Exhibit 10.1
STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement ("Agreement") is made and entered into as
of July 22, 2004 to be deemed effective as of June 30, 2004, by MAXUS TECHNOLOGY
CORPORATION, a Delaware corporation ("Buyer"), and Xxx Pyeng Jin, an individual
Korean citizen ("Seller").
RECITALS
A. Seller owns 75% of the issued and outstanding shares (the "UDT
Shares") of capital stock of UDT Korea Company, Limited, a Korean corporation
(the "Company"), and is the President of the Company.
B. Buyer desires to purchase all UDT Shares owned by Seller, as further
set forth on Schedule 1, and Seller desires to sell his UDT Shares in exchange
for the issuance by Buyer of that number of common shares of Buyer set forth on
Schedule 1 hereto beside such Seller's name (collectively, the "Maxus Shares"),
on the terms set forth in this Agreement.
C. Buyer and Seller intend that the transaction set forth herein be
treated for United States federal income tax purposes as a "reorganization"
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "I.R.C.").
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms have
the meanings specified or referred to in this Section 1:
"Affiliate": as defined in Rule 405 promulgated under the Securities
Act.
"Applicable Contract": any Contract (a) under which the Company has or
may acquire any rights, (b) under which the Company has or may become subject to
any obligation or liability, or (c) by which the Company or any of the assets
owned or used by it is or may become bound.
"UDT Shares": as defined in the Recitals of this Agreement.
"Balance Sheet": as defined in Section 3.4.
"Best Efforts": the efforts that a prudent Person desirous of achieving
a result would use in similar circumstances to ensure that such result is
achieved as expeditiously as possible.
"Breach": a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"Buyer": as defined in the first paragraph of this Agreement.
"Closing": as defined in Section 2.2.
"Closing Date": the date and time as of which the Closing actually
takes place.
"Company": as defined in the Recitals of this Agreement.
"Consent": any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions": all of the transactions contemplated by
this Agreement, including:
(a) the exchange of the Maxus Shares for UDT Shares;
(b) the issuance of 200,000 options to Seller to acquire Maxus
Shares as provided herein;
(c) the issuance to Seller of 100,000 Maxus Shares as
"Performance Shares," but only under the conditions set forth in this
Agreement;
(d) the execution, delivery, and performance of the Seller's
Closing Documents;
(e) the performance by Buyer and Seller of their respective
covenants and obligations under this Agreement; and
(f) Buyer's acquisition and ownership of the UDT Shares and
exercise of control over the Company.
"Contract": any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding under applicable law.
"Control": as defined in Rule 405 promulgated under the Securities Act.
"Damages": as defined in Section 10.2.
"Encumbrance": any charge, claim, community property interest, charge,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"GAAP": generally accepted United States accounting principles.
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"Governmental Authorization": any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body": any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or
entity, any court or other tribunal and any multi-national organization
or body); or
(d) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
"Intellectual Property Assets": as defined in Section 3.21.
"I.R.C.": as defined in the Recitals.
"IRS": the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge": an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving, or who
has at any relevant time served, as a director, officer, partner, or trustee of
such Person (or in any similar capacity) has, or at any relevant time had,
Knowledge of such fact or other matter.
"Legal Requirement": any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty of any
Governmental Body.
"Order": any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
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"Ordinary Course of Business": an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if.
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in
the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"Organizational Documents": (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the articles and memorandum
of association of a Korean corporation; (c) the partnership agreement and any
statement of partnership of a general partnership; (d) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (e) any amendment to any of the foregoing.
"Person": any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Proceeding": any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Related Person": with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly Controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly Controls, is
directly or indirectly Controlled by, or is directly or indirectly
under common Control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
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(c) each Person that serves as a director, officer, partner or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity);
and
(f) any Family member of any individual described in clause
(c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is the parent, grandparent, child, grandchild or sibling of
the individual or the individual's spouse and (iv) any other natural person who
resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least five percent (5%) of the outstanding voting power of a
Person or equity securities or other equity interests representing at least five
percent (5%) of the outstanding equity securities or equity interests in a
Person.
"Representative": with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Securities Act": the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Seller": as defined in the first paragraph of this Agreement.
"Seller's Release": as defined in Section 2.3.
"Tax": any income taxes or similar assessments on any sales, excise,
occupation, use, ad valorem, property, production, severance, transportation,
employment, payroll, franchise, or other tax imposed by any Korean, United
States or other Governmental Body's federal, state, local (or any foreign or
provincial) taxing authority, including any interest, penalties, or additions
attributable thereto.
"Tax Return": any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threatened": a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
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2. EXCHANGE OF SHARES; CLOSING
2.1 Share Exchange. Subject to the terms and conditions of this
Agreement, at the Closing, (a) Seller will transfer the UDT Shares owned by him
to Buyer, and (b) Buyer will issue to Seller the number of Maxus Shares set
forth beside Seller's name on Schedule 1.
2.2 Closing. The closing (the "Closing") of the exchange of the Maxus
Shares for the UDT Shares (the "Exchange") will take place at the offices of
Buyer in Morgan Hill, California, at 10:00 a.m. (local time) on July 22, 2004 or
at such other time and place as the parties may agree. Subject to the provisions
of Section 9, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.2 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.3 Closing Obligations. At the Closing:
(a) Seller will deliver to Buyer:
(i) the original share registry document of the Company
reflecting the transfer of the UDT Shares to Buyer in a manner legally
effective to transfer full ownership rights in the UDT Shares to Buyer
under Korean law;
(ii) a release in the form of Exhibit 2.3(a)(ii) executed by
Seller ("Seller's Release");
(iii) tax clearance certificates for national tax and local
tax for the Company for the past three financial years;
(iv) a certificate executed by Seller to the effect that each
of Seller's representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made on the
Closing Date.
(b) Buyer will deliver to Seller:
(i) certificates representing the Maxus Shares, issued in the
name of Seller in accordance with Section 2.1(b) above;
(ii) options in form determined by Buyer granting to those
persons listed in Schedule 2.3(b)(ii) the right to acquire the number
of common shares set forth opposite the names of such persons in
Schedule 2.3(b)(ii) for the market price of the common shares at the
Closing Date; and
(iii) a certificate executed by Buyer to the effect that each
of Buyer's representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made on the
Closing Date; and
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2.4 After Closing. Buyer agrees to issue to Seller no later than May
30, 2005 on a date to be established by Buyer, in addition to the Maxus Shares
to be delivered at Closing, twenty thousand (20,000) common shares (the
Performance Shares) of Maxus shares (to be restricted under the Securities Act
as the Maxus Shares are restricted hereunder) for each US $100,000 of net profit
(determined by the Company's accountants according to the method utilized by the
Company in a consistent manner for the prior three calendar years (2001-2003) in
determining net profit), earned by the Company for calendar year 2004. In no
event, however, shall the maximum number of Performance Shares that may be
issued by Buyer to Seller pursuant to this Section 2.4 exceed 100,000.
2.5 Securities Law Matters.
(a) Seller understands that the Maxus Shares to be issued and
delivered to Seller pursuant to terms of this Agreement will not be
registered under the Securities Act, but will be issued in reliance
upon the exemption afforded by Section 4(2) of the Securities Act
and/or Regulation D promulgated by the SEC thereunder ("Regulation D"),
and that Buyer is relying upon the truth and accuracy of the
representations set forth herein in issuing such shares. Each
certificate representing the Maxus Shares issued to Seller pursuant to
terms of this Agreement shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE TRANSFERRED UNLESS THEY ARE SO
REGISTERED OR, IN THE OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY, SUCH TRANSFER IS EXEMPT FROM
REGISTRATION.
Buyer shall give instructions to its transfer agent consistent with the
foregoing legend.
