EXHIBIT 10.24
STOCK PURCHASE AGREEMENT
dated as of
December 27, 2001,
between
Xxxxxx X. Xxx, Xxxxxx Xxxx and The Eigen Fund
("SELLERS")
and
Avant! Corporation
("BUYER")
ARTICLE I PURCHASE AND SALE/CLOSING.............................................1
1.1 Transfer of Shares by Sellers.........................................1
1.2 Purchase of the Shares by Buyer.......................................1
1.3 Holdback..............................................................2
1.5 The Closing...........................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS.........................4
2.1 Organization and Qualification; Subsidiaries..........................4
2.2 Capitalization of the Company and Its Subsidiaries....................5
2.3 Intentionally Omitted.................................................5
2.4 Financial Statements..................................................6
2.5 No Undisclosed Liabilities............................................6
2.6 Absence of Changes....................................................6
2.7 Disclosure............................................................8
2.8 No Violations.........................................................8
2.9 No Default............................................................8
2.10 Real Property.........................................................9
2.11 Litigation............................................................9
2.12 Company Permits; Compliance with Applicable Laws.....................10
2.13 Employee Benefit Plans; ERISA........................................10
2.14 Labor Matters........................................................15
2.15 Environmental Matters................................................15
2.16 Taxes................................................................17
2.17 Absence of Questionable Payments.....................................20
2.18 Company Contracts....................................................20
2.19 Insurance Matters....................................................22
2.20 Intellectual Property................................................22
2.21 Brokers..............................................................25
2.22 Representations and Warranties Concerning Sellers....................25
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER..............................26
3.1 Organization and Related Matters.....................................26
3.2 Authorization........................................................27
ARTICLE IV CONTINUING COVENANTS.................................................27
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4.1 Nondisclosure of Proprietary Data....................................27
4.2 Tax Cooperation......................................................27
4.3 Change of Corporate Name.............................................27
ARTICLE V INDEMNIFICATION......................................................27
5.1 Obligations of Sellers...............................................28
5.2 Obligations of Buyer.................................................28
5.3 Limitations on Indemnity.............................................28
5.4 Certain Tax Matters..................................................29
5.5 Procedure............................................................29
5.6 Waiver of Subrogation and Other Rights...............................30
5.7 Survival.............................................................31
5.8 Dispute Resolution...................................................31
ARTICLE VI GENERAL..............................................................33
6.1 Amendments; Waivers..................................................33
6.2 Schedules; Exhibits; Integration.....................................33
6.3 Best Efforts; Further Assurances.....................................33
6.4 Governing Law; Forum.................................................33
6.5 No Assignment........................................................34
6.6 Headings.............................................................34
6.7 Counterparts.........................................................34
6.8 Limitation on Remedies...............................................34
6.9 Parties in Interest..................................................34
6.10 Notices..............................................................35
6.11 Expenses and Attorneys Fees..........................................36
6.12 Specific Performance.................................................36
6.13 Knowledge Convention.................................................36
6.14 Representation by Counsel; Interpretation............................36
6.15 Severability.........................................................37
ARTICLE VII DEFINITIONS..........................................................37
7.1 Definitions..........................................................37
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of December 27,
2001, as amended, among Avant! Corporation, a Delaware corporation ("BUYER"),
and Xxxxxx X. Xxx ("XXX"), Xxxxxx Xxxx ("ANDO") and The Eigen Fund, a California
limited liability company ("EIGEN" and together with Xxx and Ando, the
"Sellers").
R E C I T A L S
WHEREAS, the Sellers own the outstanding shares of Common Stock
(the "SHARES") of Maingate Electronics KK, a company organized under the laws of
Japan (the "COMPANY"), as set forth in Section 2.2(a) of the Sellers' Disclosure
Schedule; and
WHEREAS, the Sellers desire to sell, and Buyer desires to buy,
the Shares for the consideration described herein.
A G R E E M E N T
In consideration of the mutual promises contained herein and
intending to be legally bound the parties agree as follows:
ARTICLE I
PURCHASE AND SALE/CLOSING
1.1 TRANSFER OF SHARES BY SELLERS.
Subject to the terms and conditions of this Agreement, the
Sellers agree to sell the Shares and deliver the certificates evidencing the
Shares to Buyer at the Closing. The certificates will be properly endorsed for
transfer to or accompanied by a duly executed stock power in favor of Buyer or
its nominee as Buyer may have directed prior to the Closing Date and otherwise
in a form acceptable for transfer on the books of Company. Sellers will pay any
Taxes payable with respect to the transfer of the Shares.
1.2 PURCHASE OF THE SHARES BY BUYER.
Subject to the terms and conditions of this Agreement, Buyer
agrees to acquire the Shares from the Sellers and, in consideration therefor, to
pay to the Sellers an aggregate of US $ 13,647,400 at the Closing (the "PURCHASE
PRICE"). Each of the Sellers shall receive from Buyer that portion of the
Purchase Price set forth opposite his or her name in Section 1.2 of the Sellers'
Disclosure Schedule, subject to Section 1.3 hereof, in exchange for the number
of Shares set forth opposite his or her name on such schedule.
1.3 HOLDBACK.
Seventy percent (70%) of the Purchase Price (the "HOLDBACK")
shall be withheld from payment at Closing and held in escrow by Buyer, which
shall serve as security for the indemnification obligations of the Sellers under
Article V hereof and shall be disbursed to Buyer as set forth in Section 5.8
hereof. On the Termination Date (as defined in Section 5.7 hereof), the
remaining amount of the Holdback less any amount reasonably necessary to pay any
Claim with respect to which a notice of Claim has been given as provided in
Article V hereof shall be delivered to the Sellers pro rata in accordance with
their percentage interests set forth in Section 1.3 of the Sellers' Disclosure
Schedule (subject to the final sentence of Section 5.8(h) hereof). Any remaining
portion of the Holdback retained by Buyer after the Termination Date in order to
settle any outstanding Claim shall be placed by Buyer in an independent escrow
account concurrent with the Termination Date and released to the Buyer or
Sellers, as applicable, immediately after the Claim has been resolved.
Notwithstanding the foregoing, if the Merger Agreement (as defined in Section
5.7 hereof) has been terminated, then fifty percent (50%) of the then-current
Holdback, less any amount reasonably necessary to pay any Claim with respect to
which a notice of Claim has been given but for which such Claim has not been
resolved, shall be delivered to the Sellers in accordance with their percentage
interests set forth in Section 1.3 of the Sellers' Disclosure Schedule (subject
to the final sentence of Section 5.8(h) hereof), within 5 days after termination
of the Merger Agreement. The remaining fifty percent (50%) of the then-current
Holdback shall remain subject to the escrow and other provisions set forth in
this Section 1.3.
1.4 PURCHASE PRICE ADJUSTMENT.
(a) Promptly following the Closing, Buyer shall cause
PricewaterhouseCoopers LLP (the "AUDITORS") to commence an audit of the books
and records of the Company as of December 31, 2001 (the "POST-CLOSING AUDIT") to
determine, as of December 31, 2001, the balance sheet of the Company (the
"CLOSING BALANCE SHEET"), calculated in accordance with GAAP (defined below).
From the Closing Balance Sheet, the Auditors will use the following formula to
calculate the formula price (the "FORMULA PRICE"):
Formula Price = US$13,000,000 minus A minus B.
For purposes of this formula, A shall equal fifteen million U.S. dollars
(US$15,000,000) minus the amount of cash on the Closing Balance Sheet.
Notwithstanding the previous sentence, if A is a negative amount, it shall not
be subtracted under the previous sentence in determining the Formula Price. For
purpose of the formula, B shall equal one million three hundred fifty thousand
U.S. dollars ($US1,350,000) minus (x minus y) where x is the total amount of
assets on the Closing Balance Sheet other than cash, and y is the total amount
of liabilities on the Closing Balance Sheet other than accounts payable-trade
owing to Buyer and/or its Subsidiaries. Notwithstanding the previous sentence, B
shall not be subtracted in determining the formula price if B is a negative
number or if A plus B is a negative number.
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(b) Buyer shall direct the Auditors to complete the Post-Closing
Audit and to notify Buyer and Sellers in writing of the results thereof and the
Formula Price as promptly as practicable, but in no event later than 60 days
after the Closing Date. The determinations of the Auditors pursuant to this
Section 1.4(b) shall be made in consultation with the Company's former
accountants, but shall be finally determined by the Auditors and shall be
binding and conclusive for purposes hereof. Buyer shall bear the costs and
expenses associated with the Post-Closing Audit.
(c) If the Post-Closing Audit determination of the Formula Price
pursuant to Section 1.4(b) is less than the Purchase Price minus US$647,400 (a
"BASE SHORTFALL"), then Buyer shall have a Claim against Sellers for the Base
Shortfall amount, which Buyer shall satisfy out of the Holdback as promptly as
practicable after such determination.
1.5 THE CLOSING.
(a) The Closing will take place at the offices of O'Melveny &
Xxxxx LLP, 000 Xxxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx, at 9:00 a.m. California time
on December 27, 2001 or on such later date as the Sellers and Buyer may agree.
(b) Prior to the Closing::
(1) the Sellers shall have obtained and provided to Buyer all
required Approvals and Permits listed in Section 2.8 of the Sellers'
Disclosure Schedule; and
(2) the directors and officers of the Company and its
Subsidiaries listed on Section 1.5 of the Sellers' Disclosure Schedule
shall have submitted their resignations in writing to the Company and
its Subsidiaries, as applicable, which shall be effective as of the
Closing.
(c) At the Closing, the Sellers shall deliver to Buyer the
following:
(1) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), for transfer to Buyer;
(2) copies, certified as of the Closing Date by a
representative or director of the Company, of the resolution(s) duly
adopted by the Board of Directors of the Company authorizing the
transactions contemplated by this Agreement;
(3) copies, certified as of the Closing Date by the Secretary
or Assistant Secretary of Eigen, of the resolution(s) duly adopted by
the managing member of Eigen authorizing the transactions contemplated
by this Agreement;
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(4) copies, certified as of the Closing Date by a
representative or director of the Company, of the charter and
organizational documents of the Company in effect as of the date hereof;
(5) a spousal consent duly executed by the spouse of Xxxxxx
X. Xxx; and
(6) a resignation letter from Xxxxxxxx Xxxxxxx whereby Xx.
Xxxxxxx resigns as a member of the Board of Directors of the Company
effective immediately after the meeting of the Board of Directors of the
Company to be held on the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as set forth in Section 2.22 hereof or as indicated on the
Sellers' Disclosure Schedule dated December 27, 2001 previously delivered to
Buyer, Sellers jointly and severally represent, warrant and agree as follows:
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company and each of its Subsidiaries is a corporation or
legal entity duly organized, validly existing and (in those jurisdictions in
which there is an applicable concept of good standing) in good standing under
the Laws (defined below) of the jurisdiction of its organization and has all
requisite corporate, partnership or similar power and authority to own, lease
and operate its properties and to carry on its businesses as now conducted and
proposed by the Company to be conducted.
