EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
ADVANCED ENERGY INDUSTRIES, INC.
ADVANCED ENERGY JAPAN K.K.
AERA JAPAN LIMITED
AND
CERTAIN STOCKHOLDERS OF AERA JAPAN LIMITED
Dated November 16, 2001
TABLE OF CONTENTS
1. PURCHASE AND SALE OF THE SHARES..........................................................................1
1.1 PURCHASE OF THE SHARES FROM THE STOCKHOLDERS.............................................................1
1.2 FURTHER ASSURANCES.......................................................................................1
1.3 PURCHASE PRICE FOR THE SHARES............................................................................2
1.4 ADJUSTMENTS TO THE BASE PRICE............................................................................2
1.5 CLOSING..................................................................................................3
1.6 STOCKHOLDERS' REPRESENTATIVE.............................................................................3
1.7 CURRENCY.................................................................................................4
2. REPRESENTATIONS OF THE STOCKHOLDERS REGARDING THE SHARES.................................................4
2.1 OWNERSHIP OF SHARES......................................................................................5
2.2 AUTHORITY................................................................................................5
2.3 NONCONTRAVENTION.........................................................................................5
2.4 ENGLISH LANGUAGE AGREEMENT...............................................................................5
3. REPRESENTATIONS OF THE STOCKHOLDERS AND THE COMPANY REGARDING THE COMPANY................................6
3.1 ORGANIZATION.............................................................................................6
3.2 CAPITALIZATION OF THE COMPANY............................................................................6
3.3 SUBSIDIARIES.............................................................................................6
3.4 AUTHORIZATION............................................................................................7
3.5 FINANCIAL STATEMENTS.....................................................................................8
3.6 ABSENCE OF UNDISCLOSED LIABILITIES.......................................................................9
3.7 LITIGATION...............................................................................................9
3.8 INSURANCE...............................................................................................10
3.9 PERSONAL PROPERTY.......................................................................................10
3.10 INTANGIBLE PROPERTY.....................................................................................11
3.11 LEASES..................................................................................................12
3.12 REAL ESTATE.............................................................................................13
3.13 INVENTORY...............................................................................................15
3.14 ACCOUNTS RECEIVABLE.....................................................................................15
3.15 TAX MATTERS.............................................................................................15
3.16 BOOKS AND RECORDS.......................................................................................16
3.17 CONTRACTS AND COMMITMENTS...............................................................................16
3.18 COMPLIANCE WITH AGREEMENTS AND LAWS.....................................................................18
3.19 EMPLOYEE RELATIONS......................................................................................19
3.20 EMPLOYEE BENEFIT PLANS..................................................................................21
3.21 ABSENCE OF CERTAIN CHANGES OR EVENTS....................................................................21
3.22 CUSTOMERS; MARKET LEADERSHIP............................................................................23
3.23 SUPPLIERS...............................................................................................23
3.24 WARRANTY AND PRODUCT LIABILITY CLAIMS...................................................................23
3.25 PREPAYMENTS AND DEPOSITS................................................................................24
3.26 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND STOCKHOLDERS...........................................24
3.27 BANKING FACILITIES......................................................................................24
3.28 POWERS OF ATTORNEY AND SURETYSHIPS......................................................................24
3.29 CONFLICTS OF INTEREST...................................................................................24
3.30 REGULATORY APPROVALS....................................................................................25
3.31 DISCLOSURE..............................................................................................25
3.32 ENGLISH LANGUAGE AGREEMENT..............................................................................25
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4. REPRESENTATIONS OF THE BUYER AND THE PARENT.............................................................25
4.1 ORGANIZATION AND AUTHORITY..............................................................................26
4.2 CAPITALIZATION OF THE PARENT............................................................................26
4.3 AUTHORIZATION...........................................................................................26
4.4 REGULATORY APPROVALS....................................................................................27
4.5 PARENT REPORTS AND FINANCIAL STATEMENTS.................................................................27
4.6 INVESTMENT REPRESENTATION...............................................................................27
5. ACCESS TO INFORMATION; PUBLIC ANNOUNCEMENTS.............................................................27
5.1 ACCESS TO MANAGEMENT, PROPERTIES AND RECORDS............................................................27
5.2 PUBLIC ANNOUNCEMENTS....................................................................................28
5.3 INFORMATION TO MINORITY STOCKHOLDERS....................................................................28
6. PRE-CLOSING COVENANTS...................................................................................28
