, each of
which such resignations are to be effective at the Closing.
(j) RELEASES. There shall have been delivered to Parent releases in the
form attached hereto as EXHIBIT 6.1(j) signed by (i) the Company with respect to
the New York Litigation, (ii) the plaintiff in the Kentucky Litigation, and
(iii) each officer and director of the Company and each Subsidiary.
35
(k) STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been legally approved and adopted by the
requisite vote or consents of the Company's stockholders.
(l) DISSENTING SHARES. Of the total shares of Company Common Stock
outstanding immediately prior to the Effective Time of the Merger, no more than
five (5%) will be Dissenting Shares.
(m) SCHEDULE AMENDMENT. The Company and the Principal Stockholders
shall have executed and delivered to the Purchasers in form and substance
satisfactory to the Purchasers in their sole and absolute discretion, the
Schedule Amendment, to which shall be attached true and complete copies of the
Schedules contemplated by this Agreement, which Schedules, including all
information contained thereon shall be in form and substance satisfactory to
Purchasers in their sole and absolute discretion.
(n) ESCROW AGREEMENT. The Principal Stockholders and the Escrow Agent
shall have executed and delivered to Parent the Escrow Agreement.
(o) TITLE INSURANCE. The Purchasers shall have obtained title insurance
on the Owned Real Property with exceptions and on terms satisfactory to the
Purchasers in their sole and absolute discretion.
(p) SETTLEMENT AGREEMENT. Xxxxxx Antanovskii shall have executed and
delivered to Parent a Settlement Agreement in the form annexed hereto as EXHIBIT
6.1(p).
(q) OTHER DELIVERIES. The Company and the Principal Stockholders shall
have executed and delivered such other documents, certificates, instruments or
opinions as may be required by the Purchasers.
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE PRINCIPAL
STOCKHOLDERS. The obligation of the Company and the Principal Stockholders to
consummate this Agreement and the transactions contemplated hereby is subject to
the fulfillment, prior to or at the Closing, of the following conditions
precedent (all or any of which may be waived in whole or in part by the Company
and the Principal Stockholders in their sole and absolute discretion):
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the representations
and warranties of the Purchasers contained in SECTION 4 shall be true and
correct in all material respects as though made on and as of the Closing; each
of Parent and MergerSub shall, on or before the Closing, have performed all of
its obligations hereunder which by the terms hereof are to be performed on or
before the Closing; and Parent and MergerSub each shall have delivered to the
Company and the Principal Stockholders a certificate of the President or any
Vice President of Parent and MergerSub dated on the Closing to such effect.
36
(b) ESCROW AGREEMENT. Parent and the Escrow Agent shall have executed
and delivered to the Principal Stockholders the Escrow Agreement.
(c) SEVERANCE ARRANGEMENTS. (i) Subject to SECTIONS 6.2(ii) AND (iii),
Parent will, in accordance with the severance arrangements set forth in EXHIBIT
6.2(c) hereto (the "SEVERANCE ARRANGEMENTS"), provide severance payments to
those officers or employees of the Company whose employment is terminated
without cause by (1) the Company as of the Closing in connection therewith or
(2) subsequently thereto by the Company or Parent pursuant to the Severance
Arrangements (the "SEVERANCE PAYMENTS").
(ii) Notwithstanding SECTION 6.2(c)(i), the payment of such
Severance Payments to each such officer or employee is contingent upon the
effectiveness of a Non-Competition and Release Agreement, in substantially
the form annexed hereto as EXHIBIT 6.1(h)(i)(a) or (b), as the case may be,
to be executed and delivered by such officer or employee.