(b) Buyer understands that the UDT Shares to be transferred to
Buyer pursuant to terms of this Agreement have not been registered
under the Securities Act, but will be transferred in reliance upon the
exemption afforded by Section 4(1) of the Securities Act for private
resales of restricted securities, and that Seller is relying upon the
truth and accuracy of the representations set forth herein in
transferring such shares.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows.
3.1 Organization and Existence.
(a) The Company is a corporation duly organized and validly
existing under the laws of the Republic of Korea, with full corporate
power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it owns or
uses, and to perform all its obligations under Applicable Contracts.
The Company is not required to qualify to do business as a foreign
corporation in any foreign state or jurisdiction.
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(b) Seller has delivered or caused to be delivered to Buyer
copies of the Organizational Documents of the Company, as currently in
effect and a certified copy of the corporate registry extract for the
Company issued within 30 days prior to Closing.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against Seller in accordance with its
terms. Upon the execution and delivery by Seller of the Employment
Agreement and Seller's Release (the "Seller's Closing Documents"), the
Seller's Closing Documents will constitute the legal, valid, and
binding obligations of Seller, enforceable against Seller in accordance
with their respective terms. Seller has the absolute and unrestricted
right, power, authority, and capacity to execute and deliver this
Agreement and the Seller's Closing Documents and to perform his
obligations under this Agreement and such Seller's Closing Documents.
(b) Except as set forth in Schedule 3.2, neither the execution
and delivery of this Agreement by Seller nor the consummation or
performance of any of the Contemplated Transactions by Seller will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents
of the Company, or (B) any resolution adopted by the board of
directors or the stockholders of the Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person
the right to challenge any of the Contemplated Transactions or
to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which the Company or Seller, or
any of the assets owned or used by the Company, may be
subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the
Company;
(iv) to Seller's Knowledge, cause Buyer or the
Company to become subject to, or to become liable for the
payment of, any Tax except Tax resulting from the transactions
contemplated hereby;
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(v) to Seller's Knowledge, cause any of the assets
owned by the Company to be reassessed or revalued by any
taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by the Company.
Except as set forth in Schedule 3.2, neither Seller nor the Company will be
required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions by such Seller.
(c) Seller is acquiring the Maxus Shares for investment solely
for his own account and not with a present view due to any
distribution, transfer or resale to others, including any
"distribution" within the meaning of the Securities Act. Seller
understands that the Maxus Shares to be transferred to him have not and
will not be registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act, the
availability of which depends on, among other things, the bona fide
nature of the investment intent and accuracy of the representations set
forth herein.
(d) Seller is financially able to bear the economic risks of
an investment in Buyer and has no need for liquidity in the investment.
The financial capacity of Seller is of such a proportion that the total
cost of Seller's investment is not material when compared to his net
worth. Seller is financially able to suffer a complete loss of an
investment in the Maxus Shares.
(e) Seller has such knowledge and experience in financial and
business matters in general and with respect to investments of a nature
similar to that evidenced by the Maxus Shares so as to be capable, by
reason of such knowledge and experience, of evaluating the merits and
risks of, and making an informed business decision with regard to, and
protecting his own interests in connection with, the acquisition of
such shares.
(f) Seller has been provided with and had the opportunity to
(i) review the financial and other information regarding Buyer and its
operations, (ii) conduct his own due diligence regarding Buyer, and
(iii) discuss the same with his attorneys, accountants and advisors.
(g) Seller understands that no market now exists for the Maxus
Shares because of the restrictions thereon.
(h) Seller understands that the investment in the Maxus Shares
is particularly risky and that he is not assured of any return on this
investment.
(i) Seller owns the UDT Shares held by him free and clear of
all Encumbrances, and no legend or other reference to any purported
Encumbrance appears upon any certificate representing any such UDT
Shares. Seller has not granted any options, warrants, convertible
instruments, rights of first refusal or similar or other rights with
regard to the UDT Shares owned by him, and he has not sold,
transferred, disposed of or agreed to sell, transfer or otherwise
dispose of any of such shares except to the Buyer as set forth herein.
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(j) Neither Seller nor any of his assets are the subject of
any Order that might prevent, delay, make illegal or otherwise
interfere with the consummation of the Contemplated Transactions.
(k) Seller and his agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payment in connection with this
Agreement.
3.3 Capitalization. The authorized capital stock of the Company
consists of 1,000,000 shares of common stock, par value Won 5,000 per share, of
which 70,000 shares are issued and outstanding. Seller is record and beneficial
owner and holder of 57,000 shares constituting the UDT Shares. The UDT Shares
represent seventy-five percent (75%) of the issued and outstanding capital stock
of the Company. All of the outstanding equity securities of the Company
(including the UDT Shares) have been duly authorized and validly issued and are
fully paid and nonassessable, subject to pre-emptive rights, if any, under
Korean law. Except as set forth in Schedule 3.3, there are no Contracts relating
to the issuance or sale of any equity securities or other securities of the
Company, and the Company has not granted any options, warrants, convertible
instruments, right of first refusal or similar rights with regard to the UDT
Shares or any unissued capital stock of the Company. None of the outstanding
equity securities or other securities of the Company were issued in violation of
any preemptive or restricted rights, the Securities Act, Korean law or any other
Legal Requirement. The Company does not own, or have any Contract to acquire,
any shares or other securities issued by the Company or any equity securities or
other securities of any other Person or any direct or indirect equity or
ownership interest in any other business.
3.4 Financial Statements. Seller has delivered or caused to be
delivered to Buyer audited balance sheets of the Company as of December 31, 2003
(the "Balance Sheet") and 2002, and the related statements of income, changes in
stockholders' equity, and cash flow for each of such periods, including in each
case the notes thereto. Such financial statements and notes are true and correct
in all material respects as of the dates thereof and fairly present the
financial condition and the results of operations, changes in stockholders'
equity, and cash flow of the Company as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with GAAP,
and the financial statements referred to in this Section 3.4 reflect the
consistent application of the GAAP throughout the periods involved, except as
disclosed in the notes to such financial statements. No financial statements of
any Person other than the Company are required by GAAP to be included in the
consolidated financial statements of the Company.
3.5 Books and Records. The books of account, minute books, stock record
books, and other records of the Company, all [some, and then specify] of which
have been made available to Buyer, are complete and correct in all material
respects and have been maintained in accordance with sound business practices.
The minute books of the Company contain records of all meetings held of, and
corporate action taken by, the stockholders, the Board of Directors, and
committees of the Board of Directors of the Company, and no meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of the
Company.
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3.6 Real Property and Inventory. Except as described in Schedule 3.6(a)
attached hereto, the Company does not own, and has not ever owned, any real
property, and any such real estate is not subject to any Encumbrance except as
reflected in Schedule 3.6(a). All inventory reflected on the Balance Sheet or on
the accounting records of the Company as of the Closing Date represent usable
inventory except as set forth in Schedule 3.6.
3.7 Condition and Sufficiency of Assets. Schedule 3.7 contains a
complete list of all furniture, fixtures, equipment and items of personal
property (including all equipment) of the Company (the "Personal Property"). The
Personal Property of the Company is sufficient for the continued conduct of the
Company's business after the Closing in substantially the same manner as
conducted prior to the Closing.