6.1 CONDUCT OF BUSINESS.....................................................................................28
6.2 ABSENCE OF MATERIAL CHANGES.............................................................................28
6.3 DELIVERY OF INTERIM FINANCIAL STATEMENTS................................................................30
6.4 COMMUNICATIONS WITH CUSTOMERS AND SUPPLIERS.............................................................31
6.5 COMPLIANCE WITH LAWS....................................................................................31
6.6 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES.......................................................31
6.7 CONTINUING OBLIGATION TO INFORM.........................................................................31
6.8 EXCLUSIVE DEALING.......................................................................................31
6.9 REPORTS, TAXES..........................................................................................32
7. BEST EFFORTS TO OBTAIN SATISFACTION OF CONDITIONS AND CONTINUATION OF CREDIT............................32
8. CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE PARENT...................................................32
8.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND THE COMPANY; COMPLIANCE WITH
COVENANTS AND OBLIGATIONS...............................................................................32
8.2 NO MATERIAL ADVERSE CHANGE..............................................................................32
8.3 GOVERNMENTAL APPROVALS..................................................................................32
8.4 CONSENT OF LESSORS AND OTHER THIRD PARTIES..............................................................33
8.5 ADVERSE PROCEEDINGS.....................................................................................33
8.6 OPINION OF COUNSEL......................................................................................33
8.7 NON-COMPETITION AGREEMENTS..............................................................................33
8.8 ENVIRONMENTAL REPORT....................................................................................33
8.9 CUSTOMER RELATIONSHIPS..................................................................................33
8.10 SATISFACTORY NOVEMBER 2001 FINANCIAL STATEMENTS.........................................................34
8.11 EXERCISE OF WARRANT.....................................................................................34
8.12 REPAYMENT OF AOYAMA LOANS...............................................................................34
8.13 AOYAMA INDEMNIFICATION AGREEMENT........................................................................34
8.14 SALE OF SHARES OF COMMON STOCK BY SELLING MINORITY STOCKHOLDERS.........................................34
8.15 CLOSING DELIVERIES......................................................................................35
9. CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDERS...........................................................36
9.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE PARENT; COMPLIANCE WITH COVENANTS
AND OBLIGATIONS.........................................................................................36
9.2 CORPORATE PROCEEDINGS...................................................................................36
9.3 GOVERNMENTAL APPROVALS..................................................................................36
9.4 CONSENTS OF LESSORS AND OTHER THIRD PARTIES; RELEASE OF GUARANTEE.......................................37
9.5 ADVERSE PROCEEDINGS.....................................................................................37
9.6 DIRECTORS' AND STATUTORY AUDITOR'S RELEASES.............................................................37
9.7 OPINION OF COUNSEL......................................................................................37
9.8 CLOSING DELIVERIES......................................................................................37
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10. INDEMNIFICATION.........................................................................................38
10.1 BY THE STOCKHOLDERS AND THE COMPANY.....................................................................38
10.2 BY THE BUYER AND THE PARENT.............................................................................39
10.3 CLAIMS FOR INDEMNIFICATION..............................................................................39
10.4 DEFENSE.................................................................................................40
10.5 PAYMENT OF INDEMNIFICATION OBLIGATION...................................................................40
10.6 SURVIVAL OF REPRESENTATIONS; CLAIMS FOR INDEMNIFICATION.................................................41
11. POST-CLOSING AGREEMENTS.................................................................................42
11.1 PROPRIETARY INFORMATION.................................................................................42
11.2 NO SOLICITATION OR HIRING OF FORMER EMPLOYEES...........................................................42
11.3 SEVERANCE PAYMENT.......................................................................................43
11.4 COMPENSATION OF THE CONTINUING DIRECTORS................................................................43
11.5 DECEMBER 2001 FINANCIAL STATEMENTS......................................................................43
12. TERMINATION OF AGREEMENT; OPTION TO PROCEED; DAMAGES....................................................44
12.1 TERMINATION BY LAPSE OF TIME............................................................................44
12.2 TERMINATION BY AGREEMENT OF THE PARTIES.................................................................44
12.3 TERMINATION BY REASON OF BREACH.........................................................................44
12.4 OPTION TO PROCEED.......................................................................................44
12.5 AVAILABILITY OF REMEDIES AT LAW.........................................................................45
13. DISPUTE RESOLUTION......................................................................................45
13.1 GENERAL.................................................................................................45
13.2 CONSENT OF THE PARTIES..................................................................................45
13.3 ARBITRATION.............................................................................................45
14. BROKERS.................................................................................................46