(b) Section 2.1(b) of the Sellers' Disclosure Schedule sets forth
(i) a list of all Subsidiaries of the Company, and (ii) in the case of such
Subsidiaries not wholly-owned by the Company (A) the identity of any other
entity or person that owns, directly or indirectly, beneficially or of record,
any shares of capital stock or other security, or any option to purchase any
shares of capital stock or other security, or any other investment in such
entity (and all rights, privileges and preferences of any such beneficial or
record holder with respect thereto, including repurchase rights, put rights,
cancellation rights, co-sale rights, registration rights or other rights
affecting the shares or options held by such third party), (B) the percentage
ownership represented by such investment and (C) with regard to the entity in
which such investment is held, all jurisdictions where such entities conduct
business or own assets. The Company does not own, directly or indirectly,
beneficially or of record, any shares of capital stock or other security of any
other entity or any other investment in any entity that is not listed in Section
2.1(b) to the Sellers' Disclosure Schedule.
(c) The Company and each of its Subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary.
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(d) The Company has heretofore delivered to Buyer accurate and
complete copies of the articles or certificate of incorporation and bylaws or
other similar organizational documents, as currently in effect, of (i) the
Company and (ii) each of its Subsidiaries.
2.2 CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of:
13,600 shares of Common Stock. As of the date hereof, 8,000 shares of Common
Stock were issued and outstanding and owned of record and beneficially as set
forth in Section 2.2(a) of the Sellers' Disclosure Schedule. All the outstanding
share capital of the Company has been duly authorized, validly issued, fully
paid and non-assessable. Except as set forth above and in Section 2.2(a) of the
Sellers' Disclosure Schedule, (1) there are no shares of capital stock of the
Company authorized, issued or outstanding, (2) there are no authorized or
outstanding options, warrants, calls, preemptive rights, subscriptions or other
rights, agreements, arrangements or commitments of any character (whether or not
conditional) relating to the issued or unissued capital stock of the Company or
any of its Subsidiaries, obligating the Company or any of its Subsidiaries to
issue, transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or other equity interest in the Company or any of its Subsidiaries
or securities convertible into or exchangeable for such shares or equity
interests, or obligating the Company or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, subscription or other right,
agreement, arrangement or commitment, (3) there are no outstanding contractual
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any capital stock of the Company or any of its Subsidiaries,
or to make any payments based on the market price or value of capital stock of
the Company or its Subsidiaries, or to provide funds to make any investment (in
the form of a loan, capital contribution or otherwise) in any Subsidiary or any
other entity and (4) there are no outstanding shareholder agreements, voting
agreements, option agreements, buy-sell agreements, rights of first refusal or
first offer, proxies, registration rights agreements or other similar agreements
with respect to the equity securities of the Company or any of its Subsidiary.
(b) All of the capital stock of the Company's Subsidiaries owned
by the Company, directly or indirectly, is free and clear of any Lien or any
other limitation or restriction (including any restriction on the right to vote
or sell the same, except as may be provided as a matter of Law), and there are
no irrevocable proxies with respect to such capital stock. For purposes of this
Agreement, "LIEN" means, with respect to any asset (including, without
limitation, any security) any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset.
(c) The Company has received written waivers from the persons
named on Section 2.2 (c) of the Sellers' Disclosure Schedule canceling the
options listed opposite such persons' names on such schedule (the "WAIVERS"). No
consideration was, or will be, paid by the Company or any of its Subsidiaries to
obtain any Waiver or otherwise in connection with any Waiver. The Company has
delivered a true and complete copy of each Waiver to Buyer prior to the date
hereof.
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2.3 INTENTIONALLY OMITTED.
2.4 FINANCIAL STATEMENTS.
The audited and unaudited consolidated financial statements of
the Company for the fiscal years ended March 31, 1999, 2000, and 2001 and for
the seven-month period ended October 31, 2001 (the "FINANCIAL STATEMENTS")
fairly present, in conformity with Japanese generally accepted accounting
principles applied on a consistent basis ("GAAP") (except as specifically
indicated in the notes thereto), the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments that have not been, and will not be,
material in amount).
2.5 NO UNDISCLOSED LIABILITIES.
Neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature, whether accrued, contingent or
otherwise, and whether or not required to be recorded or reflected on a balance
sheet under GAAP, except (a) liabilities or obligations reflected in the
Financial Statements, (b) liabilities or obligations incurred in the ordinary
course of business consistent with past practice, and which have not had, and
would not have, individually or in the aggregate, a Material Adverse Effect on
the Company and (c) as otherwise disclosed in Section 2.5 of the Sellers'
Disclosure Schedule. Section 2.5 of the Sellers' Disclosure Schedule sets forth
each of the Company's liabilities and obligations of any nature, whether
accrued, contingent or otherwise, and whether or not required to be recorded or
reflected on a balance sheet under GAAP, which liability or obligation (x) if
incurred on or before September 30, 2001, is or may be in an individual amount
greater than five hundred thousand U.S. dollars (US$500,000) or (y) if incurred
after September 30, 2001 and on or before the date hereof, is or may be in an
individual amount greater than one hundred thousand U.S. dollars (US$100,000).
2.6 ABSENCE OF CHANGES.
Since December 31, 2000, the Company and its Subsidiaries have
conducted their business in the ordinary course of business consistent with past
practice and there has not been:
(a) any event, occurrence or development which has had, or would
have, individually or in the aggregate, a Material Adverse Effect on the
Company;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the Company or
any repurchase, redemption or other acquisition by the Company or any Subsidiary
of the Company of
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any securities of the Company or of any of its Subsidiaries (including without
limitation any options or other equity or potential equity rights);
(c) any amendment of (or agreement to amend) any term of any
outstanding security of the Company or of any Subsidiary of the Company;
(d) (i) any incurrence or assumption (or agreement to incur or
assume) by the Company or any Subsidiary of the Company of any indebtedness for
borrowed money or (ii) any guarantee, endorsement or other incurrence or
assumption of (or agreement to guarantee, endorse, incur or assume) liability
(whether directly, contingently or otherwise) by the Company or any Subsidiary
of the Company for the obligations of any other person (other than any wholly
owned Subsidiary of the Company);
(e) any creation or assumption by the Company or any Subsidiary
of the Company of any Lien on any material asset of the Company or any
Subsidiary of the Company other than in the ordinary course of business
consistent with past practice;
(f) any making or cancellation of (or agreement to make or
cancel) any loan, advance or capital contribution to or investment in any person
by the Company or any Subsidiary of the Company other than loans, advances or
capital contributions to or investments in wholly owned Subsidiaries of the
Company;
(g) (i) any contract or agreement entered into by the Company or
any Subsidiary of the Company relating to any material acquisition or
disposition of any assets or business or (ii) any material modification,
amendment, assignment, termination or relinquishment by the Company or any
Subsidiary of the Company of any contract, license or other right (including any
insurance policy naming it as a beneficiary or a loss payable payee);
(h) any change in any method of accounting or accounting
principles or practice by the Company or any Subsidiary of the Company, except
for any such change required by reason of a change in GAAP;
(i) any (i) grant of (or agreement to grant) any severance or
termination payment; (ii) entering into (or agreement to enter into) any
employment, deferred compensation, change in control, severance, retention,
consulting, indemnification, release or other similar agreement (or any
amendment to any such existing agreement or arrangement); (iii) increase in (or
agreement to increase) any compensation or benefits payable or to become payable
under any severance or termination pay or benefit plans or policies or
employment, deferred compensation, retention, consulting, change in control,
severance agreements or arrangements; (iv) grant of (or agreement to increase)
any bonus or similar payment (annual or otherwise, and whether or not consistent
with past practice) other than in the ordinary course of business but only as
specified in Section 2.6(i) of the Sellers' Disclosure Schedule (which Section
2.6(i) sets forth (x) in the case of officer, director or consultant grantees,
the identity of the grantee and the amount of such bonus or similar payment and
(y) in the case of other
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grantees, the aggregate amount of such bonuses and similar payments); or (v)
increase in (or agreement to increase) any compensation or benefits (other than
as referred to in clause (iv)), in the case of each of clauses (i) through (v)
to or with any current or former director, officer, employee or consultant of or
to the Company or any of its Subsidiaries other than, in the case of clause (v)
only, increases prior to the date hereof in annual salary or wage rates payable
to employees of the Company or any of its Subsidiaries (other than officers,
directors or employees with employment agreements referred to in Section 2.18(a)
of the Sellers' Disclosure Schedule) that have been granted in the ordinary
course of business consistent with past practice and at regularly scheduled
times; or
(j) any new material Tax election or revocation of a previous
material Tax election by the Company or any Subsidiary of the Company, any
settlement or compromise of any Tax liability of the Company or any Subsidiary
of the Company, or change (or request to any taxing authority to change) any
aspect of the method of accounting for Tax purposes employed by the Company or
any Subsidiary of the Company.
2.7 DISCLOSURE.
None of the information supplied or to be supplied by or on
behalf of any Seller, Company or any Subsidiary of the Company to Buyer or its
agents or representatives in connection with these transactions, this Agreement
or the negotiations leading up to this Agreement, did contain, or at the
respective times such information is or was delivered, will contain any untrue
statement of a material fact, or omitted or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
2.8 NO VIOLATIONS.
Neither the execution, delivery and performance of this Agreement
by the Sellers nor the consummation by the Sellers of the transactions
contemplated hereby will (i) conflict with or result in any breach of any
provision of the respective articles or certificate of incorporation or bylaws
(or similar governing documents) of the Company or any of its Subsidiaries, (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration of any obligation or the loss of any
material benefit, or the creation of any Lien) under any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which any of them or any of
their respective properties or assets may be bound or (iii) violate any Law
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets. Section 2.8 of the Sellers' Disclosure Schedule sets forth
a list of all Approvals and Permits required to be obtained in connection with
the consummation of the transactions contemplated by this Agreement
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2.9 NO DEFAULT.
Except to the extent disclosed in Section 2.9 of the Sellers'
Disclosure Schedule, neither the Company nor any of its Subsidiaries is in
violation of any term of (i) its articles or certificate of incorporation,
bylaws or other organizational documents, (ii) any agreement or instrument
related to indebtedness for borrowed money or any other material agreement to
which it is a party or by which it is bound, or (iii) any foreign or domestic
law, order, writ, injunction, decree, ordinance, award, stipulation, statute,
judicial or administrative doctrine, rule or regulation entered by a
Governmental Entity (defined below) ("LAW") applicable to the Company, its
Subsidiaries or any of their respective properties or assets.
2.10 REAL PROPERTY.
(a) Neither the Company nor any of its Subsidiaries owns any real
property.
(b) Section 2.10 of the Sellers' Disclosure Schedule sets forth
all leases, subleases and other agreements (the "REAL PROPERTY LEASES") under
which the Company or any of its Subsidiaries uses, occupies or sublets or has
the right to use, occupy or sublet now or in the future, any real property.
Sellers have heretofore delivered to Buyer true, correct and complete copies of
all Real Property Leases (and all modifications, amendments and supplements
thereto and all side letters to which the Company or any of its Subsidiaries is
a party affecting the obligations of any party thereunder). Each Real Property
Lease constitutes the valid and legally binding obligation of the Company or its
Subsidiaries, enforceable in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar Laws of general applicability relating to or
affecting creditors' rights or by general equity principles), and is in full
force and effect. All rent and other sums and charges payable by the Company and
its Subsidiaries as tenants, or payable to the Company or any of its
Subsidiaries as sublessor, under each Real Property Lease are current, no
termination event or condition or uncured default of a material nature on the
part of the Company or any such Subsidiary of the Company or, to the Company's
knowledge, the landlord or the sublessee, as the case may be, exists under any
Real Property Lease. Each of the Company and its Subsidiaries has a good and
valid leasehold interest in each parcel of real property leased by it free and
clear of all Liens, except (i) Liens for Taxes and general and special
assessments not in default and payable without penalty and material interest and
(ii) other liens, mortgages, pledges, encumbrances and security interests which
do not materially interfere with the Company's or any of its Subsidiaries' use
and enjoyment of such real property or materially detract from or diminish the
value thereof.