3.8 Accounts Receivable. All accounts receivable of the Company that
are reflected on the Balance Sheet or on the accounting records of the Company
as of the Closing Date (collectively, the "Accounts Receivable") represent or
will represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Closing Date, the Accounts Receivable are or will be as of the Closing Date
current and collectible net of the respective reserves shown on the Balance
Sheet or on the accounting records of the Company as of the Closing Date (which
reserves are adequate and calculated consistent with past practice and, in the
case of the reserve as of the Closing Date, will not represent a greater
percentage of the Accounts Receivable as of the Closing Date than the reserve
reflected in the Balance Sheet represented of the Accounts Receivable reflected
therein and will not represent a material adverse change in the composition of
such Accounts Receivable in terms of aging). There is no contest, claim, or
right of set-off, other than returns in the Ordinary Course of Business, under
any Contract with any obligor of an Accounts Receivable relating to the amount
or validity of such Accounts Receivable. Schedule 3.8 contains a complete and
accurate list of all Accounts Receivable as of the date of the Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
3.9 No Undisclosed Liabilities. Except as set forth in Schedule 3.9,
the Company does not have any liabilities or obligations of any nature (whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheet and current
liabilities incurred in the Ordinary Course of Business since the date thereof.
3.10 Taxes.
(a) The Company has filed or caused to be filed (on a timely
basis since the inception of the Company) all Tax Returns that are or
were required to be filed by the Company, pursuant to applicable Legal
Requirements. Seller has delivered or caused to be delivered to Buyer
copies of all such Tax Returns filed since the inception of the
Company. The Company has paid, or made provision for the payment of,
all Taxes that have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by the Company.
(b) The charges, accruals, and reserves with respect to Taxes
on the books of the Company are adequate and are at least equal to the
Company's liability for Taxes. There exists no tax assessment against
the Company except as disclosed in the Balance Sheet, and to the
Seller's Knowledge, no such tax assessment has been proposed or
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Threatened. All Taxes that the Company is or was required by Legal
Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(c) All Tax Returns filed by the Company are true, correct,
and complete in all material respects. There is no tax sharing
agreement that will require any payment by the Company after the date
of this Agreement.
3.11 No Material Adverse Change. Since the date of the Balance Sheet,
there has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Company, and no event has
occurred or circumstance exists that may result in such a material adverse
change.
3.12 Employee Benefits.
(a) Except as set forth in Schedule 3.12(a), Company has no
employee benefit, insurance and welfare plans ("Employee Benefit
Plans") that are not provided in the Company's general employment terms
and conditions, employment regulations or under programs mandated by
law.
(b) With respect to each Employee Benefit Plan, there has been
delivered or made available to Buyer (i) accurate and complete copies
of each Employee Benefit Plan currently in effect (including all trust
agreements, insurance or annuity contracts, summary plan descriptions,
general notices to employees or beneficiaries and any other material
documents or instruments relating thereto); (ii) copies of the most
recent letters from the Governmental Body with authority and
supervision of the Employee Benefit Plans; and (iii) copies of the
three most recent annual reports and all accompanying actuarial and
audit reports, if applicable, and exhibits and schedules thereto with
respect to each Employee Benefit Plan as to which an annual report is
required to be filed.
(c) Except as set forth in Schedule 3.12(c), with respect to
each Employee Benefit Plan:
(i) The documents provided pursuant to Section
3.12(b)(i) and (ii) above are accurate and complete;
(ii) Each such plan qualifies under applicable law;
(iii) The Company has complied in all material
respects with all provisions of any laws applicable to the
Plans;
(iv) There are no matters pending before or notice of
audit from any Governmental Body that could result in a
material liability to the Company;
(v) There are no actions, suits or claims relating to
any Plan (other than routine claims for benefits in the
ordinary course) pending or Threatened and neither the Company
nor Seller has any Knowledge of any matter that could give
rise to any such actions, suits or claims (other than routine
claims for benefits in the ordinary course) or subject the
Company to a material liability, individually or in the
aggregate;
12
(vi) No event has occurred and no basis exists that
could subject the Company to any material tax or penalty under
applicable Legal Requirements;
(vii) The Company is not subject to any legal,
contractual, equitable or other obligation to establish as of
any date any benefit plan of any nature, including any
pension, profit sharing, welfare, post-retirement, stock
option, stock or cash award, non-qualified deferred
compensation or executive compensation plan, policy or
practice; and
(viii) No representations or communications with
respect to participation, eligibility for benefits, vesting,
benefit accrual, coverage or other material terms of an
Employee Benefit Plan have been made to any employee,
beneficiary or other person other than those that are in
accord with the terms and provisions of each such plan as in
effect immediately prior to the Closing.
(d) Except as set forth in Schedule 3.12(d), neither the
Company nor any of its affiliates has any liability (contingent or
otherwise) with respect to any multiemployer plan to which
contributions are or have been made by the Company or any of its
affiliates or as to which the Company or any of its affiliates may have
liability. Neither the Company nor any affiliate has incurred any
liability or taken any action that could reasonably be expected to
cause it to incur any liability (i) on account of a partial or complete
withdrawal with respect to any multiemployer plan or (ii) on account of
unpaid contributions to any such multiemployer plan.
(e) For each welfare benefit plan listed in Schedule 3.12(a)
that is a "group health plan" within the meaning of applicable Legal
Requirements, the Company has complied in all material respects with
the notice and continuation requirements of all Legal Requirements.
(f) The Company and its affiliates have made on a timely
basis, in accordance with the Employee Benefit Plans, all contributions
to, and payments from, the Employee Benefit Plans that are required to
have been made by the Company, or any of its affiliates with respect to
any period ending on or before the Closing Date and are of a character
which if not made might result in the imposition of an Encumbrance
against any of the assets of the Company.
(g) Schedule 3.12(g) sets forth the financial cost of all
obligations owed under any Employee Benefit Plan, if any, that is not
subject to the disclosure and reporting requirements of applicable
Legal Requirements. Except as set forth in Schedule 3.12(g), (i) the
Company has performed all of its material obligations under all
Employee Benefit Plans and has made appropriate entries in its
financial records and statements for all obligations and liabilities
under such Plans that have accrued but are not due; (ii) no accumulated
funding deficiency exists with respect to any Employee Benefit Plan;
(iii) no event has occurred or circumstance exists that may result in
an accumulated funding deficiency as of the last day of the current
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plan year of any Employee Benefit Plan; (iv) the actuarial benefit
reports (to the extent applicable) for each Employee Benefit Plan of
the Company and each affiliate of the Company fairly present the
financial condition and the results of operations of each such Plan;
(v) since the last valuation date for each Plan, no event has occurred
or circumstance exists that would increase the amount of benefits
provided under any such Plan or that would cause the excess of the
value of Plan assets over benefit liabilities to decrease and, as of
December 31, 2003, there are no unfunded accrued benefits for any such
Plan and each such Plan is fully funded, determined in both cases as if
the current plan year of the Plan ended on such date; (vi) except to
the extent required under applicable Legal Requirements, the Company
does not provide health or welfare benefits for any retired or former
employee or is obligated to provide health or welfare benefits to any
active employee following such employee's retirement or other
termination of service; (vii) no payment that is owed or may become due
to any director, officer, employee or agent of the Company will be
non-deductible to the Company or subject to tax under applicable Legal
Requirements; the Company will not be required to "gross up" or
otherwise compensate any such person because of the imposition of any
excise tax on a payment to such person; and (viii) the consummation of
the Contemplated Transactions will not result in the payment, vesting
or acceleration of any benefit under any Plan.
3.13 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Schedule 3.13(a):
(i) the Company is, and at all times since its
formation has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct
or operation of its business or the ownership or use of any of
its assets;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A) may
constitute or result in a violation by the Company of, or a
failure on the part of the Company to comply with, any Legal
Requirement, or (B) may give rise to any obligation on the
part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and
(iii) the Company has not received any notice or
other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any
actual, alleged, possible, or potential obligation on the part
of the Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature.