14.1 FOR THE STOCKHOLDERS, THE COMPANY AND THE SUBSIDIARIES..................................................46
14.2 FOR THE BUYER...........................................................................................47
15. NOTICES.................................................................................................47
16. SUCCESSORS AND ASSIGNS..................................................................................48
17. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS...............................................................48
18. SEVERABILITY............................................................................................49
19. INVESTIGATION OF THE PARTIES............................................................................49
20. EXPENSES................................................................................................49
21. LEGAL FEES..............................................................................................49
22. PARENT'S COMMITMENT.....................................................................................50
23. GOVERNING LAW...........................................................................................50
24. SECTION HEADINGS........................................................................................50
25. COUNTERPARTS............................................................................................50
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EXHIBITS
Exhibit A Form of Minority
Stock Purchase Agreement
Exhibit B Escrow Agreement
Exhibit C-1 Opinions of Hatasawa & Wakai
Exhibit C-2 Opinions of Fulbright & Xxxxxxxx
Exhibit D Forms of Non-Competition Agreements
Exhibit E Form of Release Letter
Exhibit F-1 Opinions of Mitsui, Yasuda, Wani & Maeda
Exhibit F-2 Opinions of Xxxxxx Xxxx & Priest LLP
SCHEDULES
Schedule I Stockholders
Schedule II Minority Stockholders
Schedule 2.1 Exceptions re Ownership of Shares
Schedule 2.3 Stockholder Consents
Schedule 3.2 Options
Schedule 3.3 Subsidiaries and Affiliated Entities
Schedule 3.4 Company Consents
Schedule 3.6 Liabilities
Schedule 3.7 Litigation
Schedule 3.8 Insurance
Schedule 3.9 Personal Property
Schedule 3.10 Intangible Property
Schedule 3.11 Leases
Schedule 3.12A Real Property
Schedule 3.12B Liens and Encumbrances
Schedule 3.13 Inventory
Schedule 3.14 Accounts Receivable
Schedule 3.15 Tax Matters
Schedule 3.17 Contracts
Schedule 3.18A Permits
Schedule 3.18B Permits Requiring Amendment to Transfer
Schedule 3.19 Directors, Officers and Employees
Schedule 3.20 Employee Benefit Plans
Schedule 3.21 Changes and Events Since June 30, 2001
Schedule 3.22 Customers
Schedule 3.23 Suppliers
Schedule 3.24 Warranty and Product Liability Claims
Schedule 3.25 Prepayments and Deposits
Schedule 3.26 Indebtedness to and from Officers, Directors and Stockholders
Schedule 3.27 Banking Facilities
Schedule 3.28 Powers of Attorney and Suretyships
Schedule 3.29 Conflicts of Interest
Schedule 3.30 Regulatory Approvals
Schedule 4.3 Buyer and Parent Consents
Schedule 9.4 Guarantee Obligations
Schedule 11.3 Severance Arrangements
Schedule 11.4 Compensation of Continuing Directors
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STOCK PURCHASE AGREEMENT
This
Stock Purchase Agreement ("Agreement") is made as of the 16th day
of November, 2001, by and among Advanced Energy Industries, Inc., a Delaware
corporation with its principal office at 0000 Xxxxx Xxxxx Xxxxx, Xxxx Xxxxxxx,
Xxxxxxxx 00000 (the "Parent"), Advanced Energy Japan K.K., a Japanese
corporation with its principal office at Towa Edogawabashi Building, 347,
Yamabuki-cho, Shinjuku-ku, Tokyo, Japan (or such other entity designated by the
Parent, the "Buyer"), Aera Japan Limited, a Japanese corporation with its
principal office at 0000-0, Xxxxxxxx-Xxx, Xxxxxxxx-Xxx, Xxxxx, Xxxxx (the
"Company"), and the stockholders of the Company listed on Schedule I attached
hereto (the "Stockholders").
Preliminary Statements
1. Each of the Stockholders owns, or has the right to
purchase, as indicated, the number of the issued and outstanding shares
(collectively, the "Shares") of the common stock, Y.500 par value per share (the
"Common Stock"), of the Company set forth opposite such Stockholder's name on
Schedule I.
2. The Buyer desires to purchase, and the Stockholders desire
to sell, the Shares for the consideration set forth below, subject to the terms
and conditions of this Agreement.
3. Simultaneously with the Closing (as defined in Section 1.1
below), the Buyer shall purchase, pursuant to Minority
Stock Purchase
Agreements, the form of which is attached hereto as Exhibit A ("Minority
Stock
Purchase Agreement"), from some or all of the stockholders of the Company set
forth on Schedule II attached hereto (the "Minority Stockholders") the shares of
Common Stock held by such Minority Stockholders (the "Minority Shares"). The
Shares and the Minority Shares together shall represent at least 97.1% of the
outstanding capital stock of the Company. The Minority Stockholders who agree to
sell Minority Shares to the Buyer are referred to herein as the "Selling
Minority Stockholders."
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. PURCHASE AND SALE OF THE SHARES.
1.1 PURCHASE OF THE SHARES FROM THE STOCKHOLDERS. Subject to
and upon the terms and conditions of this Agreement, at the closing of the
transactions contemplated by this Agreement (the "Closing"), each Stockholder
shall sell, transfer, convey, assign and deliver to the Buyer, and the Buyer
shall purchase, acquire and accept from each Stockholder, all the Shares owned
by such Stockholder, as set forth opposite such Stockholder's name on Schedule
I. At the Closing, each Stockholder shall deliver to the Buyer certificates
evidencing the Shares owned by such Stockholder.
1.2 FURTHER ASSURANCES. At any time and from time to time
after the Closing, at the Buyer's request and without further consideration,
each of the Stockholders shall promptly execute and deliver such instruments of
sale, transfer, conveyance, assignment and
confirmation, and take all such other action as the Buyer may reasonably request
to effect the transfer, conveyance and assignment of the Shares to the Buyer, to
register the Buyer's name in the Company's stockholders' register, to confirm
the Buyer's title to all of the Shares owned by such Stockholder immediately
prior to the Closing, to put the Buyer in actual possession and operating
control of the assets, properties and business of the Company and the
Subsidiaries (as defined in Section 3.3 hereof), to assist the Buyer in
exercising all rights with respect thereto and otherwise to carry out the full
purpose and intent of this Agreement.