(c) No party to any Real Property Lease has given notice to the
Company or any of its Subsidiaries of or made a claim against the Company or any
of its Subsidiaries with respect to any material breach or default thereunder
and the Company has no knowledge of any such claim.
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2.11 LITIGATION.
There is no suit, claim, action, proceeding or investigation
pending or, to the Company's knowledge, threatened against the Company or any of
its Subsidiaries or any of their respective properties or assets.
2.12 COMPANY PERMITS; COMPLIANCE WITH APPLICABLE LAWS.
The Company and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "COMPANY
PERMITS"). The Company and its Subsidiaries are in compliance with the terms of
the Company Permits. The businesses of the Company and its Subsidiaries are not
being conducted in violation of any Law applicable to the Company or its
Subsidiaries. To the Company's knowledge, no investigation or review by any
Governmental Entity with respect to the Company or its Subsidiaries is pending
or threatened, nor, to the Company's knowledge, has any Governmental Entity
indicated an intention to conduct the same.
2.13 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Neither the Company nor any of its Subsidiaries maintains or
contributes to, or has any obligation to contribute to, or has or may have any
liability, direct or indirect, contingent or otherwise (including, without
limitation, a liability arising out of an indemnification, guarantee, hold
harmless or similar agreement) under or with respect to, any employment,
consulting, severance, termination, retirement, profit sharing, bonus, incentive
or deferred compensation, retention or change in control plan, program,
arrangement, agreement or commitment, or bonus, pension, stock option,
restricted stock or other equity-based, profit sharing, savings, life, health,
disability, accident, medical, insurance, vacation, other welfare fringe benefit
or other employee compensation or benefit plan, program, arrangement, agreement,
fund or commitment, including any "employee benefit plan" as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") providing benefits to any current or former employee, consultant or
director of the Company or any of its Subsidiaries or any current or former
employee, consultant or director of any entity with respect to which the Company
or its Subsidiaries is a successor (collectively the "COMPANY BENEFIT PLANS").
True and complete copies of each Company Benefit Plan, including, but not
limited to, any trust instruments and/or insurance contracts, if any, forming a
part thereof, all amendments thereto and the most recent determination letters
issued by the Internal Revenue Service, all government and regulatory approvals
received from any foreign Regulatory Agency, the most recent summary plan
descriptions (including any material modifications), the two most recent annual
reports on Form 5500 (including all exhibits and attachments thereto), the two
most recent actual reports and the two most recent audited financial reports for
any funded Company Benefit Plan have been supplied or made available to Buyer.
Neither the Company nor any of its Subsidiaries has made any plan or commitment
to create any additional Company Benefit Plan or modify or change any existing
Company Benefit Plan that would increase the compensation or benefits provided
to any employee or former employee, consultant or
10
director of the Company or any Subsidiary of the Company. Since December 31,
2000, there has been no material change, amendment, modification to, or adoption
of, any Company Benefit Plan.
(b) With respect to each Company Benefit Plan: (i) if intended to
qualify under Section 401(a), 401(k) or 403(a) of the Code or under any law or
regulation of any foreign jurisdiction or Regulatory Agency, such plan so
qualifies, its trusts (if any) are exempt from taxation under Section 501(a) of
the Code (or the comparable provisions of any law or regulation of any foreign
jurisdiction or Regulatory Agency) and the consummation of the transaction
contemplated hereby will not adversely affect such qualification or exemption;
(ii) it has been operated and administered in compliance with its terms and all
applicable laws and regulations (including but not limited to ERISA, the Code
and any relevant foreign laws and regulations); (iii) there are no pending or
threatened claims against, by or on behalf of any Company Benefit Plans or the
assets, fiduciaries or administrators thereof (other than routine claims for
benefits); (iv) no breaches of fiduciary duty have occurred; (v) no non-exempt
prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of the Code has occurred; (vi) no Lien imposed under the Code, ERISA or any
foreign law exists; and (vii) all contributions, premiums and expenses to or in
respect of such Company Benefit Plan have been timely paid in full or, to the
extent not yet due, have been adequately accrued on the Company's consolidated
financial statements.
(c) Neither the Company nor any of its Subsidiaries has incurred
or reasonably expects to incur, either directly or indirectly (including as a
result of an indemnification obligation), any liability under Title I or IV of
ERISA or the penalty, excise tax or joint and several liability provisions of
the Code or any foreign law or regulation relating to employee benefit plans
(including, without limitation, Section 406, 409, 502(i), 502(l), 4069 or
4212(c) of ERISA, or Section 4971, 4975 or 4976 of the Code), or under any
agreement, instrument, statute, rule or legal requirement pursuant to or under
which the Company or any of its Subsidiaries or any Company Benefit Plan has
agreed to indemnify or is required to indemnify any person against liability
incurred under, or for a violation or failure to satisfy the requirements of,
any such legal requirement, and to the knowledge of the Company, no event,
transaction or condition has occurred, exists or is expected to occur which
could result in any such liability to the Company, any of its Subsidiaries or,
after the Closing, to Buyer.
(d) The Company and each of its Subsidiaries has complied in all
material respects with, and each such Company Benefit Plan conforms in all
material respects in operation and form to, all applicable legal requirements,
including, but not limited to, ERISA, the Code and all applicable U.S. and
non-U.S. state and local securities laws and regulations.
(e) With respect to each "employee pension benefit plan" (within
the meaning of Section 3(2) of ERISA) as to which either the Company or any
Subsidiary of the Company may incur any liability under, or which is subject to,
Section 302 or Title IV of ERISA or Section 412 of the Code:
11
(1) no such plan is a "multiemployer plan" (within the
meaning of Section 3(37) of ERISA) or a "multiple employer plan" (within
the meaning of Section 413(c) of the Code);
(2) no such plan has been terminated so as to result,
directly or indirectly, in any material liability, contingent or
otherwise, of either the Company or any Subsidiary of the Company under
Title IV of ERISA;
(3) no complete or partial withdrawal from such plan has been
made by the Company or any Subsidiary of the Company, or by any other
person, so as to result in any material liability to the Company or any
Subsidiary of the Company, whether such liability is contingent or
otherwise;
(4) no proceeding has been initiated by any Person (including
the Pension Benefit Guaranty Corporation (the "PBGC")) to terminate any
such plan or to appoint a trustee for any such plan;
(5) no condition or event currently exists or currently is
expected to occur that could result, directly or indirectly, in any
material liability of the Company or any Subsidiary of the Company under
Title IV of ERISA, whether to the PBGC or otherwise, on account of the
termination of any such plan;
(6) if any such plan were to be terminated as of the Closing
Date or if any person were to withdraw from such plan, neither the
Company nor any Subsidiary of the Company would incur, directly or
indirectly, any material liability under Title IV of ERISA;
(7) no "reportable event" (as defined in Section 4043 of
ERISA) has occurred with respect to any such plan, nor has notice of any
such event or similar notice to any foreign Regulatory Agency been
required to be filed for any Company Benefit Plan within the past 12
months nor will any such notice be required to be filed as a result of
the transactions contemplated by this Agreement;
(8) no such plan has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and section 412 of the
Code, respectively), whether or not waived, and neither the Company nor
any of its Subsidiaries has provided, or is required to provide,
security to any Company Benefit Plan pursuant to Section 401(a)(29) of
the Code; and
(9) the transactions contemplated hereby will not result in
any event described in section 4062(e) of ERISA.
(f) With respect to each Company Benefit Plan that is a "welfare
plan" (as defined in Section 3(1) of ERISA), neither the Company nor any
Subsidiary of the Company has any obligations to provide health, life insurance,
or death benefits with respect to current or former employees, consultants or
directors of the Company or any of its Subsidiaries beyond their termination of
employment or service, other than as required
12
under Section 4980B of the Code, and each such Company Benefit Plan may be
amended or terminated at any time without incurring liability thereunder. There
has been no communication to any employee, consultant or director of the Company
or any Subsidiary of the Company that would reasonably be expected to promise or
guarantee any such retiree health or life insurance or other retiree death
benefits on a permanent basis.
(g) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, either alone or in
combination with another event (whether contingent or otherwise) will (i)
entitle any current or former employee, consultant or director of the Company or
any of its Subsidiaries or any group of such employees, consultants or directors
to any payment; (ii) increase the amount of compensation or benefits due to any
such employee, consultant or director; (iii) accelerate the vesting, funding or
time of payment of any compensation, equity award or other benefit; (iv) result
in any "parachute payment" under Section 280G of the Code (whether or not such
payment is considered to be reasonable compensation for services rendered); or
(v) cause any compensation to fail to be deductible under Section 162(m) of the
Code, or any other provision of the Code or any similar foreign law or
regulation.
(h) Under each Company Benefit Plan which is a single-employer
plan and any foreign plan that is a defined benefit plan, as of the last day of
the most recent plan year ended prior to the date hereof, the actuarially
determined present value of all "benefit liabilities", within the meaning of
Section 4001(a)(16) of ERISA or, with respect to any foreign plan, as determined
under any equivalent law or practice (in each case as determined on the basis of
the actuarial assumptions contained in Company Benefit Plan's most recent
actuarial valuation), did not exceed the then current value of the assets of
such Company Benefit Plan, and there has been no material adverse change in the
financial condition of such Company Benefit Plan (with respect to either assets
or benefits) since the last day of the most recent plan year.
(i) Neither the Company nor any of its Subsidiaries maintains any
plan, agreement or arrangement, formal or informal, that provides benefits in
the nature of severance or has outstanding any liabilities with respect to any
severance benefits available under any plan, agreement or arrangement.
(j) Neither the Company nor any Subsidiary of the Company has any
material liability (including a material liability arising out of an
indemnification, guarantee, hold harmless or similar agreement) relating to any
insurance contract held under or purchased to fund a Company Benefit Plan, the
issuer of which is or was insolvent or in reorganization or the payments under
which were suspended.
(k) Section 2.13(k) of the Sellers' Disclosure Schedule sets
forth any and all indebtedness in excess of fifty thousand U.S. dollars
(US$50,000) owed by any current or former employee, consultant or director to
the Company or any Subsidiary of the Company.
13
(l) No Company Benefit Plan, nor the Company or any Subsidiary of
the Company with respect to any Company Benefit Plan, is under audit or is the
subject of an audit or investigation by the IRS, the U.S. Department of Labor,
the PBGC or any other federal or state governmental agency or any foreign
Regulatory Agency, nor is any such audit or investigation pending or threatened.
(m) All liabilities with respect to any current or former
employee, consultant or director of the Company or any Subsidiary of the Company
or any affiliate of any member thereof, whether contingent or otherwise, that
are accurately reflected on the Company's latest audited financial statements.
(n) Except as set forth in Section 2.13(n) of the Sellers'
Disclosure Schedule, neither the Company nor any Subsidiary of the Company
maintains any plan, program or arrangement or is a party to any contract that
provides any benefits or provides for payments to any Person in, based on or
measured by the value of, any equity security of, or interest in, the Company or
any Subsidiary of the Company.