(b) Schedule 3.13 contains a complete and accurate list of
each Governmental Authorization that is held by the Company or that
otherwise relates to the business of, or to any of the assets owned or
used by, the Company. Each Governmental Authorization listed or
required to be listed in Schedule 3.13 is valid and in full force and
effect. Except as set forth in Schedule 3.13(b):
14
(i) the Company is, and at all times since its
formation has been, in compliance with all of the terms and
requirements of each Governmental Authorization;
(ii) no event has occurred or circumstance exists
that may (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of
or a failure to comply with any term or requirement of any
Governmental Authorization, or (B) result directly or
indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any
Governmental Authorization; and
(iii) the Company has not received, at any time since
its formation any notice or other communication (whether oral
or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement
of any Governmental Authorization, or (B) any actual,
proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to
any currently effective Governmental Authorization.
The Governmental Authorizations listed in Schedule 3.13(b) collectively
constitute all of the Governmental Authorizations necessary to permit the
Company to lawfully conduct and operate its business in the manner it currently
conducts and operates such business and to permit the Company to own and use its
assets in the manner in which it currently owns and uses such assets.
3.14 Legal Proceedings; Orders.
(a) There is no pending Proceeding (i) that has been commenced
by or against the Company or that otherwise relates to or may affect
the business of, or any of the assets owned or used by, the Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To the Knowledge of Seller, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding.
(b) Neither the Company nor any assets owned or controlled by
the Company are subject to any Order that could prevent, delay, make
illegal or otherwise interfere with the consummation of the
Contemplated Transactions or interfere with the ability of the Company
to conduct its business as currently conducted, or to own or use its
assets as currently owned or used, after the Closing Date.
3.15 Absence of Certain Changes and Events. Except as set forth in
Schedule 3.15, since the date of the Balance Sheet, the Company has conducted
its business only in the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
15
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer,
or (except in the Ordinary Course of Business) employee or entry into
any employment, severance, or similar Contract with any director,
officer, or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or
with any employees of the Company;
(e) damage to or destruction or loss of any asset or property
of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial
condition, or prospects of the Company;
(f) entry into, termination of, or receipt of notice of
termination of (i) any customer agreement or relationship, or (ii) any
Contract or transaction involving a total remaining commitment by or to
the Company of at least $5,000;
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or property of
the Company or mortgage, pledge, or imposition of any Encumbrance on
any material asset or property of the Company, including the sale,
lease, or other disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of $5,000;
(i) material change in the accounting methods used by the
Company; or
(j) agreement, whether oral or written, by the Company to do
any of the foregoing.
3.16 Contracts; No Defaults.
(a) Schedule 3.16(a) contains a complete and accurate list,
and Seller has delivered or caused to be delivered to Buyer true and
complete copies, of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by
the Company of an amount or value in excess of $5,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to
the Company of an amount or value in excess of $5,000;
16
(iii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that involves
expenditures or receipts of the Company in excess of $5,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any
real or personal property (except personal property leases and
installment and conditional sales agreements having a value
per item or aggregate payments of less than $1,000 and with
terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current
or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(vi) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by the Company with any
other Person;
(vii) each Applicable Contract containing covenants
that in any way purport to restrict the business activity of
the Company or any Affiliate of the Company or limit the
freedom of the Company or any Affiliate of the Company to
engage in any line of business or to compete with any Person;
(viii) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(ix) each power of attorney granted by or to the
Company that is currently effective and outstanding;
(x) each Applicable Contract entered into other than
in the Ordinary Course of Business that contains or provides
for an express undertaking by the Company to be responsible
for consequential damages;
(xi) each Applicable Contract for capital
expenditures in excess of $2,500;
(xii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course of
Business; and
(xiii) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) Except as set forth in Schedule 3.16(b):
(i) No Seller (nor any Related Person of any Seller)
has or may acquire any rights under, and no Seller has or may
17
become subject to any obligation or liability or liability
under, any Contract that relates to the business of, or any of
the assets owned or used by, the Company; and
(ii) No officer or employee of the Company is bound
by any Contract that purports to limit the ability of such
officer or employee to (A) engage in or continue any conduct,
activity, or practice relating to the business of the Company,
or (B) assign to the Company any rights to any invention,
improvement, or discovery.
(c) Except as set forth in Schedule 3.16(c), each Contract
identified or required to be identified in Schedule 3.16(a) is in full
force and effect and is valid and enforceable in accordance with its
terms.
3.17 Insurance.
(a) Seller has delivered or caused to be delivered to Buyer
true and complete copies of all policies of insurance to which the
Company is a party or under which the Company is or has been covered
within one year preceding the date of this Agreement.
(b) The Company has paid all premiums due, and has otherwise
performed all of its obligations, under each policy to which the
Company is a party or that provides coverage to the Company.
(c) The Company has given timely notice to the insurer of all
claims that may be insured thereby.
3.18 Environmental Matters. The Company is, and at all times has been,
in full compliance with, and has not been and is not in violation of or liable
under, any Legal Requirement pertaining to the production or use, possession,
discharge or release of hazardous or toxic materials or substances.
3.19 Employees.
(a) Schedule 3.19 contains a complete and accurate list of the
following information for each employee or director of the Company:
name; job title; current compensation paid or payable and any change in
compensation since 1999; vacation accrued; and years of service.
(b) No employee or director of the Company is a party to, or
is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement,
between such employee or director and any other Person ("Proprietary
Rights Agreement") that in any way adversely affects or will affect (i)
the performance of his duties as an employee or director of the
Company, or (ii) the ability of the Company to conduct its business,
including any Proprietary Rights Agreement with Sellers or the Company
by any such employee or director.
3.20 Customers. Schedule 3.20 contains a true, correct, and complete
list of customers to which the Company has submitted invoices resulting in
18
revenues in excess of $5,000 (a) in the twelve-month period ended December 31,
2003, or (b) the twelve-month period ended May 31, 2004, along with a detail of
the amounts billed to each such customer in each such period.
3.21 Intellectual Property.
(a) Intellectual Property Assets. The term "Intellectual
Property Assets" includes:
(i) any registered and unregistered trademarks,
service marks, and applications that are used by the Company
and are material to its business (collectively, "Marks");
(ii) all patents, patent applications, and patentable
inventions and discoveries (collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights
in Mask Works"); and
(v) all know-how, trade secrets, confidential
information, customer lists, software, technical information,
data, process technology, plans, drawings, and blue prints
(collectively, "Trade Secrets") owned, used, or licensed by
the Company as licensee or licensor.
(b) Agreements. Schedule 3.21(b) contains a complete and
accurate list and summary description, including any royalties paid or
received by the Company, of all Contracts relating to the Intellectual
Property Assets to which the Company is a party or by which the Company
is bound, except for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software programs
with a value of less than $1,000.00 under which the Company is the
licensee. There are no outstanding and no Threatened disputes with
respect to any such agreement.
(c) Know-How Necessary for the Business.
(i) The Intellectual Property Assets are all those
necessary for the operation of the Company's business as it is
currently conducted. The Company is the owner (or licensee
under either an agreement set forth in Schedule 3.21(b) or a
license under which the fees are less than $1,000) of all
right, title, and interest in and to each of the Intellectual
Property Assets, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse
claims, and, except as set forth in Schedule 3.21(b), has the
right to use without payment to a third party all of such
Intellectual Property Assets.
(ii) No employee of the Company has entered into any
Contract that restricts or limits in any way such employee's
ability to perform for the Company the services that such
19
employee has been engaged to perform or requires the employee
to transfer, assign, or disclose information concerning any
work performed by such employee for the Company to anyone
other than the Company.
(iii) None of the products manufactured and sold, nor
any process or know-how used, by the Company infringes any
patent or other proprietary right of any other Person.
(d) Patents. The Company does not have any issued Patents, and
has not applied for any Patents.
(e) Trademarks and Copyrights.
(i) Schedule 3.21(e) contains a complete and accurate
list and summary description of all Marks and Copyrights owned
by the Company. Except as set forth on Schedule 3.21(e), the
Company is the owner of all right, title, and interest in and
to each of such Marks and Copyrights, free and clear of all
liens, security interests, charges, encumbrances, equities,
and other adverse claims.