(iii) If, upon the termination by the Company or Parent of the
employment of any officer or employee of the Company, the aggregate amount of
the Severance Payments that have been paid by or are required to be paid by
Parent and the Company in connection with such termination and any prior
terminations, exceeds $700,000 (the "AGGREGATE SEVERANCE PAYMENTS"), the
Principal Stockholders shall, contemporaneously with such termination, jointly
and severally pay to Parent an amount equal to the difference between the
Aggregate Severance Payments and $700,000 (the "INITIAL SEVERANCE
DIFFERENTIAL"). If, subsequent to the payment by the Principal Stockholders of
the Initial Severance Differential, there are additional terminations made by
Parent or the Company of any employees or officers of the Company, the result of
which would require Parent to make a Severance Payment (with respect to each
such termination, a "Subsequent Severance Payment"), the Principal Stockholders
shall, contemporaneously with each such subsequent termination, jointly and
severally pay to Parent an amount equal to the full amount of the Subsequent
Severance Payment.
(iv) The Principal Stockholders' obligation to pay the Initial
Severance Differential and any Subsequent Severance Payment shall be
satisfied first from the Cash Escrow Amount held in escrow pursuant to the
Escrow Agreement. However, to the extent that (1) an amount equal to $600,000
or more has been paid to Parent from the Cash Escrow Amount in satisfaction
of the Principals Stockholders' obligation to pay the Initial Severance
Differential or any Subsequent Severance Payment, or (2) the Cash Escrow
Amount is insufficient to satisfy the payment of all or any portion of the
Initial Severance Differential or any Subsequent Severance Payment, the
Principal Stockholders shall jointly and severally pay directly to Parent any
unpaid portion of the Initial Severance Differential or any Subsequent
Severance Payment.
(d) RELEASES. There shall have been delivered to the Company releases
in the form attached thereto as EXHIBIT 6.2(d) signed by Parent and Moldflow
Pty., Ltd. with respect to the Litigations.
37
6.3. POST-CLOSING OBLIGATION OF THE PARENT: Parent agrees that from and
after the Closing Date and for a period of twelve (12) months following the
Closing Date, Parent shall use commercially reasonable efforts to maintain and
support the installed customer base of Company with respect to the products of
the Company offered on the Closing Date. Further, Parent agrees that it will
retain the name of the Company, including the d/b/a C-Mold designation, for such
twelve (12) month period.
SECTION 7. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
7.1 TERMINATION. At any time prior to the Closing, this Agreement may
be terminated as follows:
(i) on or prior to March 31, 2000, by Parent or MergerSub if
either is not satisfied, in its sole and absolute discretion, with the
results of the Business Review contemplated by SECTION 3.8;
(ii) by any of the Purchasers, the Company or the Principal
Stockholders if the Closing has not occurred by May 31, 2000;
(iii) by mutual written consent of all of the parties to this
Agreement;
(iii) by Parent or MergerSub, pursuant to written notice by
Parent or MergerSub to the Company and the Principal Stockholders, if any
of the conditions set forth in SECTION 6.1 of this Agreement have not been
satisfied at or prior to the Closing, or if it has become reasonably and
objectively certain that any of such conditions, other than a condition
within the control of Parent or MergerSub, will not be satisfied at or
prior to the Closing, such written notice to set forth such conditions
which have not been or will not be so satisfied; and
(iv) by the Company and the Principal Stockholders, pursuant to
written notice by the Company and the Principal Stockholders to Parent, if
any of the conditions set forth in SECTION 6.2 of this Agreement have not
been satisfied at or prior to the Closing, or if it has become reasonably
and objectively certain that any of such conditions, other than a condition
within the control of the Company or any of the Principal Stockholders,
will not be satisfied at or prior to the Closing, such written notice to
set forth such conditions which have not been or will not be so satisfied.
7.2 EFFECT OF TERMINATION. All obligations of the parties hereunder
shall cease upon any termination pursuant to SECTION 7.1, provided, however,
that (i) the provisions of this SECTION 7, SECTION 3.6, SECTION 5.2, SECTION
10.1 and SECTION 10.9 hereof shall survive any termination of this Agreement;
(ii) nothing herein shall relieve any party from any liability for a material
error or omission in any of its representations or warranties contained herein
or a
38
material failure to comply with any of its covenants, conditions or agreements
contained herein, and (iii) any party may proceed as further set forth in
SECTION 7.3 below.