(o) The Company has provided to Buyer a true and complete list of
each current or former employee, consultant, officer or director of the Company
or any of its Subsidiaries who, as of the date hereof, holds (i) any option to
purchase any shares of capital stock or commitments for future options, together
with the number of such shares subject to each such option, the exercise price
per share under each such option, whether such option is intended to qualify as
an incentive stock option within the meaning of Section 422(b) of the Code, and
the expiration date of each such option, (ii) any shares that are unvested or
subject to a repurchase option, risk of forfeiture or other condition providing
that such shares may be forfeited or repurchased by the Company upon any
termination of the shareholders' employment, directorship or other relationship
with the Company or any of its Subsidiaries or which shares are subject to
performance-based vesting and (iii) any other award or right (including share
units or stock appreciate rights), directly or indirectly, to receive shares of
capital stock (or any other unit of Company equity) or any amount payable by
reference to the shares of capital stock (or any other unit of Company equity),
together with the number of shares of capital stock (or any other unity of
Company equity) subject to such right.
(p) Except as set forth in Section 2.13(p) of the Sellers'
Disclosure Schedule, there are no liabilities, whether contingent or absolute,
of the Company or any of its Subsidiaries relating to workers' compensation
benefits that are not fully insured against by a bona fide third-party insurance
carrier.
(q) With respect to each Company Benefit Plan and with respect to
each state workers' compensation arrangement, that is funded wholly or partially
through an insurance policy or public or private fund, all premiums required to
have been paid to date under such insurance policy or fund have been paid, all
premiums required to be paid under the insurance policy or fund through the
Closing Date will have been paid on or before the Closing Date and, as of the
Closing Date, there will be no liability of the Company or its Subsidiaries
under any such insurance policy, fund or ancillary agreement with respect to
such insurance policy in the nature of a retroactive rate
14
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring prior to the Closing Date.
(r) Neither the Company nor any Subsidiary of the Company
maintains any plan, program or arrangement or is a party to any contract that
provides any benefits or provides for payments to any person in, based on or
measured by the value of, any equity security of, or interest in, the Company or
any Subsidiary of the Company.
2.14 LABOR MATTERS.
(a) Neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreements. There are no labor unions or other
organizations representing, purporting to represent or attempting to represent,
any employee of the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries has any knowledge of any strikes, slowdowns, work
stoppages, lockouts, or threats thereof, by or with respect to any employees of
the Company or any of its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries has violated
any statute, law, ordinance, rule or regulation, or any order, ruling, decree,
judgment or arbitration award of any court, arbitrator or any government agency
regarding the terms and conditions of employment of employees, former employees
or prospective employees or other labor related matters, including laws, rules,
regulations, orders, rulings, decrees, judgments and awards relating to
discrimination, fair labor standards and occupational health and safety,
wrongful discharge or violation of the personal rights of employees, former
employees or prospective employees.
(c) Except as set forth in Section 2.14 of the Sellers'
Disclosure Schedule, since the enactment of the Worker Adjustment and Retraining
Notification Act (the "WARN ACT"), neither the Company nor any of its
Subsidiaries has effectuated (i) a "plant closing" (as defined in the WARN Act,
or any similar state, local or foreign law) affecting any site of employment or
one or more facilities or operating units within any site of employment or
facility of the Company or any of its Subsidiaries or (ii) a "mass layoff" (as
defined in the WARN Act, or any similar state, local or foreign law) affecting
any site of employment or facility of the Company or any of its Subsidiaries.
2.15 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement:
(1) "ENVIRONMENT" means any ambient, workplace or indoor air,
surface water, drinking water, groundwater, land surface, subsurface
strata, river sediment, plant or animal life, natural resources,
workplace, and real property and the physical structures and
improvements thereon.
(2) "ENVIRONMENTAL COSTS AND LIABILITIES" mean any and all
losses, liabilities, obligations, damages (including compensatory,
punitive and consequential damages), fines, penalties, judgments,
actions, claims, costs and
15
expenses (including, without limitation, fees, disbursements and
expenses of legal counsel, experts, engineers and consultants and the
costs of investigation, monitoring, remediation or other response
action) pursuant to any Environmental Law or arising from the
Environment, Hazardous Substances or a Release.
(3) "ENVIRONMENTAL LAW" means any law (including without
limitation common law), statute, code, order, judgment, decision, rule,
regulation, standard, or requirement of any Governmental Entity, or any
binding agreement with any Governmental Entity, relating to: (a) the
Environment, including, without limitation, pollution, contamination,
cleanup, preservation, protection, or reclamation of the Environment;
(b) public or employee health or safety; (c) any Release, including
without limitation notification, investigation, monitoring, or
remediation of or other response to a Release; or (d) the handling, use,
manufacture, distribution, treatment, storage, disposal, or recycling of
or exposure to Hazardous Substances.
(4) "HAZARDOUS SUBSTANCE" means any pollutant, hazardous
contaminant, chemical, petroleum or any fraction thereof, asbestos or
asbestos-containing-material, polychlorinated biphenyls, or industrial,
toxic, radioactive, infectious, disease-causing or hazardous substance,
waste or agent.
(5) "PROCEEDING" means any order, decree, judgment,
agreement, claim, citation, complaint, inspection, investigation,
notice, arbitration or other proceeding.
(6) "RELEASE" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing, or other release of any Hazardous Substance at, in, on, or
onto the Environment.
(b) Except as set forth in Section 2.15(b) of the Sellers'
Disclosure Schedule:
(1) The operations of the Company and its Subsidiaries are,
have been and, as of the Closing Date, will be, in compliance with all
Environmental Laws and all Company Permits issued under Environmental
Laws, and the Company is not aware of any facts, circumstances or
conditions which would prevent the operations of the Company and its
Subsidiaries from continued compliance in the future with all
Environmental Laws and Company Permits issued under such Laws.
(2) The Company and its Subsidiaries have obtained and will,
as of the Closing Date, maintain all Company Permits required under
applicable Environmental Laws for the continued operations of their
respective businesses and will, as of the Closing Date, have filed all
applications and related documents required to obtain the extension or
renewal of all such Company Permits.
16
(3) There have been no Proceedings against the Company or its
Subsidiaries relating to either their current or former operations
alleging any violation of Environmental Law or of any Company Permit
issued under any Environmental Law or seeking to impose Environmental
Costs and Liabilities. To the knowledge of the Company and its
Subsidiaries, no such Proceeding has been threatened.
(4) To the Company's knowledge, there has been no Release,
whether on-site or off-site, that has subjected, or is reasonably
anticipated to subject, the Company or its Subsidiaries to a
notification or reporting requirement under any Environmental Law or to
any Environmental Costs and Liabilities.
(5) To the Company's knowledge, there has been no disposal of
Hazardous Substances at, in, on or under any of the properties currently
or previously owned or operated by the Company or its Subsidiaries, and
no storage or use of Hazardous Substances at these properties.
(6) There is not now, nor to the Company's knowledge, has
there been in the past, on or in any current or former property owned or
operated by the Company or its Subsidiaries any asbestos,
asbestos-containing material, polychlorinated biphenyls, or underground
storage tanks.
(c) The Company has provided Parent with copies of all
assessments, audits, investigations, and sampling or similar reports relating to
the Environment, Hazardous Substances, Environmental Laws or any Release, to the
extent applicable to the current or former operations of the Company or its
Subsidiaries and to the extent in the possession or control of the Company.
2.16 TAXES.
(a) The Company and each Subsidiary of the Company have timely
filed (taking into account all available extensions) all Tax Returns concerning
Taxes (or such Tax Returns have been filed on behalf of the Company or
Subsidiary of the Company, as the case may be) required to be filed by
applicable Law and have paid all amounts due in respect of Taxes (whether or not
actually shown on such Tax Returns); all such Tax Returns are true, correct and
complete in all material respects and accurately set forth all items to the
extent required to be reflected or included in such Tax Returns by applicable
Law.
(b) The amount of the Company's and its Subsidiaries' liability
for unpaid Taxes for all periods ending on or before the date of this Agreement
does not, in the aggregate, exceed the amount of the current liability accruals
for Taxes (excluding reserves for deferred Taxes) as shown in the most recent
Financial Statements. For these purposes "liability for unpaid Taxes" shall
include Taxes, penalties, interest, fines, deficiencies, assessments and
governmental charges (including, without limitation, all Taxes that the Company
or a Subsidiary of the Company is obligated to withhold from amounts paid or
payable to or benefits conferred upon employees, creditors and third
17
parties) relating to periods covered by the Financial Statements. Except as set
forth in Section 2.16(b) of the Sellers' Disclosure Schedule, the current
liability accruals do not include any Taxes other than those imposed by U.S.
federal, state, or local government or any agency or political subdivision of
such government. Except as set forth in Section 2.16(b) of the Sellers'
Disclosure Schedule, as of the date hereof, there is no proposed liability for
any material Tax to be imposed upon the Company or any of its Subsidiaries for
the most recently ended period and all prior periods for which there is not an
adequate reserve.
(c) No claim has ever been made by any authority in a
jurisdiction where neither the Company nor any of its Subsidiaries files Tax
Returns that it is or may be subject to taxation by that jurisdiction.
(d) No Liens for Taxes exist with respect to any asset of the
Company or any Subsidiary of the Company, except for statutory liens for Tax not
yet due.
(e) No deficiency with respect to Taxes has been proposed,
asserted or assessed against the Company or any Subsidiary of the Company in
writing by any Tax authority. Except as set forth in Section 2.16(e) of the
Sellers' Disclosure Schedule, neither the Company nor any Subsidiary of the
Company has received any written or oral notice from any Tax authority of any
examinations, audits or litigation involving Taxes, or of any proposed
assessments or adjustments regarding Taxes. Except as set forth in Section
2.16(e) of the Sellers' Disclosure Schedule, there are and have been no
examinations, audits or litigation involving Taxes involving the Company or any
Subsidiary of the Company. As of the date hereof, neither the Company nor any of
its Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
material Taxes or Tax Returns; and the period during which any assessment
against the Company or any of the Subsidiaries may be made by the United States
Internal Revenue Service (the "IRS") or other appropriate taxing authority has
expired or will expire without waiver or extension of any such period for each
such authority.
(f) There are no agreements relating to allocating or sharing of
Taxes of which the Company or any of its Subsidiaries is a party. Neither the
Company nor any of its Subsidiaries is liable for Taxes of any other Person, or
is currently under any contractual obligation to indemnify any Person with
respect to any amounts of Taxes (except for customary agreements to indemnify
lenders or security holders in respect of Taxes) or is a party to any agreement
providing for payments by the Company or any of its Subsidiaries with respect to
any amount of Taxes.
(g) Neither the Company nor any Subsidiary of the Company has
constituted either a "distributing corporation" or a "controlled corporation"
within the meaning of Section 355(a)(1)(A) of the Code. Neither the Company nor
any of its Subsidiaries is or has been a United States real property holding
corporation within the meaning of section 897(c)(2) of the Code and the Company
is not required to withhold tax on the purchase of the Company by reason of
section 1445 of the Code. Neither the Company nor any of its Subsidiaries has
agreed to nor is it required to make, any
18
adjustment under Code section 481(a) by reason of a change in accounting method
or otherwise.
(h) Neither the Company nor any Subsidiary of the Company has
been a member of an affiliated group of corporations within the meaning of
Section 1504 of the Code or within the meaning of any similar provision of Law
to which the Company or a Subsidiary may be subject, other than the affiliated
group of which the Company is the common Parent.