(ii) All Marks and Copyrights that have been
registered with the Korean Patent and Trademark Office are
currently in compliance with all formal legal requirements
(including the timely post-registration filing of affidavits
of use and incontestability and renewal applications), are
valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due prior to the Closing Date
that have not been paid or taken.
(iii) No Xxxx or Copyright is now involved in any
action opposing the registration thereof, or seeking the
invalidation or cancellation thereof, and, to Seller's
Knowledge, no such action is Threatened with the respect to
any of the Copyrights.
(iv) Except as set forth in Schedule 3.21(e), to
Seller's Knowledge, there is no potentially interfering
trademark or trademark application of any third party.
(v) No Copyright is infringed or has been challenged
or threatened in any way and none of the Marks or Copyrights
used by the Company infringes any trade name, trademark, or
service xxxx of any third party, except as disclosed in
Schedule 3.21(e).
(vi) All products and materials containing a Xxxx or
Copyright bear the proper registration notice where permitted
by law. All works encompassed by the Copyrights have been
marked with the proper copyright notice.
(f) Trade Secrets
(i) With respect to each Trade Secret, the
documentation relating to such Trade Secret is current,
accurate, and sufficient in detail and content to identify and
explain it and to allow its full and proper use without
reliance on the knowledge or memory of any individual.
20
(ii) The Company has an absolute (but not necessarily
exclusive) right to use the Trade Secrets. The Trade Secrets
are not part of the public knowledge or literature, and, to
Seller's Knowledge, have not been used, divulged, or
appropriated either for the benefit of any Person or to the
detriment of the Company. No Trade Secret is subject to any
adverse claim asserted against the Company or has been
challenged or threatened in any way.
3.22 Certain Payments. Neither the Company nor any director, officer,
agent, or employee of the Company, or any other Person acting for or on behalf
of the Company, has directly or indirectly (a) in violation of any Legal
Requirement, made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, or (iii) to obtain special concessions or for special concessions
already obtained, for or in respect of the Company or any Affiliate of the
Company, or (b) established or maintained any fund or asset that has not been
recorded in the books and records of the Company.
3.23 Relationships with Related Persons. Neither Seller nor any Related
Person of Seller or of the Company has, or since January 1, 2000, has had, any
interest in any property (whether real, personal, or mixed and whether tangible
or intangible), used in or pertaining to the Company's business. Neither Seller
nor any Related Person of Seller or of the Company is, or since such date has
owned (of record or as a beneficial owner) an equity interest or any other
financial or profit interest in, a Person that has (i) had business dealings or
a material financial interest in any transaction with the Company, or (ii)
engaged in competition with the Company with respect to any line of the products
or services of the Company (a "Competing Business") in any market presently
served by the Company. Neither Seller nor any Related Person of Seller or of the
Company is a party to any Contract with, or has any claim or right against, the
Company.
3.24 Brokers or Finders. The Company and its agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3.25 Disclosure.
(a) No representation or warranty of Seller in this Agreement
omits to state a material fact necessary to make the statements herein,
in light of the circumstances in which they were made, not misleading.
(b) There is no fact known to Seller that has specific
application to Seller or the Company (other than general economic or
industry conditions) and that materially adversely affects the assets,
business, prospects, financial condition, or results of operations of
the Company that has not been set forth in this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
21
4.1 Organization and Good Standing.
(a) Buyer is a corporation validly existing and in good
standing under the laws of the State of Delaware, with full power and
authority to conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own or use, and to
perform all its obligations under its Contracts, including without
limitation this Agreement and the Employment Agreements. Buyer is not
required to qualify to do business as a foreign corporation in any
foreign state or jurisdiction in which Buyer has failed to so qualify.
(b) Buyer has delivered or shall deliver to Seller prior to
Closing copies of the Organizational Documents of Buyer, as currently
in effect.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms. Upon the execution and delivery by Buyer of the Employment
Agreement and the Seller's Release (collectively, the "Buyer's Closing
Documents"), Buyer's Closing Documents will constitute the legal,
valid, and binding obligations of Buyer (and the Company with respect
to the Employment Agreement), enforceable against Buyer or the Company,
respectively, in accordance with their respective terms. Buyer has the
absolute and unrestricted right, power, and authority to execute and
deliver this Agreement and Buyer's Closing Documents and to perform its
obligations under this Agreement and Buyer's Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution
and delivery of this Agreement by Buyer nor the consummation or
performance of any of the Contemplated Transactions by Buyer will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents
of Buyer, or (B) any resolution adopted by the board of
managers or the members of Buyer;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person
the right to challenge any of the Contemplated Transactions or
to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which Buyer, or any of the assets
owned or used by Buyer, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by Buyer or that otherwise relates to the
business of, or any of the assets owned or used by, Buyer;
(iv) cause Buyer to become subject to, or to become
liable for the payment of, any Tax except such Tax resulting
from the transactions contemplated hereby;
(v) cause any of the assets owned by Buyer to be
reassessed or revalued by any taxing authority or other
Governmental Body;
22
(vi) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Contract; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by Buyer.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
4.3 Capitalization. 100,000,000 common shares, per value $.001, of
Buyer are authorized, with 21,670,769 shares currently issued and outstanding,
which includes 10,267,840 shares to be issued to holders of outstanding
exchangeable shares ("Exchangeable Shares") on a one-to-one basis. Such common
shares and Exchangeable Shares constitute (and at the Closing will constitute)
all of the outstanding equity securities of Buyer. No Person has any preemptive
rights or rights of first refusal by reason of the issuance of the Maxus Shares
pursuant to this Agreement. The Maxus Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable and will be free of any liens or Encumbrances; provided, however,
that the Maxus Shares will be subject to restrictions on transfer under state
and/or federal securities laws. Except as set forth Schedule 4.3 and as provided
in this Agreement, there are (and as of the Closing Date there will be
outstanding) (i) no shares of capital stock, shares or other voting securities
of Buyer, (ii) no securities of Buyer convertible into or exchangeable for
shares of capital stock, shares or other voting securities of Buyer, (iii) no
options or other rights to acquire from Buyer, and no obligation of Buyer to
issue or sell, any shares of capital stock, shares or other voting securities of
Buyer or any securities of Buyer convertible into or exchangeable for such
capital stock, shares or voting securities, provided, however, that Buyer plans
to implement a Stock Option Plan (herein so called), with a maximum number of
common shares to be issued under such Stock Option Plan on an annual basis not
to exceed 10% of the outstanding common shares of Buyer, and (iv) no equity
equivalents, interests in the ownership or earnings, or other similar rights of
or with respect to Buyer. There are (and as of the Closing Date there will be)
no outstanding obligations of Buyer to repurchase, redeem, or otherwise acquire
any of the foregoing shares, shares, securities, options, equity equivalents,
interests, or rights. Buyer is not a party to, and is not aware of, any voting
agreement, voting trust, or similar agreement or arrangement relating to any
class or series of its equity securities.
4.4 Investment Intent. Buyer is acquiring the UDT Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
4.5 Title to Properties. Buyer has good and defensible title to its
properties (except in cases in which failure to have such title would not have a
material adverse effect on Buyer) and assets and has good title to all its
leasehold interests. The assets and properties owned or leased by Buyer are
23
sufficient for the continued conduct of Buyer's business after the Closing in
substantially the same manner as conducted by Buyer prior to the Closing.
4.6 Financial Statements. Buyer has delivered to Seller audited
consolidated balance sheets of the Buyer as of December 31, 2003 (the "Buyer's
Balance Sheet") and 2002, and the related statements of income, changes in
stockholders' equity, and cash flow for each of such periods, including in each
case the notes thereto. Such financial statements and notes fairly present the
financial condition and the results of operations, changes in stockholders'
equity, and cash flow of the Buyer as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with GAAP;
the financial statements referred to in this Section 4.6 reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements. No financial
statements of any Person other than Buyer is required by GAAP to be included in
the consolidated financial statements of Buyer.