1.3 PURCHASE PRICE FOR THE SHARES.
(a) The purchase price per Share shall be cash in an
amount equal to Y.5,784,000,000 subject to any Adjustments (as defined in
Section 1.4) (the "Base Price"), divided by the aggregate number of shares of
Common Stock outstanding as of the Closing (such per Share price multiplied by
the total number of Shares, the "Purchase Price"). The Shares underlying the
Aoyama Warrant (as defined in Section 8.11) shall be deemed to be outstanding as
of the Closing, for purposes of calculating the Purchase Price.
(b) At the Closing, except as provided pursuant to
the Indemnification Agreement dated as of the date hereof between the Buyer and
Hisanori Aoyama (the "Aoyama Indemnification Agreement"), the Buyer shall
deliver the Purchase Price, less the Escrow Amount (as defined in paragraph (c)
below), to the Stockholders by wire transfer of immediately available funds in
Japanese yen to the accounts that shall be designated by the Stockholders at
least 5 business days prior to the Closing, provided that no Stockholder shall
designate more than one account to which such Stockholder's funds are to be
delivered. The yen amount to be delivered to each Stockholder, assuming no
Adjustments are made, is set forth on Schedule I.
(c) At the Closing, the Buyer shall deliver to State
Street Bank and Trust Company, as escrow agent ("Escrow Agent") cash in an
amount equal to twelve percent (12%) of the Purchase Price (the "Escrow
Amount"), to be held in an account (the "Reserve Account") pursuant to the terms
of an escrow agreement among the Buyer, the Stockholders and the Escrow Agent in
the form attached hereto as Exhibit B (the "Escrow Agreement"), to satisfy all
or part of any claims for indemnity pursuant to Section 10 hereof.
(d) The Escrow Amount shall be deducted pro rata from
the portion of the Purchase Price payable to each Stockholder, it being
understood that, for purposes of calculating each Stockholder's pro rata share
of the Escrow Amount, the portion of the Purchase Price payable to Hisanori
Aoyama shall be determined without regard to the Aoyama Indemnification
Agreement. Each Stockholder's proportionate share of the Escrow Amount is set
forth on Schedule I.
1.4 ADJUSTMENTS TO THE BASE PRICE. The Base Price shall be
adjusted as follows (each an "Adjustment" and, collectively, "Adjustments"):
(a) If the Company's stockholders' equity as of
November 30, 2001 (as reflected in the November 2001 Financial Statements, as
defined in Section 6.3) is less than Y.3.0 billion, and if the Buyer elects (in
its sole discretion) to complete the purchase of the Shares, then the Base Price
shall be reduced by the amount of the shortfall.
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(b) If Section 12.4 is applicable, the Base Price
shall be adjusted as set forth therein.
1.5 CLOSING. The Closing shall take place at the offices of
Mitsui, Yasuda, Wani & Maeda, Akasaka 2.14 Xxxxx Xxxxxxxx, 00-00, Xxxxxxx
0-xxxxx, Xxxxxx-xx, Xxxxx, Xxxxx at 10:00 a.m., Tokyo Time, on January 10, 2002,
or at such other place, time or date as may be mutually agreed upon in writing
by the parties. The above-referenced scheduled date for the Closing, or such
other date as may be mutually agreed upon in writing by the parties, is
hereinafter referred to as the "Closing Date."
1.6 STOCKHOLDERS' REPRESENTATIVE.
(a) In order to administer efficiently (i) the
determination of the Adjustment Amount (as defined in Section 12.4 hereof), (ii)
waiver of any condition to the obligations of the Stockholders to consummate the
transactions contemplated hereby, (iii) the defense and/or settlement of any
claims for which the Stockholders may be required to indemnify the Buyer or the
Company pursuant to Section 10 hereof, and (iv) any rights or obligations of the
Stockholders pursuant to this Agreement or the Escrow Agreement, the
Stockholders hereby designate Hisanori Aoyama as their representative (the
"Stockholders' Representative").
(b) The Stockholders hereby authorize the
Stockholders' Representative (i) to make all decisions relating to the
determination of the Adjustment Amount, (ii) to take all action necessary in
connection with the waiver of any condition to the obligations of the
Stockholders to consummate the transactions contemplated hereby, or the defense
and/or settlement of any claims for which the Stockholders may be required to
indemnify the Buyer or the Company pursuant to Section 10 hereof, (iii) to give
and receive all notices required to be given under this Agreement, and (iv) to
take any and all additional action as is contemplated, permitted or required by
the terms of this Agreement or the Escrow Agreement to be taken by or on behalf
of the Stockholders.