(i) The Company has made available to Buyer true and complete
copies of all Tax Returns of the Company and its Subsidiaries for tax years
beginning on or after January 1, 1997. No audit report have been issued since
1991 (or otherwise with respect to any audit or proceeding in progress) relating
to Taxes of the Company or any Subsidiary of the Company. Section 2.16(i) of the
Sellers' Disclosure Schedule lists all material Tax Returns filed by the Company
or any of its Subsidiaries for all years and indicates whether each such Tax
Return has been examined by and settled with the IRS or other appropriate taxing
authority.
(j) No elections under section 338 of the Code have been made by
or in respect of the Company or any of its Subsidiaries.
(k) Neither the Company nor any of its Subsidiaries previously
elected to be treated as an S Corporation under section 1361 of the Code.
(l) Section 2.16(l) of the Sellers' Disclosure Schedule lists all
transactions in which the Company or any of its Subsidiaries acquired
substantially all of the assets relating to a business or acquired more than 50
percent of the stock or other equity interests of any entity (including but not
limited to a profits or capital interest of a limited liability company or
partnership); provided that such list of transactions does not include
transactions where the purchase price was less than one million U.S. dollars
(US$1,000,000) (whether such consideration was delivered in cash or other
property).
(m) For purposes of this Agreement:
(A) "TAXES" means all taxes, however denominated, including
any interest or penalties that may become payable in respect
thereof, imposed by any federal, state, local or foreign
government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the
generality of the foregoing, all income taxes (including, but
not limited to, United States federal income taxes and state
income Taxes), payroll and employee withholding taxes,
unemployment insurance, social security, ad valorem taxes,
sales and use taxes, excise taxes, environmental taxes,
franchise taxes, gross receipts taxes, occupation taxes, real
and personal property taxes, gift taxes, stamp taxes,
transfer taxes, withholding taxes, workers' compensation
premiums, Pension Benefit Guaranty Corporation
19
premiums and other obligations of the same or of a similar
nature, whether arising before, on or after the Closing
Date.
(B) "TAX RETURNS" means a report, estimate, declaration of
estimated taxes, information statement or return or other
information (including any amendments) required to be
supplied to a governmental entity with respect to Taxes
including, where permitted or required, combined or
consolidated returns for any group of entities that includes
the Company or any of its Subsidiaries and information
returns or reports with respect to backup withholding and
other payments to third parties.
2.17 ABSENCE OF QUESTIONABLE PAYMENTS.
Neither the Company nor any of its Subsidiaries nor, any
director, officer, agent, employee, consultant or other person acting on behalf
of the Company or any of its Subsidiaries, has used any corporate or other funds
for unlawful contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to government officials or
others or established or maintained any unlawful or unrecorded funds in
violation of Section 30A of the Exchange Act. Neither the Company nor any of its
Subsidiaries nor, any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries, has accepted or received
any unlawful contributions, payments, gifts, or expenditures. Except as set
forth in Section 2.17 of the Sellers' Disclosure Schedule, neither the Company
nor any of its Subsidiaries has entered into, or is a party to, any transaction,
understanding, contract or other agreement or arrangement with any Affiliate,
Associate or shareholder of the Company, other than transactions in the ordinary
course of business consistent with past practice between the Company on one hand
and Buyer or its Subsidiaries on the other hand.
2.18 COMPANY CONTRACTS.
(a) The Company has heretofore delivered to Buyer true, correct
and complete copies of each of the following and all amendments, modifications
and supplements thereto, to which the Company or any of its Subsidiaries is a
party and which are in effect (or contain provisions that remain in effect) as
of the date hereof or will come into effect (or give rise to actual or
contingent obligations that will or may come into effect) after the date hereof:
(i) employment, severance, product design or development, personal services,
consulting, non-competition or indemnification contracts other than employment
agreements and offer letters terminable in each case at will (or on not more
than 30 days' notice) and without consideration, including any contract to which
the Company or any of its Subsidiaries is a party involving employees of the
Company; (ii) distribution agreements, franchise agreements, original equipment
manufacturer agreements, end user licenses granted by the Company, volume
purchase agreements, software licenses granted by the Company, material software
licenses granted to the Company, reseller agreements, service agreements,
research and development agreements, joint sales agreements, territory
arrangements, franchise, product development, commission or agency agreements
with non-employees, sales
20
representative agreements with non-employees, conditional sales contracts, and
other agreements with non-employees involving the payment of commissions or
other consideration or providing for discounts with respect to the provision of
services by the Company or its Subsidiaries or the manufacture, licensing,
rental, sale or distribution of the Company's products; (iii) joint development
agreements with non-employees, cooperative development agreements, technical
development agreements, joint marketing agreements, cooperative marketing
agreements, interoperability agreements and agreements with subcontractors
related to the development, maintenance or quality assurance testing of the
Company's products; (iv) all agreements, including employee and severance
agreements, that either have change of control or similar provisions or
otherwise have benefits or payment provisions that would be triggered by the
consummation of the transactions contemplated hereby; (v) contracts granting a
right of first refusal or first negotiation with regard to a sale of any assets
of the Company or any of its Subsidiaries; (vi) subscription, shareholder,
voting, release, indemnification, partnership or joint venture agreements; (vii)
agreements for the acquisition, sale or lease (including leases in connection
with financing transactions) of material properties or assets of the Company (by
merger, purchase or sale of assets or stock or otherwise) entered into since
January 1, 1998 or, if prior to that date, having representations, warranties or
indemnities that remain in effect or as to which claims are pending or pursuant
to which the Company retains any payment obligations (including contingent
payment obligations); (viii) contracts or agreements with any Governmental
Entity; (ix) loan or credit agreements, mortgages, indentures or other
agreements or instruments evidencing material indebtedness for borrowed money by
the Company or any of its Subsidiaries or any such agreement pursuant to which
material indebtedness for borrowed money may be incurred; (x) agreements that
purport to limit, curtail or restrict the ability of the Company or any of its
Subsidiaries to compete in any geographic area or line of business; (xi)
agreements or arrangements, including but not limited to xxxxxx, options, swaps,
caps and collars, designed to protect the Company or any of its Subsidiaries
against fluctuations in interest rates, currency exchange rates or the prices of
certain commodities and raw materials; (xii) contracts or agreements with any
Affiliates or Associates of the Company and its Subsidiaries or the Buyer and
its Subsidiaries, except for any agreements between any Seller and Buyer; (xiii)
agreements with respect to the settlement of any suits, claims, actions,
proceedings or investigations against the Company or any of its Subsidiaries or
any of their respective properties or assets; (xiv) agreements granting a
security interest in respect of any assets of the Company to any third party;
and (xv) commitments and agreements to enter into any of the foregoing
(collectively, the "COMPANY CONTRACTS"). Section 2.18 of the Sellers' Disclosure
Schedule sets forth a list of all Company Contracts.
(b) Each of the Company Contracts constitutes the valid and
legally binding obligation of the Company or one or more of its Subsidiaries,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar Laws of general applicability relating to or
affecting creditors' rights or by general equity principles), and is in full
force and effect. There is no default under any Company Contract so listed
either by the Company or, to the Company's knowledge, by any other party
thereto, and no event has occurred that with the lapse of time or the giving of
notice
21
or both would constitute a default thereunder by the Company or, to the
Company's knowledge, any other party.
(c) No party to any Company Contract has given notice to the
Company of or made a claim against the Company with respect to any material
breach or default thereunder.
2.19 INSURANCE MATTERS.
Section 2.19 of the Sellers' Disclosure Schedule sets forth a
list of insurance policies (including information on the premiums payable in
connection therewith and the scope and amount of the coverage and deductibles
provided thereunder) maintained by the Company or any of its Subsidiaries which
policies have been issued by insurers, which, to the Company's knowledge, are
reputable and financially sound and provide coverage for the operations
conducted by the Company and its Subsidiaries of a scope and coverage consistent
with customary industry practice.
2.20 INTELLECTUAL PROPERTY.
(a) (i) Section 2.20(a)(i) of the Sellers' Disclosure Schedule
sets forth a list of the following categories of Company Owned Intellectual
Property: (A) Trademarks; (B) Patents (including issued and applications
therefor); (C) registered Copyrights; (D) Software (other than commercial
"shrink wrap" software and those that are in development and alpha or beta
tests); and (E) Network Identifiers; and in each case listing, as applicable,
the registration number, and in the case of a registration, the registered
owner, and the jurisdiction of registration; and
(ii) Section 2.20(a)(ii) of the Sellers' Disclosure Schedule
sets forth a complete and correct list of: (A) all agreements under which the
Company or any of its Subsidiaries use, have access to or exercise any other
rights with regard to Company Licensed Intellectual Property, other than those
agreements for Company Licensed Intellectual Property that is commercial "shrink
wrap" software or publicly available "shareware" or "freeware" software and (B)
all agreements under which the Company or any of its Subsidiaries has licensed
to others, or has been granted a license or otherwise afforded, the right to
access or use Company Intellectual Property or exercise any other rights with
regard thereto; in each case, specifying the parties to the agreement, the
Intellectual Property that is licensed, and whether the license is exclusive or
non-exclusive.
(b) The Company and its Subsidiaries own, or license or otherwise
possess full, legally enforceable rights to use, all Intellectual Property that
the Company or any of its Subsidiaries uses or holds for use, or intends to use,
in connection with its respective business, or that is material or necessary to
its respective business, in each case, as such business currently is conducted
or as is proposed to be conducted, free and clear of conditions, adverse claims
or Liens.
(c) The Company and its Subsidiaries have taken all reasonable
and appropriate steps when deemed necessary in the Company's reasonable
discretion to
22
register all registrable Company Intellectual Property, other than Copyrights,
with the applicable authorities in Japan and any other jurisdiction in which the
Company currently conducts business, and all registrations for Company Owned
Intellectual Property, including for Patents and Trademarks, are registered in
the name of the Company or its Subsidiaries, as the case may be, and are
subsisting.
(d) The Company and its Subsidiaries generally secures valid
written assignments from all consultants and employees who contribute or have
contributed to the creation or development of Company Owned Intellectual
Property of the rights to such contributions that the Company or its
Subsidiaries do not already own by operation of law.
(e) The Company and its Subsidiaries have taken reasonable and
appropriate steps to protect and preserve the confidentiality of all of the
Trade Secrets that comprise any part of Company Intellectual Property.
(f) Except as set forth in Section 2.20(f) of the Sellers'
Disclosure Schedule, there is no pending (or, to the knowledge of the Company
and its Subsidiaries, threatened) assertion or claim: (i) challenging the
validity, enforceability, scope or effectiveness of, or contesting the Company's
or any of its Subsidiaries' rights with respect to, any Company Owned
Intellectual Property, or (ii) challenging the Company's or any of its
Subsidiaries' rights to use any Company Licensed Intellectual Property or the
enforceability of any agreements or arrangements relating thereto.
(g) Except as set forth in Section 2.20(g) of the Sellers'
Disclosure Schedule, neither the Company nor any of its Subsidiaries: (i) is a
party to any suit, action or proceeding which involves a claim of infringement,
breach or misappropriation of any Intellectual Property of any person; or (ii)
has brought any action, suit or proceeding against any person for infringement
or misappropriation of, or breach of any license or agreement involving, any
Company Intellectual Property.