7.3 RIGHT TO PROCEED. Notwithstanding anything in this Agreement to the
contrary, if any of the conditions specified in SECTION 6.1 hereof have not been
satisfied, Parent and MergerSub shall, in their sole and absolute discretion,
have the right to proceed with the transactions contemplated hereby without
waiving any of their rights hereunder, and if any of the conditions specified in
SECTION 6.2 hereof have not been satisfied, the Company and the Principal
Stockholders shall, in their sole and absolute discretion, have the right to
proceed with the transactions contemplated hereby without waiving any of their
rights hereunder.
SECTION 8. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
8.1 SURVIVAL OF WARRANTIES. Each of the representations, warranties,
agreements, covenants and obligations herein or in any schedule, exhibit,
certificate or financial statement delivered by any party to the other party
incident to the transactions contemplated hereby are material (except as
specifically provided herein), shall be deemed to have been relied upon by the
other party and shall survive the Closing regardless of any investigation and
shall not merge in the performance of any obligation by either party hereto.
SECTION 9. INDEMNIFICATION.
9.1 INDEMNIFICATION BY THE PRINCIPAL STOCKHOLDERS.
(a) The Principal Stockholders jointly and severally agree subsequent
to the Closing to indemnify and hold the Company, Parent and their respective
subsidiaries and affiliates and persons serving as officers, directors, partners
or employees thereof (individually a "PURCHASER INDEMNIFIED PARTY" and
collectively the "PURCHASER INDEMNIFIED PARTIES") harmless from and against any
damages, liabilities, losses, taxes, fines, penalties, costs, and expenses
(including, without limitation, reasonable fees of counsel) of any kind or
nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon any of the following matters:
(i) fraud, intentional misrepresentation or a deliberate or
willful breach by the Company or any Principal Stockholder of any of their
representations, warranties or covenants under this Agreement or in any
certificate, schedule or exhibit delivered pursuant hereto;
(ii) any other breach of any representation or warranty of the
Company or any Principal Stockholder under this Agreement or in any
document, certificate, schedule or exhibit delivered pursuant hereto, or by
reason of any claim,
39
action or proceeding asserted or instituted growing out of any matter or
thing constituting a breach of such representations or warranties; and
(iii) any breach of any covenant of the Company or any of the
Principal Stockholders under this Agreement or in any document,
certificate, schedule or exhibit delivered pursuant hereto, or by reason of
any claim, action or proceeding asserted or instituted growing out of any
matter or thing constituting a breach of such covenants.
(b) Claims under clauses (i), (ii) and (iii) of SECTION 9.1(a) are
collectively referred to herein as "PURCHASER INDEMNIFIABLE CLAIMS", and Losses
in respect of such claims are collectively referred to herein as "PURCHASER
INDEMNIFIABLE LOSSES".
9.2 LIMITATION ON INDEMNIFICATION BY THE PRINCIPAL STOCKHOLDERS.
(a) All Purchaser Indemnifiable Claims and Purchaser Indemnifiable
Losses shall be satisfied first from the Cash Escrow Amount held in escrow
pursuant to the Escrow Agreement. To the extent that the Cash Escrow Amount is
insufficient to satisfy any Purchaser Indemnifiable Claims or Purchaser
Indemnifiable Losses, or such Purchaser Indemnifiable Claims or Purchaser
Indemnifiable Losses occur on or after the Termination Date (as such term is
defined in the Escrow Agreement), the Purchaser Indemnified Parties shall be
entitled to claim directly against the Principal Stockholders.