(c) In the event that the Stockholders'
Representative dies, becomes unable to perform his responsibilities hereunder or
resigns from such position, Stockholders (or their respective successors, heirs
or executors) holding, prior to the Closing, a majority of the Shares as set
forth on Schedule I shall promptly select another representative to fill such
vacancy and such substituted representative shall be deemed to be the
Stockholders' Representative for all purposes of this Agreement.
(d) All decisions and actions by the Stockholders'
Representative, including, without limitation, any agreement between the
Stockholders' Representative and the Buyer relating to the determination of the
Adjustment Amount or the defense or settlement of any claims for which the
Stockholders may be required to indemnify the Buyer and/or the Company pursuant
to Section 10 hereof, shall be binding upon all of the Stockholders, and no
Stockholder shall have the right to object, dissent, protest or otherwise
contest the same.
(e) By their execution of this Agreement, the
Stockholders agree that:
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(i) the Buyer and the Parent shall be able to
rely conclusively on the instructions and decisions of the Stockholders'
Representative as to the determination of the Adjustment Amount, the settlement
of any claims for indemnification by the Buyer or the Company pursuant to
Section 10 hereof, the taking of any action pursuant to the Escrow Agreement or
as to any other actions authorized to be taken by the Stockholders'
Representative hereunder, and no party hereunder shall have any cause of action
against the Buyer or the Parent for any action taken by the Buyer or the Parent
in reliance upon the instructions or decisions of the Stockholders'
Representative;
(ii) all actions, decisions and instructions
of the Stockholders' Representative shall be conclusive and binding upon all of
the Stockholders, and no Stockholder shall have any cause of action against the
Stockholders' Representative for any action taken, decision made or instruction
given by the Stockholders' Representative under this Agreement or the Escrow
Agreement;
(iii) the provisions of this Section 1.6 are
independent and severable, are irrevocable and coupled with an interest and
shall be enforceable notwithstanding any rights or remedies that any Stockholder
may have in connection with the transactions contemplated by this Agreement;
(iv) money damages for any breach of the
provisions of this Section 1.6 would be inadequate;
(v) the provisions of this Section 1.6 shall
be binding upon the executors, heirs, legal representatives and successors of
each Stockholder, and any references in this Agreement to a Stockholder or the
Stockholders shall mean and include the successors to the Stockholder's or
Stockholders' rights hereunder, whether pursuant to testamentary disposition,
the laws of descent and distribution or otherwise; and
(vi) the Stockholders' Representative shall
have the right, power and authority to execute and deliver on behalf of each
Stockholder the Escrow Agreement and any other agreements, certificates and
instruments contemplated by this Agreement or necessary or appropriate to
facilitate the Closing.
(f) All fees and expenses incurred by the
Stockholders' Representative shall be paid by the Stockholders in proportion to
their ownership of Shares as set forth on Schedule I.
1.7 CURRENCY. All references herein to "dollars" or "$" shall
refer to the currency of the United States, and all references herein to "yen"
or "Y." shall refer to the currency of Japan. Amounts given in this Agreement in
yen shall include amounts in other currencies, on an as-converted-to-yen basis,
based upon the applicable exchange rate, as quoted by The Wall Street Journal,
on the date of this Agreement.
2. REPRESENTATIONS OF THE STOCKHOLDERS REGARDING THE SHARES.
Each Stockholder severally represents and warrants to the Buyer and the
Parent as follows:
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2.1 OWNERSHIP OF SHARES. Except as set forth in Schedule 2.1,
such Stockholder has good and marketable title, free and clear of any and all
Share Encumbrances (as defined below), to all of the Shares listed on Schedule I
as being owned by such Stockholder. The Shares listed opposite such
Stockholder's name on Schedule I constitute all of the shares of capital stock
of the Company beneficially owned by such Stockholder. Subject to approval by
the Board of Directors of the Company pursuant to the Company's Articles of
Incorporation, which approval has been (or on or prior to the Closing will have
been) obtained, such Stockholder has the full right, power and authority to
transfer, convey and deliver to the Buyer at the Closing the Shares owned by
such Stockholder and, upon consummation of the sale of the Shares contemplated
hereby, the Buyer will acquire from such Stockholder good and marketable title
to such Shares, free and clear of all Share Encumbrances. "Share Encumbrances"
means any title defect, liens, charges, claims, options, pledges, voting trusts,
proxies, stockholder or similar agreements, security interests, mortgages,
encumbrances or restrictions of any kind, other than applicable securities law
restrictions and restrictions under the Company's Articles of Incorporation.
2.2 AUTHORITY. Such Stockholder has all requisite power and
authority to execute and deliver this Agreement and to perform such
Stockholder's obligations hereunder. This Agreement has been duly and validly
executed and delivered by such Stockholder and constitutes valid and legally
binding obligations of such Stockholder, enforceable against such Stockholder in
accordance with its terms.