(h) Neither Company Intellectual Property nor the use or other
exploitation thereof by the Company or any of its Subsidiaries (or any
consultant, contractor or employee of the Company or any of its Subsidiaries who
contributes to or has contributed to or participated in the creation or
development of Company Intellectual Property), nor the Company's or any of its
Subsidiaries' sale or provision of, or any other exercise of rights in respect
of, any products or services of the Company or its Subsidiaries that heretofore
have been or currently are exploited by the Company or its Subsidiaries,
infringes on, misappropriates, breaches or violates the rights in Intellectual
Property of any person.
(i) Neither the Company nor any of its Subsidiaries has given or
received any notice of default or any event which with the lapse of time would
constitute a default under any agreement relating to Company Intellectual
Property; neither the Company nor any of its Subsidiaries, nor, to the knowledge
of the Company and its Subsidiaries, any other party is currently in default
with regard to any agreement relating to the Company Intellectual Property, and
there exists no condition or event (including,
23
without limitation, the execution, delivery and performance of this Agreement)
which, with the giving of notice or the lapse of time or both, would constitute
a default by the Company or any of its Subsidiaries under any agreement relating
to Company Intellectual Property, or would give any person any rights of
termination, cancellation, acceleration of any performance under any such
agreement or result in the creation or imposition of any Lien.
(j) To the Company's and each of its Subsidiaries' knowledge,
there are no unauthorized uses, disclosures, infringements, or misappropriations
by any person of any Company Intellectual Property. Other than in license
agreements granting certain Company Owned Intellectual Property rights, neither
the Company nor any of its Subsidiaries has entered into (i) any agreement to
indemnify any other person against any charge of infringement, breach or
misappropriation of any person's rights in Intellectual Property or (ii) any
agreement granting any person the right to bring infringement or
misappropriation actions with respect to, or otherwise to enforce rights with
respect to, any Company Owned Intellectual Property.
(k) To the Company's and each of its Subsidiaries' knowledge, all
use, disclosure or appropriation of confidential and/or proprietary information
not owned by the Company or its Subsidiaries in the course of conducting their
respective businesses has been pursuant to the terms of a written agreement
between the Company or its Subsidiaries and the owner of such confidential
and/or proprietary information, or is otherwise lawful.
(l) No person other than the Company, its Subsidiaries, and third
parties authorized to hold source codes pursuant to an escrow or other
agreement, possesses any current or contingent rights to, or otherwise uses, any
computer software source code that is part of Company Owned Intellectual
Property. Section 2.20(l) of the Sellers' Disclosure Schedule sets forth a
complete and correct list of all such escrow and other agreements.
(m) All Software contained within Company Owned Intellectual
Property performs in all material respects in accordance with the specifications
and other documentation included therein or applicable thereto issued by the
Company.
(n) As used in this Agreement:
(1) "INTELLECTUAL PROPERTY" means any and all intellectual
property or proprietary rights in any jurisdiction, whether owned or
held for use under license, whether registered or unregistered,
including such rights in and to: (i) trademarks and pending trademark
applications, trade dress, service marks, certification marks, logos,
trade names, brand names, corporate names, assumed names and business
names ("Trademarks"); (ii) issued patents and pending patent
applications, and any and all divisions, continuations,
continuations-in-part, reissues, continuing patent applications,
reexaminations, and extensions thereof, any counterparts claiming
priority therefrom, utility models, patents of importation/confirmation,
certificates of invention, certificates of registration and
24
like statutory rights ("PATENTS"); inventions, invention disclosures,
discoveries and improvements, whether patentable or not; (iii) works of
authorship, whether or not copyrightable, copyrights, copyright
registrations and pending copyright registration applications and mask
works ("COPYRIGHTS"); (iv) trade secrets (including, but not limited to,
those trade secrets defined in the Uniform Trade Secrets Act and under
corresponding foreign statutory and common law), business, technical and
know-how information, non-public information, and confidential
information and rights to limit the use or disclosure thereof by any
person ("TRADE SECRETS") ; (v) computer software and firmware, data
files, source and object codes, user interfaces, manuals, databases and
other specifications and documentation ("SOFTWARE"); (vi); all internet
protocol addresses and networks, including without limitation, DNS
domain names, internet e-mail addresses, world wide web (www) and http
addresses, network names, network addresses, (such as IPv4) and services
(such as mail or website) whether or not used or currently in service,
and any registrations relating thereto ("NETWORK IDENTIFIERS"); (vii)
claims, causes of action or defenses relating to the enforcement of any
of the foregoing; and (viii) goodwill associated with the foregoing.
(2) "COMPANY INTELLECTUAL PROPERTY" means any and all
Intellectual Property that is being used or held for use, or is
currently under development for use or is intended to be used, in the
business of the Company or its Subsidiaries, as such businesses
currently are or are anticipated to be conducted.
(3) "COMPANY LICENSED INTELLECTUAL PROPERTY" means all
Company Intellectual Property other than the Company Owned Intellectual
Property.
(4) "COMPANY OWNED INTELLECTUAL PROPERTY" means all Company
Intellectual Property that is owned by the Company or its Subsidiaries.
2.21 BROKERS.
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission or expense reimbursement in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or any of its affiliates.
2.22 REPRESENTATIONS AND WARRANTIES CONCERNING SELLERS
Each of the Sellers, severally and not jointly, represents and
warrants to Buyer that the statements contained in this Section 2.22 are correct
and complete as of the date of this Agreement with respect to himself, herself
or itself:
(a) Each Seller owns of record and beneficially the number of
Shares set forth opposite such Seller's name in Section 1.2 of the Seller's
Disclosure Schedule
25
hereto, and has good and valid title to such Shares free and clear of
any and all Liens other than the agreements and commitments contained herein or
contemplated hereby. All consents, approvals, authorizations and orders
necessary for the sale and delivery of the Shares to be sold by Sellers
hereunder have been obtained, and each Seller has full right, power, authority
and capacity to sell, assign, transfer and deliver the Shares pursuant to this
Agreement. Upon delivery of the Shares by Sellers hereunder and payment of the
consideration therefor pursuant to this Agreement, good and valid title to the
Shares, free and clear of any and all Liens, will pass to Buyer.
(b) Eigen has duly and validly authorized the execution, delivery
and performance of this Agreement and approved the consummation of the
transactions contemplated hereby, and taken all corporate or similar actions
required to be taken by Eigen for the consummation of the transactions
contemplated hereby. No other proceeding on the part of Eigen is necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each Seller
and constitutes a valid, legal and binding agreement of each Seller, enforceable
against each Seller in accordance with its terms.
(c) No filing with or notice to, and no permit, authorization,
consent or approval of, any supranational, national, state, municipal or local
court or tribunal or administrative, governmental, quasi-governmental or
regulatory body, agency or authority (a "GOVERNMENTAL ENTITY") is necessary for
the execution and delivery by the Sellers of this Agreement or the consummation
by the Sellers of the transactions contemplated hereby.
(d) Neither the execution, delivery and performance of this
Agreement by the Sellers nor the consummation by the Sellers of the transactions
contemplated hereby will (i) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration of any
obligation or the loss of any material benefit, or the creation of any Lien)
under any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which any Seller is a party or by which any of them or any of
their respective properties or assets or the Shares may be bound or (ii) violate
any Law applicable to any Seller or any of their respective properties or assets
or the Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents, warrants and agrees as follows:
26
3.1 ORGANIZATION AND RELATED MATTERS.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Buyer has the necessary
corporate power and authority to execute, deliver and perform this Agreement and
any related agreement to which it is a party.
3.2 AUTHORIZATION.
Buyer has duly and validly authorized the execution, delivery and
performance of this Agreement. This Agreement has been duly executed and
delivered by Buyer and constitutes the legally valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms.
ARTICLE IV
CONTINUING COVENANTS
4.1 NONDISCLOSURE OF PROPRIETARY DATA.
Neither any Seller nor any of their representatives shall, at any
time prior to the fourth anniversary of the date hereof, make use of, divulge or
otherwise disclose, directly or indirectly, any trade secret or other
proprietary data (including, but not limited to, any customer list, record or
financial information) concerning the business or policies of Company that any
Seller or any representative of Seller may have learned as a shareholder,
employee, officer or director of Company or any of its Subsidiaries. In
addition, at any time prior to the fourth anniversary of the date hereof,
neither any Seller nor any of its representatives shall make use of, divulge or
otherwise disclose, directly or indirectly, to persons other than Buyer, any
confidential information concerning the business or policies of Company and its
Subsidiaries which may have been learned in any such capacity.
4.2 TAX COOPERATION.
After the Closing, each Seller shall, and shall cause their
respective Affiliates and Associates to, cooperate fully with Buyer, Company and
its Subsidiaries in the preparation of all Tax Returns and shall provide, or
cause to be provided at such Seller's sole cost and expense, to Buyer, Company
and its Subsidiaries any records and other information requested by such parties
in connection therewith as well as access to, and the cooperation of, any
accountants of such Seller. Each Seller shall cooperate fully with Buyer,
Company and the Subsidiaries in connection with any Tax investigation, audit or
other proceeding.
4.3 CHANGE OF CORPORATE NAME
After the Closing, Buyer shall cause the Company to change its
corporate name from Maingate Electronics, KK to a different name to be selected
in the sole discretion of Buyer.
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ARTICLE V
INDEMNIFICATION
5.1 OBLIGATIONS OF SELLERS.
Sellers jointly and severally agree to indemnify and hold
harmless Buyer, each Subsidiary of Buyer, Company and each Subsidiary of
Company, and their respective directors, officers, employees, Affiliates and
Associates (except Affiliates and Associates of Buyer to the extent they are
other Sellers), agents and assigns, from and against any and all Losses,
incurred directly or indirectly, as a result of, or based upon or arising from:
(a) any third party claims or demands arising in connection with
the conduct of Company's business prior to the Closing;
(b) any inaccuracy in or breach or non-performance of any of the
representations, warranties, covenants or agreements made by any Seller in or
pursuant to this Agreement (provided that the Sellers' indemnification
obligations for breach or non-performance of Section 4.1 shall be several but
not joint);
(c) any failure of any Seller to perform or observe fully any
covenant, provision or agreement to be performed or observed by it pursuant to
this Agreement (provided that the Sellers' indemnification obligations for
failure to perform or observe Section 4.1 shall be several but not joint); and
(d) any failure to have obtained all Permits and Approvals
required in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
5.2 OBLIGATIONS OF BUYER.
Buyer covenants and agrees to indemnify and hold harmless the
Sellers and their respective Affiliates, Associates, agents and assigns from and
against any and all Losses, incurred directly or indirectly, as a result of, or
based upon or arising from:
(a) any third party claims or demands arising in connection with
the conduct of Company's business, after the Closing;
(b) any inaccuracy in or breach or non-performance of any of the
representations, warranties, covenants or agreements made by Buyer in or
pursuant to this Agreement; and
(c) any failure of Buyer to perform or observe fully any
covenant, provision or agreement to be performed or observed by it pursuant to
this Agreement.
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5.3 LIMITATIONS ON INDEMNITY
(a) The aggregate dollar amount of all payments Sellers shall be
obligated to make pursuant to Section 5.1 shall not exceed the Purchase Price.
(b) Neither Sellers nor Buyer shall have any obligation to
indemnify Buyer or Sellers, as the case may be, pursuant to Section 5.1 or 5.2
hereof, unless and until in the case of the Sellers, Buyer has, or in the case
of Buyer, all Sellers as a group have, suffered aggregate Losses with respect to
one or more claims under such sections in excess of US $75,000, in which event
the applicable indemnitee or indemnities, as the case may be, may claim
indemnification only for the amount of such Losses in excess of US $75,000.