(b) No indemnification shall be payable pursuant to SECTION 9.1(a)(ii)
above to any Purchaser Indemnified Party, unless the total of all claims for
indemnification pursuant to SECTION 9.1(a)(ii) exceeds $50,000 in the aggregate,
whereupon the amount in excess of such claims shall be recoverable in accordance
with the terms hereof;
(c) No indemnification shall be payable to any Purchaser Indemnified
Party with respect to claims asserted pursuant to SECTION 9.1(a)(ii) (exclusive
of claims for indemnification for a breach of any representation or warranty
contained in SECTION 2.3 (Capital Stock of the Company); SECTION 2.4
(Subsidiaries); SECTION 2.6 (Real and Personal Property, but only to the extent
such representations and warranties relate to the Company's and its Subsidiaries
title to the Owned Real Property and Personal Property); SECTION 2.8 (Taxes);
SECTION 2.13 (Intellectual Property); and SECTION 2.23 (Environmental Matters))
after the second anniversary of the Closing Date (the "INDEMNIFICATION CUT-OFF
DATE"); provided, HOWEVER, if prior to the Indemnification Cut-Off Date, a
Purchaser Indemnified Party shall have given written notice of a Purchaser
Indemnifiable Claim under SECTION 9.5, such Purchaser Indemnifiable Claim shall
survive the Indemnification Cut-Off Date until final resolution of such
Purchaser Indemnifiable Claim; and
(d) The Principal Stockholders shall not be obligated to indemnify the
Purchaser Indemnified Parties with respect to Purchaser Indemnifiable Claims
asserted pursuant to SECTION 9.1(a)(II) for any amount payable thereunder in
excess of the greater of (a)
40
the proceeds to be received by the Principal Stockholders pursuant to SECTION
1.2, and (b) $8,700,000.
9.3 INDEMNIFICATION BY PARENT. (a) Parent agrees to indemnify and hold
the Principal Stockholders (individually a "STOCKHOLDER INDEMNIFIED PARTY" and
collectively the "STOCKHOLDER INDEMNIFIED PARTIES") harmless from and against
any damages, liabilities, losses and expenses (including, without limitation,
reasonable fees of counsel) of any kind or nature whatsoever (whether or not
arising out of third-party claims and including all amounts paid in
investigation, defense or settlement of the foregoing) which may be sustained or
suffered by any of them arising out of or based upon any of the following
matters:
(i) fraud, intentional misrepresentation or a deliberate or
willful breach by Parent or MergerSub of any of their representations or
warranties or under this Agreement or in any certificate, schedule or
exhibit delivered pursuant hereto;
(ii) any other breach of any representation or warranty or of
Parent or MergerSub under this Agreement or in any document, certificate,
schedule or exhibit delivered pursuant hereto, or by reason of any claim,
action or proceeding asserted or instituted growing out of any matter or
thing constituting a breach of such representations, warranties or
covenants; and
(iii) any breach of any covenant of Parent of Merger Sub under
this Agreement or in any document, certificate, schedule or exhibit
delivered pursuant hereto, or by reason of any claim, action or proceeding
asserted or instituted growing out of any matter or thing constituting a
breach of such covenants.
(b) Claims under clauses (i), (ii) and (iii) of SECTION 9.3(a) are
collectively referred to herein as "STOCKHOLDER INDEMNIFIABLE CLAIMS", and
Losses in respect of such claims are collectively referred to herein as
"STOCKHOLDER INDEMNIFIABLE LOSSES".