4.7 No Material Adverse Change. Since the date of Buyer's Balance
Sheet, there has not been any (a) material adverse change in the business,
operations, properties, prospects, assets, or condition of Buyer, and no event
has occurred or circumstance exists that may result in such a material adverse
change; (b) termination, or receipt of notice of termination, of any (i)
significant customer agreement or relationship or (ii) any Contract or
transaction involving a total remaining commitment to Buyer of at least
$20,000.00; or (c) material change in the accounting methods used by Buyer.
4.8 Compliance with Legal Requirements; Governmental Authorizations.
(a) Buyer is in material compliance with each Legal
Requirement that is applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets.
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
material violation by Buyer of, or a failure on the part of Buyer to
comply with, any material Legal Requirement, or (B) may give rise to
any obligation on the part of Buyer to undertake, or to bear all or any
portion of the cost of, any material remedial action of any nature; and
(c) Buyer has not received any notice or other communication
(whether oral or written) from any Governmental Body or any other
Person regarding (A) any alleged violation of, or failure to comply
with, any material Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of Buyer to undertake, or
to bear all or any portion of the cost of, any material remedial action
of any nature.
(d) Buyer has all Governmental Authorizations necessary to
permit Buyer to lawfully conduct and operate its business in the manner
it currently conducts and operates such business and to permit Buyer to
own and use its assets in the manner in which it currently owns and
uses such assets, and the same are in full force and effect.
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4.9 Legal Proceedings; Orders.
(a) Except as reflected in Schedule 4.9, there is no pending
Proceeding (i) that has been commenced by or against Buyer or that
otherwise relates to or may materially and adversely affect the
business of, or any of the assets owned or used by, Buyer; or (ii) that
challenges, or that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated
Transactions. No such Proceeding has been Threatened, and no event has
occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such Proceeding.
(b) Neither Buyer nor any assets owned or controlled by Buyer
are subject to any Order that could prevent, delay, make illegal or
otherwise interfere with the consummation of the Contemplated
Transactions or interfere with the ability of Buyer to conduct its
business as currently conducted, or to own or use its assets as
currently owned or used, after the Closing Date.
4.10 Brokers or Finders. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Seller harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
4.11 Insurance. Buyer maintains with sound and reputable insurers, and
there are currently in full force and effect, policies of insurance with respect
to its assets and operations against such casualties and contingencies of such
types and in such amounts as are customary for companies of similar size engaged
in similar lines of business. No notice of cancellation of, or indication of an
intention not to renew, any such policy has been received by Buyer.
4.12 Environmental Matters. Buyer is in material compliance with, and
is not in violation of or liable under, any material Legal Requirement
pertaining to the production or use, possession, discharge or release of
hazardous or toxic materials or substances.
4.13 Disclosure.
(a) No representation or warranty of Buyer in this Agreement
omits to state a material fact necessary to make the statements herein,
in light of the circumstances in which they were made, not misleading.
(b) There is no fact known to Buyer that has specific
application to Buyer (other than general economic or industry
conditions) and that materially adversely affects the assets, business,
prospects, financial condition, or results of operations of Buyer that
has not been set forth in this Agreement.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 Access and Investigation. Between the date of this Agreement and
the Closing Date, Seller will, and will cause the Company and its
Representatives to, (a) afford Buyer and its Representatives (collectively,
"Buyer's Advisors") full and free access to the Company's personnel, properties,
25
contracts, books and records, and other documents and data, (b) furnish Buyer
and Buyer's Advisors with copies of all such contracts, books and records, and
other existing documents and data as Buyer may reasonably request, and (c)
furnish Buyer and Buyer's Advisors with such additional financial, operating,
and other data and information as Buyer may reasonably request.
5.2 Operation of the Business of the Company. Between the date of this
Agreement and the Closing Date, Seller will, and will cause the Company to:
(a) conduct the business of the Company only in the Ordinary
Course of Business;
(b) use its Best Efforts to preserve intact the current
business organization of the Company, keep available the services of
the current officers, employees, and agents of the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of the Company.
5.3 Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Seller will
not, and will cause the Company not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any of the changes or events listed in Section
3.14 is likely to occur.
5.4 Required Approvals. As promptly as practicable after the date of
this Agreement, Seller will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Seller will, and will cause the Company to, (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining all consents identified in Schedule 4.2.
5.5 Notification. Between the date of this Agreement and the Closing
Date, Seller will promptly notify Buyer in writing if Seller or the Company
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Seller's representations and warranties as of the date of this Agreement,
or if Seller or the Company becomes aware of the occurrence after the date of
this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. During the same
period, Seller will promptly notify Buyer of the occurrence of any Breach of any
covenant of Seller in this Section 5 or of the occurrence of any event that may
make the satisfaction of the conditions in Section 7 impossible or unlikely.
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5.6 Payment of Indebtedness by Related Persons. Except as expressly
provided in this Agreement, Seller will cause all indebtedness owed to the
Company by Seller or any Related Person of Seller to be paid in full prior to
Closing.
5.7 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Seller will not, and will cause the Company
and its Representatives not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of the Company, or any of the capital stock of the
Company, or any merger, consolidation, business combination, or similar
transaction involving the Company.
5.8 Best Efforts. Between the date of this Agreement and the Closing
Date, Seller will use its Best Efforts to cause the conditions in Section 7 to
be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 Approval of Governmental Bodies. As promptly as practicable after
the date of this Agreement, Buyer will, and will cause each of its Related
Persons to, make all filings required by Legal Requirements to be made by them
to consummate the Contemplated Transactions. Between the date of this Agreement
and the Closing Date, Buyer will, and will cause each Related Person to, (i)
cooperate with Seller and the Company with respect to all filings that Seller or
the Company elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with Seller in
obtaining all consents identified in Schedule 3.2.
6.2 Access and Investigation. Between the date of this Agreement and
the Closing Date, Buyer will, and will cause its Representatives to, (a) afford
Seller and his Representatives full and free access to the Buyer's personnel,
properties, contracts, books and records, and other documents and data, (b)
furnish Seller and his Representatives with copies of all such contracts, books
and records, and other existing documents and data as Seller may reasonably
request, and (c) furnish Seller and his Representatives with such additional
financial, operating, and other data and information as Seller may reasonably
request.
6.3 Notification. Between the date of this Agreement and the Closing
Date, Buyer will promptly notify Seller in writing if Buyer becomes aware of any
fact or condition that causes or constitutes a Breach of any of Buyer's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. During the same period, Buyer will promptly notify
Seller of the occurrence of any Breach of any covenant of Buyer in this Section
6 or of the occurrence of any event that may make the satisfaction of the
conditions in Section 8 impossible or unlikely.
6.4 Best Efforts. Between the date of this Agreement and the Closing
Date, Buyer will use its Best Efforts to cause the conditions in Section 8 to be
satisfied.
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7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to acquire the UDT Shares in exchange for the Maxus
Shares and to take the other actions required to be taken by Buyer at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by Buyer, in whole or in
part):
7.1 Accuracy of Representations.
(a) All of Seller's representations and warranties in this
Agreement (considered collectively), and each of these representations
and warranties (considered individually), must have been accurate in
all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on
the Closing Date.
(b) Each of Seller's representations and warranties in
Sections 3.3, 3.4, 3.11, and 3.24 must have been accurate in all
respects as of the date of this Agreement, and must be accurate in all
respects as of the Closing Date as if made on the Closing Date.
7.2 Seller's Performance.
(a) All of the covenants and obligations that Sellers are
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
duly performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to Section
2.3(a) must have been delivered, and each of the other covenants and
obligations in Sections 5.3 and 5.7 must have been performed and
complied with in all respects.