2.3 NONCONTRAVENTION. Neither the execution and delivery of
this Agreement by such Stockholder nor the consummation by such Stockholder of
the transactions contemplated hereby will: (i) conflict with or violate any
provision of (A) the Articles of Incorporation, Share Handling Regulation or
Regulations of the Board of Directors of the Company or (B) the articles of
incorporation, certificate of incorporation, bylaws or other charter documents
of any of its Subsidiaries (as defined in Section 3.3 hereof); (ii) except as
set forth in Schedule 2.3, require on the part of such Stockholder any filing
with, or any permit, authorization, consent or approval of, any court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency except where the failure to obtain the same will
not have a material adverse effect on the Shares, Buyer's rights and title
thereto or the transactions contemplated hereby; (iii) result in the imposition
of any Share Encumbrance upon the Shares owned by such Stockholder; or (iv)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to such Stockholder or to the Shares owned by such Stockholder.
2.4 ENGLISH LANGUAGE AGREEMENT. This Agreement has been
prepared in English. Any translations of this Agreement or any portion thereof
have been for reference purposes only and shall not control the content or
interpretation of any provision of this Agreement. The Stockholder either (a)
has a sufficient command of the English language to understand the full intent
of each provision of this Agreement or (b) has consulted with such Stockholder's
advisors who have such command of the English language to ensure that such
Stockholder understands the full intent of each provision of this Agreement.
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3. REPRESENTATIONS OF THE STOCKHOLDERS AND THE COMPANY REGARDING THE
COMPANY.
Each of the Stockholders and the Company, jointly and severally,
represents and warrants to the Buyer that:
3.1 ORGANIZATION. The Company is a corporation duly organized
and validly existing under the laws of Japan, and has all requisite power and
authority (corporate and other) to own its properties, to carry on its business
as now being conducted, to execute and deliver this Agreement and the agreements
contemplated herein, and to consummate the transactions contemplated hereby and
thereby. The Company is duly qualified to do business and in good standing in
all jurisdictions in which its ownership of property or the character of its
business requires such qualification. A certified copy of the Articles of
Incorporation of the Company, as amended to date, has been previously delivered
to the Buyer, is complete and correct, and no amendments have been made thereto
or have been authorized since the date thereof.
3.2 CAPITALIZATION OF THE COMPANY. The Company's authorized
capital stock consists of 250,000 shares of Common Stock, Y.500 par value per
share, of which 68,000 shares are issued and outstanding on the date hereof and
73,000 shares shall be issued and outstanding immediately prior to the Closing,
and, in each case, held of record and beneficially by the Stockholders and
Minority Stockholders. All such issued and outstanding shares of Common Stock
have been, and on the Closing Date will be, duly and validly issued and are, and
on the Closing Date will be, fully paid and non-assessable. Except as set forth
in Schedule 3.2 attached hereto, there are not, and on the Closing Date there
will not be, outstanding (i) any options, warrants or other rights to purchase
from the Company any capital stock of the Company; (ii) any securities issued by
the Company convertible into or exchangeable for shares of such stock; or (iii)
any other commitments of any kind for the issuance of additional shares of
capital stock or options, warrants or other securities of the Company. No other
type of stock (other than common stock) of the Company is issued and
outstanding. The Company holds no shares of the issued and outstanding shares of
Common Stock in the treasury of the Company. The Company has complied in full
with the Japanese Corporation Law and other applicable laws with respect to the
provision to its stockholders of corporate, financial and other information.
3.3 SUBSIDIARIES.
(a) Schedule 3.3 attached hereto sets forth:
(i) the name and percentage ownership by the
Company of each corporation, partnership, joint venture or other entity in which
the Company has, directly or indirectly, an equity interest representing more
than 50% of the capital stock thereof or other equity interests therein
(individually, a "Subsidiary" and, collectively, the "Subsidiaries");
(ii) the name and percentage ownership by any
Stockholder of each corporation, partnership, joint venture or other entity in
which such Stockholder has, directly or indirectly, an equity interest
representing more than 50% of the capital stock thereof or other equity
interests therein, which has or at any time in the past five years has had a
6
relationship with the Company or any of the Subsidiaries (individually, an
"Affiliated Entity" and collectively, the "Affiliated Entities");
(iii) the jurisdiction of incorporation or
organization, capitalization and ownership of each Subsidiary and Affiliated
Entity;
(iv) the names of the officers, directors,
partners and members (as the case may be) of each Subsidiary and Affiliated
Entity; and
(v) the jurisdictions in which each
Subsidiary and Affiliated Entity is qualified or holds licenses to do business
as a foreign corporation or other foreign entity.
(b) Except as set forth in Schedule 3.3, the Company
owns of record and beneficially all of the outstanding shares of capital stock
of each of the Subsidiaries free and clear of all covenants, conditions,
restrictions, liens, charges and encumbrances.
(c) Each of the Subsidiaries and Affiliated Entities
is a corporation or other entity duly organized and validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has all requisite power and authority to own its properties and carry on its
business as now being conducted. Each of the Subsidiaries and Affiliated
Entities is duly qualified to do business and in good standing in all
jurisdictions in which its ownership of property or the character of its
business requires such qualification. Certified copies of the Articles of
Incorporation, Bylaws (if any) and other governing instruments of the
Subsidiaries and Affiliated Entities, each as amended to date, have been
previously delivered to the Buyer, are complete and correct, and no amendments
have been made thereto or have been authorized since the date of such delivery.