9.4 LIMITATION ON INDEMNIFICATION BY PARENT.
(a) No indemnification shall be payable pursuant to SECTION 9.3(a)(ii)
above to any Stockholder Indemnified Party, unless the total of all claims for
indemnification pursuant to SECTION 9.3(a)(ii) exceeds $50,000 in the aggregate,
whereupon the amount in excess of such claims shall be recoverable in accordance
with the terms hereof;
(b) No indemnification shall be payable to any Stockholder Indemnified
Party with respect to claims asserted pursuant to SECTION 9.3(a)(ii) after the
second anniversary of the Closing Date (the "INDEMNIFICATION CUT-OFF DATE");
PROVIDED, HOWEVER, if prior to the Indemnification Cut-Off Date, a Stockholder
Indemnified Party shall have given written notice of a Stockholder Indemnifiable
Claim under SECTION 9.5, such Stockholder Indemnifiable Claim shall survive the
Indemnification Cut-Off Date until final resolution of such Stockholder
Indemnifiable Claim; and
41
(c) Parent shall not be obligated to indemnify the Stockholder
Indemnified Parties with respect to Stockholder Indemnifiable Claims asserted
pursuant to SECTION 9.3(a)(ii) for any amount payable thereunder in excess of
the greater of (a) the proceeds to be received by the Principal Stockholders
pursuant to SECTION 1.2, and (b) $8,700,000.
9.5 NOTICE; DEFENSE OF CLAIMS. An indemnified party may make claims for
indemnification hereunder by giving written notice thereof to the indemnifying
party within the period in which indemnification claims can be made hereunder.
In addition, if indemnification is sought for a claim or liability asserted by a
third party, or to the knowledge of the indemnified party a claim or liability
is threatened to be asserted by a third party, the indemnified party shall also
give written notice thereof to the indemnifying party promptly after it receives
notice of the claim or liability being or threatened to be asserted, but the
failure to do so shall not relieve the indemnifying party from any liability
except to the extent that it is prejudiced by the failure or delay in giving
such notice. Such notice shall summarize the bases for the claim for
indemnification and any claim or liability being asserted by a third party.
Within 20 days after receiving such notice the indemnifying party shall give
written notice to the indemnified party stating whether it disputes the claim
for indemnification and whether it will defend against any third party claim or
liability at its own cost and expense. If the indemnifying party fails to give
notice that it disputes an indemnification claim within 20 days after receipt of
notice thereof, it shall be deemed to have accepted and agreed to the claim,
which shall become immediately due and payable. The indemnifying party shall be
entitled to direct the defense against a third party claim or liability with
counsel selected by it (subject to the consent of the indemnified party, which
consent shall not be unreasonably withheld) as long as the indemnifying party is
conducting a good faith and diligent defense. The indemnified party shall at all
times have the right to fully participate in the defense of a third party claim
or liability at its own expense directly or through counsel; PROVIDED, HOWEVER,
that if the named parties to the action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party is
advised that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
indemnified party may engage separate counsel at the expense of the indemnifying
party. If no such notice of intent to dispute and defend a third party claim or
liability is given by the indemnifying party, or if such good faith and diligent
defense is not being or ceases to be conducted by the indemnifying party, the
indemnified party shall have the right, at the expense of the indemnifying
party, to undertake the defense of such claim or liability (with counsel
selected by the indemnified party), and to compromise or settle it, exercising
reasonable business judgment. If the third party claim or liability is one that
by its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying party.
SECTION 10. MISCELLANEOUS.
42
10.1 FEES AND EXPENSES. Except as otherwise provided in this Agreement,
each of the parties will bear its own expenses in connection with the
negotiation and the consummation of the transactions contemplated by this
Agreement. No expenses of the Company or the Principal Stockholders relating in
any way to the purchase and sale of the shares of Company Common Stock hereunder
and the transactions contemplated hereby, including without limitation legal,
accounting or other professional expenses of the Company or the Principal
Stockholders, shall be charged to or paid by the Company or the Purchasers;
PROVIDED, HOWEVER that up to $50,000 of such legal, accounting, or other
professional expenses of the Company or the Principal Stockholders may be
charged to or paid by the Company. In the event that any such amount is charged
to or paid by the Company, the Principal Stockholders will provide a complete
accounting of such expenses to Parent at the Closing.
10.2 GOVERNING LAW. This Agreement shall be construed under and
governed by the internal laws of the State of Delaware without regard to its
conflict of laws provisions.