5.4 CERTAIN TAX MATTERS.
(a) Sellers Indemnity. Each Seller agrees to indemnify, defend
and hold harmless Buyer, Company and each of the Company's Subsidiaries against
any Tax liabilities arising out of the transfer of the Shares.
(b) Audit Matters. Buyer shall have the responsibility for, and
the right to control, the audit (and disposition thereof) of any Tax Return of
the Company. Sellers shall have the right, directly or through its designated
representatives, to review in advance all submissions made in the course of
audits or appeals thereof to any Governmental Entity relating to periods ending
or treated by this Agreement as ending on or prior to the Closing Date if such
audit or appeal could give rise to a claim for indemnification hereunder.
5.5 PROCEDURE.
(a) Notice. Any party seeking indemnification with respect to any
Loss shall give notice to the party required to provide indemnity hereunder.
(b) Defense. In the event any person or entity not a party to
this Agreement shall make a demand or claim or file or threaten to file or
continue any lawsuit, which demand, claim or lawsuit may result in liability to
an Indemnified Party in respect of matters embraced by the indemnity under this
Agreement, then the party receiving notice of such event shall promptly notify
the other party or parties of the demand, claim or lawsuit. Within ten (10) days
after notice by the Indemnified Party (the "Notice") to an Indemnifying Party of
such demand, claim or lawsuit, except as provided in the next sentence, the
Indemnifying Party shall have the option, at its sole cost and expense, to
retain counsel for the Indemnified Party, to defend any such demand, claim or
lawsuit, provided that counsel who will conduct the defense of such demand,
claim or lawsuit will be approved by the Indemnified Party whose approval will
not unreasonably be withheld. The Indemnified Party shall have the right, at its
own expense, to participate in the defense of any suit, action or proceeding
brought against it with respect to which indemnification may be sought
hereunder; provided, however, if (a) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party and representation of both parties by the same counsel
29
would be inappropriate due to actual or potential differing interests between
them, or (b) the employment of counsel by such Indemnified Party has been
authorized in writing by the Indemnifying Party, or (c) the Indemnifying Party
has not in fact employed counsel to assume the defense of such action within a
reasonable time; then, the Indemnified Party shall have the right to retain its
own counsel at the sole cost and expense of the Indemnifying Party, which costs
and expenses shall be paid by the Indemnifying Party on a current basis. No
Indemnifying Party, in the defense of any such demand, claim or lawsuit, will
consent to entry of any judgment or enter into any settlement without the
consent of the Indemnified Party. If any Indemnified Party will have been
advised by counsel chosen by it that there may be one or more legal defenses
available to such Indemnified Party which are different from or additional to
those available to and which have not been asserted by the Indemnifying Party,
the Indemnifying Party will not have at the election of the Indemnified Party,
the right to continue the defense of such demand, claim or lawsuit on behalf of
such Indemnified Party and will reimburse such Indemnified Party and any person
controlling such Indemnified Party on a current basis for the reasonable fees
and expenses of any counsel retained by the Indemnified Party to undertake the
defense. In the event that the Indemnifying Party shall fail to respond within
ten (10) days after receipt of the Notice, the Indemnified Party may retain
counsel and conduct the defense of such demand, claim or lawsuit, as it may in
its sole discretion deem proper, at the sole cost and expense of the
Indemnifying Party, which costs and expenses shall be paid by the Indemnifying
Party on a current basis. Except as explicitly provided in this Section 9.3(b),
failure to provide Notice shall not limit the rights of such party to
indemnification.
(c) Adjustments for Insurance Proceeds. The amount of any Loss
entitling a party to indemnification under this Article V shall be reduced by
the amount of any insurance proceeds recovered by the Indemnified Party for such
Loss, net of all costs and expenses incurred in collecting such insurance
proceeds (including, without limitation, reasonable attorneys' fees). Nothing in
this Section 5.5 shall be deemed to obligate any person to maintain any
insurance or, except as set forth in the following sentence, to pursue any claim
against any insurer or third party. Buyer shall use its reasonable commercial
efforts to pursue any reasonable, material claim against its then-existing
insurers to the extent the proceeds to be received from such claim would offset
the amount of any Loss recovered by Buyer against any Seller; provided that
Sellers shall not have any right to delay payment of any indemnification
obligation hereunder in the event Buyer has made, or intends to make, a claim
against its insurers in connection with the Loss associated with such
obligation.
5.6 WAIVER OF SUBROGATION AND OTHER RIGHTS.
Buyer shall not be required to proceed against any particular
Indemnifying Party for indemnification or otherwise in respect of any losses
before enforcing its rights hereunder against any other Indemnifying Party, and
each Seller expressly waives all rights such Seller may have, now and in the
future, under any statute, at common law, or at law or in equity, or otherwise,
to compel Buyer to proceed against any Indemnifying Party in respect of any
losses before proceeding against, or as a condition to proceeding against, any
other Indemnifying Party.
30
5.7 SURVIVAL.
The representations and warranties contained in or made pursuant
to this Agreement shall expire on the earlier to occur of (A) the six month
anniversary of the termination of that certain Merger Agreement, dated as of
December 3, 2001, among Buyer, Synopsys, Inc. and Maple Forest Acquisition
L.L.C. (the "MERGER AGREEMENT"), (B) the effective time of the merger
contemplated by the Merger Agreement, or (C) eighteen months from the date
hereof (the earlier of such dates in (A), (B) or (C), the "TERMINATION Date").
Notwithstanding the foregoing, (i) the representations and warranties contained
in Section 2.1, 2.2, 2.21 and 2.22 shall survive the Closing and shall remain in
full force and effect indefinitely, (ii) the representations and warranties
contained in Section 2.16 shall continue through the expiration of the
applicable statute of limitations as the same may be extended (or, if a claim
has been asserted prior to such expiration, until six months after the date of
its final resolution), (iii) the agreements made in Article IV and Article V
shall be continuing and shall remain in full force and effect indefinitely,
unless earlier terminated in accordance with their terms (provided that nothing
in this Section 5.7(iii) shall be deemed to extend a representation or warranty
that by the terms of this Section 5.7 has otherwise expired), and (iv) if a
claim or notice is given under Article V with respect to any representation or
warranty prior to the applicable expiration date, such representation or
warranty shall continue indefinitely until such claim is finally resolved.
5.8 DISPUTE RESOLUTION.
(a) Notification of Dispute. If any party (the "CLAIMING PARTY")
has any claim for indemnification pursuant to Article V (a "CLAIM"), the
Claiming Party shall deliver written notice of such Claim to the party from whom
indemnification will be sought (the "PAYING PARTY") as soon as possible after
the Claiming Party becomes aware of such Claim. If the Paying Party objects to
such Claim, the Paying Party shall give written notice of such objection (the
"COMPLAINT") to the Claiming Party within five business days of receiving notice
of such Claim from the Claiming Party as contemplated above. The Claiming Party
and Paying Party shall attempt to resolve the Complaint, if possible, by good
faith negotiation. If such negotiations fail to resolve any dispute within ten
business days after the Paying Party has delivered the Complaint to the Claiming
Party, then such dispute shall be resolved by arbitration in accordance with the
provisions of this Section 5.8.
(b) Section 5.8 to Govern. Where a Complaint pursuant to Section
5.8 is to be settled by arbitration (the "MATTER"), the provisions of this
Section 5.8 and, to the extent not inconsistent with this Section 5.8, the
Commercial Arbitration Rules of the American Arbitration Association shall
govern the arbitration of the Matter exclusively.
(c) Commencement of Arbitration. If the Paying Party and Claiming Party fail to
settle the Complaint pursuant to Section 5.8(a), they shall jointly appoint an
arbitrator (the "ARBITRATOR") to settle the Matter. If such parties are unable
to agree on the identity of the Arbitrator, the Arbitrator shall be appointed
pursuant to the
31
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration shall take place in Alameda County, California.
(d) Decisions in Writing. All decisions of the Arbitrator with
respect to the Matter shall be rendered in writing and shall contain a brief
recital of the facts upon which the decision is made and the reasons therefor.
(e) Procedures. The Arbitrator, after giving the Claiming Party
and the Paying Party an opportunity to be heard, will determine the procedure
for the arbitration; provided that the Arbitrator, the Paying Party and the
Claiming Party shall use their best efforts to resolve each Matter as promptly
as possible, and in no event later than 60 days after the Paying Party has
delivered the Complaint to the Claiming Party pursuant to Section 5.8(a) above.
This procedure shall include an opportunity for written submissions by or on
behalf of the Claiming Party and the Paying Party and a reasonable opportunity
for discovery and may include proceedings by way of exchange of oral argument,
hearing with or without witnesses, and such other procedures as the Arbitrator
may consider appropriate. If the Claiming Party and the Paying Party agree on a
code of procedure or on specific matters of procedure, that agreement shall be
binding on the Arbitrator.
(f) Decisions Final. Every award of the Arbitrator made pursuant
hereto shall be final and binding upon the Claiming Party and the Paying Party
and there shall be no appeal therefrom. Judgment upon the award rendered by the
Arbitrator may be entered by any court having jurisdiction and enforced as any
other judgment. The arbitrator shall have jurisdiction to award the costs of the
arbitration, including the fees of the Arbitrator, as between the Claiming Party
and the Paying Party as the Arbitrator sees fit, and to direct the payment of
interest in respect of any award at such rates and from and to such dates as are
determined by the Arbitrator to be appropriate.
(g) Fees. The Arbitrator shall be paid his or her normal
professional fees for his or her time and attendances in dealing with the
Matter, which fees, unless otherwise directed by the Arbitrator in accordance
with Section 5.8, shall be paid equally by the Claiming Party and the Paying
Party. The prevailing party shall be entitled to payment of its reasonable
attorney's fees by the other party.
(h) Setoff Against Holdback. Buyer may set off and apply any and
all of the Holdback against any Claim of Buyer, provided that Buyer shall first
give written notice of such Claim to the applicable Paying Party pursuant to
Section 5.8(a) hereof and Buyer shall not have received from such Paying Party
written notice of a Complaint within the time period set forth in Section 5.8(a)
hereof. If such notice has been given to Buyer, the Buyer's right of setoff
under this Section 5.8(h) shall be subject to resolution of such Complaint in
accordance with the provisions of Section 5.8. The rights of Buyer under this
Section 5.8(h) are in addition to other rights and remedies which Buyer may
have. Notwithstanding the foregoing, Buyer agrees that it will first seek to
satisfy any Claim against Sellers by application of the Holdback, to the extent
of the then-current outstanding balance of the Holdback. Notwithstanding the
preceding sentences in this Section 5.8(h), if a Claim of Buyer is based on a
breach of a Seller's representation and
32
warranty under Section 2.22 or on a breach of a Seller's covenant under Section
4.1 or 4.2, Buyer's right to set off and apply the Holdback against such Claim
stated above in this Section 5.8(h) shall apply only to the portion of the
Holdback that is then allocable to the Seller or Sellers against whom such Claim
is made, based on the Sellers' respective percentage interests set forth in
Section 1.3 of the Sellers' Disclosure Schedule, and the remainder of the
Holdback shall accordingly be distributed to the persons entitled thereto as and
when provided under Section 1.3 and this Section 5.8 as if such Claim had not
been made.