The Company does not own, directly or indirectly, any capital stock of or other
equity interest representing more than 10% of the equity of any corporation,
partnership or other entity, other than the Subsidiaries. The shares of capital
stock of each Subsidiary as set forth in Schedule 3.3 have been duly and validly
issued and are fully paid and non-assessable.
(d) Except as set forth in Schedule 3.3, none of the
Subsidiaries holds shares of its capital stock in its treasury, and there are
not, and on the Closing Date there will not be, outstanding any (i) options,
warrants or other rights with respect to the capital stock of any of the
Subsidiaries, (ii) any securities convertible into or exchangeable for shares of
such stock, or (iii) any other commitments of any kind for the issuance of
additional shares of capital stock or options, warrants or other securities of
any of them.
3.4 AUTHORIZATION.
(a) The execution and delivery by the Company of this
Agreement and the agreements provided for herein, and the consummation by the
Company of all transactions contemplated hereunder and thereunder by the
Company, have been or will be prior to the Closing duly authorized by all
requisite corporate action, including approval by the Board of Directors of the
Company. The board of directors of the Company has duly approved, or prior to
the Closing will duly approve, the transfer of the Shares by the Stockholders to
the Buyer, in
7
accordance with the Articles of Incorporation of the Company, and such approval
as of the Closing will not have been modified or rescinded.
(b) This Agreement has been duly executed by the
Company and the Stockholders. This Agreement and all other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which the Company or any of the Stockholders is a party
constitute the valid and legally binding obligations of the Company and the
Stockholders, enforceable against them in accordance with their respective
terms, except as enforceability of the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or by the exercise of judicial discretion in
accordance with general principles applicable and similar remedies.
(c) The execution, delivery and performance by the
Company and the Stockholders of this Agreement and the agreements provided for
herein, and the consummation by the Company and the Stockholders of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (i) violate the provisions of
any law, rule or regulation applicable to the Company or any of the
Stockholders; (ii) violate or conflict with any provision of the (A) Articles of
Incorporation, Share Handling Regulation or Regulations of the Board of
Directors of the Company, or (B) articles of incorporation, certificate of
incorporation, bylaws or other charter documents of any of the Subsidiaries;
(iii) violate any judgment, decree, order or award of any court, governmental
body or arbitrator; or (iv) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under, create in any party the right to
accelerate, terminate, modify or cancel, or require any payment or any notice,
consent or waiver under, any agreement, instrument, contract or arrangement to
which the Company or any of the Subsidiaries is a party or by which the Company
or any of the Subsidiaries, or any of their properties, is or may be bound, or
cause the creation of any lien, charge or encumbrance upon the properties or
assets of the Company or any of the Subsidiaries.
(d) Schedule 3.4 attached hereto sets forth a true,
correct and complete list of all consents and approvals of third parties that
are required in connection with the consummation by the Company and the
Stockholders of the transactions contemplated by this Agreement.
3.5 FINANCIAL STATEMENTS.
(a) The Company or the Stockholders have previously
delivered to the Buyer (i) the audited consolidated balance sheet of the Company
and the Subsidiaries as of June 30, 2001 (the "Current Balance Sheet") and the
related statements of income, stockholders' equity, retained earnings and cash
flows of the Company and the Subsidiaries for the fiscal year then ended (the
"Current Financial Statements"), and (ii) the audited consolidated balance sheet
of the Company and the Subsidiaries as of June 30, 2000 (collectively with the
Current Balance Sheet, the "Audited Balance Sheets") and the related statements
of income, stockholders' equity, retained earnings and cash flows of the Company
and the Subsidiaries for the fiscal year then ended (collectively with the
Current Financial Statements, the "Audited Financial Statements"). The Company
or the Stockholders have also previously delivered to the Buyer the unaudited
8
consolidated balance sheets of the Company and the Subsidiaries as of March 31,
2000, September 30, 2000, December 31, 2000, March 31, 2001 and the statements
of income, stockholders' equity, retained earnings and cash flows of the Company
and the Subsidiaries for each of the three month periods then ended (the
"Historical Unaudited Financial Statements"). The Audited Financial Statements,
the Historical Unaudited Financial Statements and the Interim Financial
Statements (as defined in Section 6.3 hereof) are collectively referred to
herein as the "Financial Statements." The Audited Financial Statements and the
Historical Unaudited Financial Statements have been prepared in accordance with
U.S. generally accepted accounting principles ("GAAP"). The Audited Financial
Statements have been audited by Deloitte Touche Tomatsu, the Company's
independent public accountants, who issued unqualified Independent Auditor's
Reports thereon.