7.3 Consents. Each of the Consents identified in Schedule 3.2 and
Schedule 4.2 must have been obtained and must be in full force and effect.
7.4 Additional Documents.
Each of the following documents must have been delivered to Buyer:
(a) An opinion of Xxx International IP & Law Group, Korean
counsel, dated the Closing Date, in the form of Schedule 7.4(a);
(b) Such other documents as Buyer may reasonably request for
the purpose of (i) evidencing the accuracy of any of Seller's
representations and warranties (ii) evidencing the performance by
Seller of, or compliance by Seller with, any covenant or obligation
required to be performed or complied with by Seller, (iii) evidencing
the satisfaction of any condition referred to in Section 7, or (iv)
otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
7.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
28
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 No Claim Regarding Stock Ownership or Sale Proceeds. There must not
have been made or Threatened by any Person any claim asserting that such Person
(a) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in the Company, or (b) is entitled to all or any portion of
the consideration payable for the UDT Shares.
7.7 No Prohibition. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Seller's obligation to transfer the UDT Shares in exchange for the
Maxus Shares and to take the other actions required to be taken by Seller at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by Seller, in whole or in
part):
8.1 Accuracy of Representations.
(a) All of Buyer's representations and warranties in this
Agreement (considered collectively), and each of these representations
and warranties (considered individually), must have been accurate in
all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on
the Closing Date.
(b) Each of Buyer's representations and warranties in Sections
4.3, 4.4, 4.6, 4.7, 4.13 and 4.14 must have been accurate in all
respects as of the date of this Agreement, and must be accurate in all
respects as of the Closing Date as if made on the Closing Date.
8.2 Buyer's Performance.
(a) All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) Buyer must have delivered or caused to be delivered each
of the documents required to be delivered by Buyer pursuant to Section
2.3(b) and each of the other covenants and obligations in Sections 6.1
and 6.4 must have been performed and complied with in all respects.
29
8.3 Consents. Each of the Consents identified in Schedule 3.2 and
Schedule 4.2 must have been obtained and must be in full force and effect.
8.4 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Seller, or against any Person
affiliated with Seller, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
8.5 No Claim Regarding Stock Ownership. There must not have been made
or Threatened by any Person any claim asserting that such Person is entitled to
all or any portion of the Maxus Shares.
8.6 No Prohibition. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Seller or any Person affiliated with Seller to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
8.7 No Injunction. There must not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the transfer of the UDT Shares
by Seller to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
9. TERMINATION
9.1 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either Buyer or Seller if a material Breach of any
provision of this Agreement has been committed by the other party and
such Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer
has not waived such condition on or before the Closing Date; or (ii) by
Seller, if any of the conditions in Section 8 has not been satisfied as
of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Seller to comply
with his obligations under this Agreement) and Seller has not waived
such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Seller; or
(d) either Buyer or Seller if the Closing has not occurred
(other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on
or before the date set forth in Section 2.2 hereof or such later date
as the parties may agree upon.
30
9.2 Effect of Termination. Each party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 11.1 and 11.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the Breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 Survival; Right to Indemnification not Affected by Knowledge. All
representations, warranties, covenants, and obligations in this Agreement, the
certificates delivered pursuant to Section 2.3(a)(v) and 2.3(b)(ii), and any
other certificate or document delivered pursuant to this Agreement will survive
the Closing for the applicable period set forth in Section 10.5. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations, unless otherwise expressly stated in writing at the time such
waiver is granted.
10.2 Indemnification and Payment of Damages by Seller. Seller will
indemnify and hold harmless Buyer, the Company and their respective
Representatives, stockholders, controlling persons, and Affiliates
(collectively, "Buyer Indemnified Persons") from and against, and will pay to
Buyer Indemnified Persons the amount of, any loss, liability, claim, damage or
expense (including costs of investigation and defense and reasonable attorneys'
fees) whether or not involving a third-party claim asserted against, imposed
upon or incurred by them (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Seller in this Agreement or any other certificate or document delivered
by Seller pursuant to this Agreement;
(b) any Breach of any representation or warranty made by
Seller in this Agreement as if such representation or warranty were
made on and as of the Closing Date;
(c) any Breach by Seller of any covenant or obligation of
Seller in this Agreement;
31
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Seller
or the Company (or any Person acting on their behalf) in connection
with any of the Contemplated Transactions; or
(e) any claim by Seller pertaining to any Excluded Matter (as
defined in each Seller's Release) or any Pre-Closing Claim (as defined
in Section 11.11).
The remedies provided in this Section 10.2 will be the exclusive remedy
available to Buyer or the other of Buyer Indemnified Persons with respect to the
matters covered hereby.
10.3 Classification of Damages.
(a) Damages for which Sellers are liable shall be classified
into the following two (2) categories: (i) "Class 1 Seller Damages,"
which shall include any Damages arising, directly or indirectly, from
or in connection with (A) any actual fraud by Seller; (B) any Breach of
any representation or warranty of which Seller had actual knowledge at
any time on or prior to the date on which such representation or
warranty was made; or (C) any intentional Breach by Seller of any
covenant or obligation to be performed prior to the Closing Date; and
(ii) "Class 2 Seller Damages," which shall include all other matters to
which any Buyer Indemnified Person is entitled to indemnity under this
Agreement. In no event shall Seller be responsible or liable for
special, consequential or other incidental damages or lost profits,
except arising out of a Breach of a representation or warranty in
Section 3.3, 3.14(f), 3.15(a), 3.19, 3.21 or 3.22.
(b) Damages for which Buyer is liable shall be classified into
two categories: (i) "Class 1 Buyer Damages," which shall include any
Damages arising, directly or indirectly, from or in connection with (A)
any actual fraud by Buyer; (B) any Breach of any representation or
warranty of which Buyer had actual knowledge at any time prior to the
date on which such representation or warranty was made; or (C) any
intentional breach by Buyer of any covenant or obligation to be
performed prior to the Closing Date; and (ii) "Class 2 Buyer Damages,"
which shall include all other matters to which Seller Indemnified
Person is entitled to indemnity under this Agreement. In no event shall
Buyer be responsible or liable for punitive, special, consequential or
other incidental damages or lost profits.
10.4 Indemnification and Payment of Damages by Buyer. Buyer will
indemnify and hold harmless Seller and his heirs, executors and assigns
(collectively, "Seller Indemnified Persons") from and against, and will pay to
Seller Indemnified Persons the amount of any Damages arising, directly or
indirectly, from or in connection with (a) any material Breach of any material
representation or warranty made by Buyer in this Agreement or in any certificate
or document delivered by Buyer pursuant to this Agreement, (b) any material
Breach of any representation or warranty made by Buyer in this Agreement as if
such representation or warranty were made on and as of the Closing Date, (c) any
material Breach by Buyer of any material covenant or obligation of Buyer in this
Agreement, or (d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
32
10.5 Time Limitations. If the Closing occurs, Seller will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, other than those in Sections 3.3, 3.10, 3.12, 3.17, 3.21
and 3.22 or for Class 1 Seller Damages, unless on or before June 30, 2005, ,
Buyer notifies Seller of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer. If the Closing occurs,
Buyer will have no liability (for indemnification or otherwise) with respect to
any representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, other than those in Section 4.3 or
Class 1 Buyer Damages, unless on or before June 30, 2005, Seller notifies Buyer
of a claim specifying the factual basis of that claim in reasonable detail to
the extent then known by Seller.
10.6 Procedure for Indemnification.
(a) Promptly after receipt by an indemnified party under
Section 10.2 or 10.4 of notice delivered in accordance with Section
10.5 of the commencement of any Proceeding against it, such indemnified
party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the
commencement of such Proceeding, but the failure to notify the
indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party, except to the
extent that the indemnifying party demonstrates that the defense of
such action is prejudiced by the indemnified party's failure to give
such notice.