ARTICLE VI
GENERAL
6.1 AMENDMENTS; WAIVERS.
This Agreement and any schedule or exhibit attached hereto may be
amended only by agreement in writing of all parties. No waiver of any provision
nor consent to any exception to the terms of this Agreement or any agreement
contemplated hereby shall be effective unless in writing and signed by the party
to be bound and then only to the specific purpose, extent and instance so
provided. No investigations made by or on behalf of Buyer at any time and no
knowledge acquired by Buyer at any time shall have the effect of waiving,
diminishing the scope or otherwise affecting any representation or warranty made
by Sellers in or pursuant to this Agreement; nor shall any such investigation or
knowledge affect the right of Buyer to indemnification or other remedy based on
such representations or warranties.
6.2 SCHEDULES; EXHIBITS; INTEGRATION.
Each schedule and exhibit delivered pursuant to the terms of this
Agreement shall be in writing and shall constitute a part of this Agreement,
although schedules need not be attached to each copy of this Agreement. This
Agreement, together with such schedules and exhibits, constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements and understandings of the parties in connection
therewith.
6.3 BEST EFFORTS; FURTHER ASSURANCES.
Each party shall execute and deliver after the Closing such
further certificates, agreements and other documents and take such other actions
as the other party may reasonably request to consummate or implement the
transactions contemplated hereby or to evidence such events or matters.
6.4 GOVERNING LAW; FORUM.
This Agreement and the legal relations between the parties shall
be governed by and construed in accordance with the laws of the State of
California applicable to contracts made and performed in such State and without
regard to conflicts
33
of law doctrines. Except as provided in Section 5.8 hereof, the sole forum for
resolving disputes arising under or relating to this Agreement shall be the
Municipal and Superior Courts for the County of Alameda, State of California, or
the federal district court for the district of California associated with such
county and all related appellate courts and the parties hereby consent to the
jurisdiction of such courts and that venue shall be in such county.
6.5 NO ASSIGNMENT.
Neither this Agreement nor any rights or obligations under it are
assignable except that Buyer may assign its rights hereunder (including but not
limited to its rights under Article V) to any Affiliate of Buyer or to any
post-Closing purchaser of the outstanding capital stock of Buyer and/or Company
or all or a substantial part of the assets or business of Buyer and/or Company.
6.6 HEADINGS.
The descriptive headings of the Articles, Sections and
subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.
6.7 COUNTERPARTS.
This Agreement and any amendment hereto or any other agreement
(or document) delivered pursuant hereto may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts shall constitute one and the same agreement (or other document) and
shall become effective (unless otherwise provided therein) when one or more
counterparts have been signed by each party and delivered to the other party.
6.8 LIMITATION ON REMEDIES.
From and after the Closing, the remedies provided in Article V,
subject to the limitations set forth in this Agreement, shall be the exclusive
remedies available to a party to this Agreement for any breach or violation of
this Agreement by another party hereto.
6.9 PARTIES IN INTEREST.
This Agreement shall be binding upon and inure to the benefit of
each party, and nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement except for Sections 5.1, 5.2, 5.3 and 6.5
(which are intended to be for the benefit of the persons provided for therein
and may be enforced by such persons). Nothing in this Agreement is intended to
relieve or discharge the obligation of any third person to (or to confer any
right of subrogation or action over against) any party to this Agreement.
34
6.10 NOTICES.
Any notice or other communication hereunder must be given in
writing and (a) delivered in person, (b) transmitted by facsimile as provided
below or (c) mailed by overnight courier as provided in below, as follows:
IF TO BUYER, ADDRESSED TO:
Avant! Corporation
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Facsimile Number: 000-000-0000
Attention: Xxxxxxx Xxxxxx, Esq.
WITH A COPY TO:
O'Melveny & Xxxxx LLP
000 Xxxxx Xxxx
Xxxxx Xxxx, XX 00000
Facsimile Number: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
IF TO SELLERS, ADDRESSED TO:
Xxxxxx X. Xxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Xxxxxx Xxxx
0-0-00, Xxxxxx Xxxxxxx
Xxxxxx, Xxxxxxxx xxxx
Xxxxxxxx Xxxxx.
The Eigen Fund
000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Facsimile Number:
Attention: Xxxxxxxx X. Xxxxx-Xxxxx
35
WITH A COPY TO:
Xxxx Xxxxx
0000 Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Facsimile Number: 000-000-0000
or to such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by facsimile, when transmitted to
the applicable number so specified in (or pursuant to) this Section 6.10 and
verbal telephone confirmation of receipt is received, (ii) if given by overnight
mail, two (2) days after such communication is deposited with an international
courier for overnight delivery, or (iii) if given by any other means, when
actually received at such address.
6.11 EXPENSES AND ATTORNEYS FEES.
The parties hereto shall each pay their own expenses incident to
the negotiation, preparation and performance of this Agreement and the
transactions contemplated hereby, including but not limited to the fees,
expenses and disbursements of their respective accountants and counsel. In the
event of any action, suit or proceeding for the breach of this Agreement or
misrepresentation by any party, the prevailing party shall be entitled to
reasonable attorney's fees, costs and expenses incurred such action, suit or
proceeding.
6.12 SPECIFIC PERFORMANCE.
The parties hereto each acknowledge that, in view of the
uniqueness of the transactions contemplated by this Agreement, each party would
not have an adequate remedy at law for money damages in the event that this
Agreement has not been performed in accordance with its terms, and therefore
agrees that the other party shall be entitled to specific enforcement of the
terms hereof in addition to any other remedy to which it may be entitled, at law
or in equity.
6.13 KNOWLEDGE CONVENTION.
Whenever any statement herein or in any schedule, exhibit,
certificate or other document delivered to any party pursuant to this Agreement
is made "to its knowledge" or "to its best knowledge" or words of similar intent
or effect of any party or its representative, such person shall make such
statement only after conducting a diligent investigation of the subject matter
thereof, and each statement shall be deemed to include a representation that
such investigation has been conducted.
6.14 REPRESENTATION BY COUNSEL; INTERPRETATION.
Each party hereto acknowledges that he, she or it has had full
and adequate opportunity to have this Agreement and the transactions
contemplated by this Agreement
36
reviewed by such party's independent counsel and to discuss this Agreement with
such counsel. Accordingly, any rule of Law, including, but not limited to,
Section 1654 of the California Civil Code, or any legal decision that would
require interpretation of any claimed ambiguities in this Agreement against the
party that drafted it has no application and is expressly waived. The provisions
of this Agreement shall be interpreted in a reasonable manner to effect the
intent of the parties hereto. Each Seller further acknowledges that Xxxxxx &
X'Xxxx LLP has acted only as counsel for the Company and O'Melveny & Xxxxx, LLP
has acted only as counsel for Buyer in connection with the transactions
contemplated by this Agreement, and they have not represented any of the
Sellers.
6.15 SEVERABILITY.
If any provision of this Agreement is determined to be invalid,
illegal or unenforceable by any Governmental Entity, the remaining provisions of
this Agreement shall remain in full force and effect provided that the economic
and legal substance of the transactions contemplated is not affected in any
manner materially adverse to any party. In event of any such determination, the
parties agree to negotiate in good faith to modify this Agreement to fulfill as
closely as possible the original intents and purposes hereof. To the extent
permitted by Law, the parties hereby to the same extent waive any provision of
Law that renders any provision hereof prohibited or unenforceable in any
respect.
ARTICLE VII
DEFINITIONS
7.1 DEFINITIONS.
For all purposes of this Agreement, except as otherwise expressly
provided in such Agreement,
(a) the terms defined in this Article VII have the meanings
assigned to them in this Article VII and include the plural as well as the
singular,
(b) all accounting terms not otherwise defined herein have the
meanings assigned under generally accepted accounting principles,
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of the body of this Agreement,
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms, and
(e) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
37
As used in this Agreement and the Exhibits and Schedules
delivered pursuant to this Agreement, the following definitions shall apply:
"AFFILIATE" means a Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, a specified Person.
"AGREEMENT" means this Agreement by and among Buyer and Sellers,
as amended or supplemented together with all Exhibits and Schedules attached or
incorporated by reference.
"APPROVAL" means any approval, authorization, consent,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from, or any notice, statement or other communication required to
be filed with or delivered to, any Governmental Entity or any other Person.
"ASSOCIATE" of a Person means
(1) a corporation or organization (other than Buyer, Company
or a party to this Agreement) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities;
(2) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as
trustee or in a similar capacity; and
(3) any relative or spouse of such person or any relative of
such spouse who has the same home as such person.
"CLOSING" means the consummation of the purchase and sale of the
Shares under this Agreement.
"CLOSING DATE" means the date of the Closing.
"CODE" means the Internal Revenue Code of 1986, as amended, or as
hereafter amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"INDEMNIFIED PARTY" means the party entitled to indemnity under
this Agreement.
"INDEMNIFYING PARTY" means the party obligated to provide
indemnification under this Agreement.
"LOSS" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or
38
nature, whether foreseeable or unforeseeable, including but not limited to,
interest or other carrying costs, penalties, legal, accounting and other
professional fees and expenses incurred in the investigation, collection,
prosecution and defense of claims and amounts paid in settlement, that may be
imposed on or otherwise incurred or suffered by the specified person.
"MATERIAL ADVERSE EFFECT" means with respect to the Company, any
change, circumstance or effect that, individually or in the aggregate with all
other changes, circumstances and effects, is or would reasonably be expected to
be materially adverse to the business, assets, properties, condition (financial
or otherwise) or results of operations of the Company and its Subsidiaries taken
as a whole, provided, however, that it shall not include any change,
circumstance or effect resulting from (1) general changes in the industries in
which either the Company and its Subsidiaries operate, except those changes,
circumstances or effects that adversely affect the Company and its Subsidiaries
to a materially greater extent than they affect other entities operating in such
industries, (2) changes in general economic conditions or changes in securities
markets in general or (3) effects of the public announcement or pendency of the
transactions contemplated hereby.
"ORDINARY COURSE OF BUSINESS" whether or not modified by the
phrase "consistent with past practice" shall mean with respect to the Company
(i) in accordance with generally accepted sound business practice and (ii) to
the extent not inconsistent with clause (i), in accordance with the Company's
past business practice.
"PERMIT" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"PERSON" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
Governmental Entity.
"SELLERS' DISCLOSURE SCHEDULE" means the Disclosure Schedule
dated December 27, 2001 and delivered by Sellers to Buyer. Information set forth
in any section of the Disclosure Schedule shall be deemed to be set forth only
in such section of the Disclosure Schedule to which it specifically relates.
"SUBSIDIARY" means any Person in which Company is a general or
managing partner or the outstanding voting securities or interests, which having
by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions, are directly or indirectly
owned or controlled by the Company or by any one or more of its Subsidiaries.
[SIGNATURE PAGE FOLLOWS.]
39
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
BUYER
Avant! Corporation,
a Delaware corporation
By: /s/ Xxxxxx Xx
-----------------------------------
Its: Executive Operating Officer
-----------------------------------
SELLERS
/s/ Xxxxxx X. Xxx
----------------------------------------
Xxxxxx X. Xxx
/s/ Xxxxxx Xxxx
----------------------------------------
Xxxxxx Xxxx
The Eigen Fund
By: /s/ Xxxxxxxx X. Xxxxx-Xxxxx
-----------------------------------
Its: Manager
-----------------------------------