10.3 NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail, upon the sooner of the date on which
receipt is acknowledged or the expiration of three days after deposit in United
States post office facilities properly addressed with postage prepaid. If any
such notice, request, demand or other communication is sent by facsimile
transmission, the sender shall confirm such facsimile transmission by
concurrently sending such notice, request, demand or other communication by
first class mail. All notices to a party will be sent to the addresses set forth
below or to such other address or person as such party may designate by notice
to each other party hereunder:
TO PURCHASER: Moldflow Corporation
00 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxx Xxxxxx, CEO
Facsimile: 000-000-0000
With a copy to: Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Cable, P.C.
TO COMPANY AND PRINCIPAL Advanced CAE Technology, Inc.
STOCKHOLDERS: d/b/a C-Mold
At its principal business address
With a copy to: True, Xxxxx & Xxxxxx, LLP
The Commons
000 Xxxx Xxxxx Xxxxxx
00
Xxxxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxx, Esq.
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
10.4 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or in such Schedules and Exhibits or in such
other writings; and all inducements to the making of this Agreement relied upon
by either party hereto have been expressed herein or in such Schedules or
Exhibits or in such other writings.
10.5 ASSIGNABILITY; BINDING EFFECT. Except as otherwise provided
herein, this Agreement shall only be assignable, in whole or in part, by either
Purchaser to an entity controlling, controlled by or under common control with
such Purchasers upon written notice to the Company and the Principal
Stockholders. This Agreement may not be assigned by the Principal Stockholders
or the Company without the prior written consent of the Purchasers. This
Agreement shall be binding upon and enforceable by, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
10.6 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
10.7 EXECUTION IN COUNTERPARTS. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document. Signatures sent by facsimile will be
deemed valid to facilitate Closing.
10.8 AMENDMENTS. This Agreement may not be amended or modified
(including without limitation the Severance Arrangement set forth on EXHIBIT
6.2(c) hereto), nor may compliance with any condition or covenant set forth
herein be waived, except by a writing duly and validly executed by each party
hereto, or in the case of a waiver, the party waiving compliance.
Notwithstanding the preceding sentence, the Company and the Principal
Stockholders hereby consent to any amendments to this Agreement that may be
necessary to effectuate the assignment contemplated by the first sentence of
SECTION 10.5; PROVIDED, HOWEVER, that in no event shall any such assignment
relieve Parent of its obligations under this Agreement.
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10.9 PUBLICITY AND DISCLOSURES. Except as set forth in SECTION 5.2(b)
hereof, no press releases or public disclosure, either written or oral, of the
transactions contemplated by this Agreement, shall be made by a party to this
Agreement without the prior knowledge and written consent of the Purchasers and
the Company.
10.10 DEFINITION OF KNOWLEDGE. As used in this Agreement, the term
"knowledge" of a party shall mean the actual knowledge of that party or any of
its directors or executive officers, and shall include any information that
could have been, or reasonably should have been, discovered by such party in the
exercise of good business judgment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS HEREOF, the parties have executed this Agreement and Plan of
Merger as of the date first written above.
MOLDFLOW CORPORATION
By: /s/ Xxxx Xxxxxx
-----------------------------------------------
Name: Xxxx Xxxxxx
Title: President
MOLDFLOW MERGER CORP.
By: /s/ Xxxx Xxxxxx
-----------------------------------------------
Name: Xxxx Xxxxxx
Title: President
ADVANCED CAE TECHNOLOGY, INC.
D/B/A C-MOLD
By: /s/ Xxx-Xxxx Xxxx
-----------------------------------------------
Name: Xxx-Xxxx Wang
Title: Chairman of the Board
PRINCIPAL STOCKHOLDERS:
/s/ Xxx-Xxxx Xxxx
-----------------------------------------------
Xxx-Xxxx Wang
/s/ Ven-Xxxx Xxxx
-----------------------------------------------
Ven-Xxxx Xxxx
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/s/ Shan-Fu Shen
-----------------------------------------------
Shan-Fu Shen
/c/ Xxxxxx Xxxxx
-----------------------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxxxxx X. Xxxxxx
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