(b) If any Proceeding referred to in Section 10.6(a) is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will, unless the claim involves Taxes, be entitled
to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding
and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel reasonably satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently
conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case, subsequently
incurred by the indemnified party in connection with the defense of
such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims
made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's
consent (which may not be unreasonably withheld) unless (A) there is no
finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims
that may be made against the indemnified party, and (B) the sole relief
provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with
respect to any compromise or settlement of such claims effected without
its consent (which may not be unreasonably withheld). If notice is
33
given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the indemnified
party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such
Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its Affiliates other than as a
result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by
notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will
not be bound by any determination made in a Proceeding so defended or
by any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
(d) Each party hereto hereby consents to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
indemnified party for purposes of any claim that an indemnified party
may have under this Agreement with respect to such Proceeding or the
matters alleged therein, and agrees that process may be served on
either party with respect to such a claim anywhere in the world.
10.7 Procedure for Indemnification - Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
10.8 Additional Limitations. The obligations of the parties under this
Section 10 shall be subject to the following limitations:
(a) Seller shall not have any liability for indemnification
with respect to the matters set forth in clause (a) or (b) of Section
10.2 (except to the extent such liability constitutes Class 1 Seller
Damages) until the total amount of damages exceed $100,000 (the
"Threshold Amount"), and then Seller shall be liable for all Damages of
Buyer in excess of the Threshold Amount (subject to the other
limitations set forth herein). The limitations set forth in this
Section 10.8(a) will not apply to any Class 1 Damages.
(b) Buyer will not have any liability for indemnification with
respect to the matters set forth in clause (a) or (b) of Section 10.4
(except to the extent such liability constitutes Class 1 Buyer Damages)
until the total amount of Damages with respect to such matters exceeds
the Threshold Amount, and then Buyer shall be liable for all Damages of
the Sellers in excess of the Threshold Amount (subject to the other
limitations set forth herein). The limitations of this Section 10.8(b)
will not apply to any Class 1 Buyer Damages.
(c) The amount of Damages required to be paid by any party to
indemnify any other party or parties pursuant to this Section 10 shall
be reduced to the extent of any amounts actually received by the
indemnified party or parties after the Closing Date pursuant to the
terms of any insurance policies with respect to such Damages.
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(d) The maximum liability of Seller for Class 2 Seller Damages
shall be limited to $500,000; provided that after Seller has paid
Damages in excess of $100,000 in cash, Seller may elect, in lieu of
paying any additional Class 2 Seller Damages, to return to Buyer all of
the Maxus Shares received by Seller under this Agreement, upon which
Seller's liability for any additional Class 2 Seller Damages shall
terminate. Nothing contained herein shall limit the ability of Buyer to
recover Class 1 Seller Damages (in cash) from Seller.
(e) Buyer's liability for Class 2 Buyer Damages to Sellers
shall not exceed $200,000 in the aggregate. Nothing contained herein
shall limit the ability of Seller to recover Class 1 Buyer Damages (in
cash) from Buyer.
11. GENERAL PROVISIONS
11.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Upon termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a breach of this Agreement by another
party.
11.2 Public Announcements. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as the parties hereto jointly
determine. Unless consented to by each party hereto in advance or required by
Legal Requirements, prior to the Closing, each party hereto shall keep this
Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person other than its Representatives. Seller and Buyer will
consult with each other concerning the means by which the Company's employees,
customers, and suppliers and others, except the Company's Representatives
assisting in the closing of the Contemplated Transactions, having dealings with
the Company will be informed of the Contemplated Transactions, and Buyer will
have the right to be present for any such communication.
11.3 Confidentiality. Between the date of this Agreement and the
Closing Date, Buyer and Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, any written, oral, or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the Contemplated Transactions, unless (a) such information is already known
to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
law or court order. If the Contemplated Transactions are not consummated, each
party will return or destroy all documents and other written and electronic
information, except to the extent that the other party otherwise consents in
writing.
11.4 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
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sent by telecopier (with written confirmation of transmission), provided that a
copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other party):
Seller:
Pyeng Xxx Xxx
Xxxxxxx-xxxx 000-00, Xxxxx Xxxx
Xxxxxxx-xx, Xxxxx
Fax:x00 00 000 0000
Buyer:
Mr. Xxxxx Xxxxx
Maxus Technology Corporation
00000 Xxxxxx
Xxxxxxxxx Xxxxxx Xxxx, Xxxxxxxxxx 00000
Fax:
11.5 Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, based on any right arising out of, this Agreement
may be brought against any of the parties in the federal or state courts of the
State of California, County of Santa Xxxxx, or, if it has or can acquire
jurisdiction, in the applicable United Stated District Court for the city of
Santa Clara, California, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world. For the purpose of receiving service of process in any
such instance, Seller hereby appoints CT Corporation System as its agent to
receive process if any action is brought against Seller in such courts, and
agrees to keep such appointment valid and in effect until the expiration of two
years after the Closing (and the fees for such representation shall be paid in
advance through the closing procedures.
11.6 Further Assurance. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.7 Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
36
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.8 Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and the Company dated May 12,
2004) and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
11.9 Schedules. The disclosures in the Schedules hereto, each of which
is incorporated into this Agreement by this reference and made a part hereof,
relate only to the representations and warranties in the Agreement to which they
expressly relate and other Schedules.
11.10 Assignments, Successors, and No Third-Party Rights. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other party. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of the successors
and permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
11.11 Survival of Indemnity Rights. Until the second anniversary of the
Closing Date, Buyer shall cause the Company and its successors (including any
Person with or into which the Company may merge or consolidate, or that may
acquire the Company or all or substantially all of its assets or properties) to
indemnify and hold harmless Seller against all judgments, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses that may
be suffered or incurred by, or imposed upon, Seller to the extent (a) that the
same are based upon, or arise out of or in connection with, Seller's service as
a director, officer or employee of the Company or any acts or omissions of
Seller in his capacity as such a director, officer or employee on or prior to
the Closing Date (collectively, "Pre-Closing Claims"), and (b) that the Company
is currently required or permitted to provide such indemnification pursuant to
the Company's Organizational Documents (including provisions relating to the
advancement of expenses) and the laws of the Republic of Korea, notwithstanding
any subsequent modification or termination of any such law or Organizational
Document, and regardless of whether such Pre-Closing Claim is asserted or
claimed prior to, on or after the Closing Date. Buyer shall cause proper
provision to be made in any merger, consolidation or acquisition agreement to
which the Company may hereafter be a party or pursuant to which the Company or
its securities, assets or properties may hereafter be acquired, to the extent
necessary to give effect to the purposes of this Section 11.11, and Buyer shall
not permit any such transaction to occur unless and until such provision is
made. Nothing herein shall be deemed to limit or impair any rights that Seller
has under this Agreement or may have, under the Company's Organizational
Documents or otherwise, with respect to his service as an officer, director or
employee of the Company or any other Person after the Closing Date. Seller
acknowledges and agrees that any payment made by Buyer, the Company or any of
their successors for Pre-Closing claims shall constitute claims of or which
Buyer shall be entitled to seek indemnification from Seller pursuant to Section
10.2(e), and nothing contained herein shall diminish any liability of Seller to
any Buyer Indemnified Person hereunder.
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11.12 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.13 Section Headings; Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.14 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.15 Governing Law. This Agreement will be governed by the laws of the
State of California as if it were to be wholly performed within such State.
11.16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
SIGNATURE PAGES FOLLOW
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written-above.
BUYER
-----
MAXUS TECHNOLOGY CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxxxx, President
Title
SELLER
------
/s/ Xxx Pyeng Xxx
Xxx Pyeng Jin
39