(b) The Financial Statements fairly present, or, in
the case of the Interim Financial Statements, will fairly present, as of their
respective dates, the financial condition, retained earnings, assets and
liabilities of the Company and the Subsidiaries and the results of operations of
the Company's and the Subsidiaries' business for the periods indicated. With
respect to contracts and commitments for the sale of goods or the provision of
services by the Company and the Subsidiaries, the Audited Financial Statements
and the Historical Unaudited Financial Statements contain and reflect adequate
reserves, which are consistent with previous reserves taken, for all reasonably
anticipated material losses and an adequate accrual for all appropriate costs
and expenses, and the Interim Financial Statements will contain and reflect
adequate reserves for all reasonably anticipated material losses and an adequate
accrual for all appropriate costs and expenses. The amounts shown, or, in the
case of the Interim Financial Statements, which will be shown, as accrued for
current and deferred income and other taxes in the Financial Statements are, or,
in the case of the Interim Financial Statements, will be, sufficient for the
payment of all accrued and unpaid income taxes, interest, penalties, assessments
or deficiencies applicable to the Company or any Subsidiary, whether disputed or
not, for the applicable period then ended and periods prior thereto.
(c) The book value of inventory reflected on the
Audited Balance Sheets, as computed on an average cost method basis, is true and
correct and in conformity with GAAP. The related reserves set forth in the
footnotes to the Audited Financial Statements are adequate and in conformity
with GAAP.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
Schedule 3.6 attached hereto, the Company has no liability or commitment
(whether known or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), other than (i) the liabilities
shown on the Company's Current Balance Sheet, (ii) liabilities, similar in
nature to those shown on such balance sheet, which have arisen since June 30,
2001 in the ordinary course of business consistent with past practice including
with respect to frequency and amount (the "Ordinary Course of Business") and
(iii) any contractual and other liabilities incurred in the Ordinary Course of
Business not required by GAAP to be reflected on a balance sheet.
3.7 LITIGATION. Except as set forth on Schedule 3. 7 attached
hereto (a) there is no action, suit or proceeding to which the Company or any of
the Subsidiaries is a party (either as a plaintiff or defendant) pending or, to
the best knowledge of the Company and the
9
Stockholders, threatened before any court or governmental agency, authority,
body or arbitrator and, to the best knowledge of the Company and the
Stockholders, there is no basis for any such action, suit or proceeding; (b)
neither the Company nor any of the Subsidiaries, nor, to the best knowledge of
the Company and the Stockholders, any officer, director or employee of any of
the foregoing, has been permanently or temporarily enjoined by any order,
judgment or decree of any court or any governmental agency, authority or body
from engaging in or continuing any conduct or practice in connection with the
business, assets, or properties of the Company or any of the Subsidiaries; and
(c) there is not in existence on the date hereof any order, judgment or decree
of any court, tribunal or agency enjoining or requiring the Company or any of
the Subsidiaries to take any action of any kind with respect to its business,
assets or properties.
3.8 INSURANCE. Schedule 3.8 attached hereto sets forth a true,
correct and complete list of all fire, theft, casualty, general liability,
workers compensation, business interruption, environmental impairment, product
liability, automobile and other insurance policies maintained by the Company or
any of the Subsidiaries and of all life insurance policies maintained on the
lives of any of their employees, specifying the type of coverage, the amount of
coverage, the premium, the insurer and the expiration date of each such policy
(collectively, the "Insurance Policies") and all claims (including pending
claims) made under such Insurance Policies. True, correct and complete copies of
all Insurance Policies have been previously delivered or disclosed by the
Stockholders or the Company to the Buyer. The Insurance Policies are in full
force and effect and are in amounts of a nature which are adequate and customary
for the Company's and the Subsidiaries' business. All premiums due on the
Insurance Policies or renewals thereof have been paid, and there is no default
under the Insurance Policies. Except as set forth on Schedule 3.8, neither the
Company nor any of the Subsidiaries has received any notice or other
communication from any issuer of the Insurance Policies canceling or materially
amending any of the Insurance Policies, materially increasing any deductibles or
retained amounts thereunder, or materially increasing the annual or other
premiums payable thereunder, and, to the best knowledge of the Company and the
Stockholders, no such cancellation, amendment or increase of deductibles,
retainages or premiums is threatened. Except as set forth on Schedule 3.8,
neither the Company nor any of the Subsidiaries has any outstanding claims or
any dispute with any insurance carrier regarding claims, settlements or premiums
and neither the Company nor any of the Subsidiaries has failed to give any
notice or present any claim under any Insurance Policy in due and timely
fashion. There are no outstanding requirements or recommendations by any issuer
of the Insurance Policies or by any governmental authority which requires or
recommends any changes in the conduct of the business of, or any repairs or
other work to be done on or with respect to any of the properties or assets of,
the Company or any of the Subsidiaries.
3.9 PERSONAL PROPERTY. Schedule 3.9 attached hereto sets forth
(i) a true, correct and complete list of all items of tangible personal property
(A) owned by the Company or any of the Subsidiaries as of the date hereof having
either a net book value per unit or an estimated fair market value per unit in
excess of Y.2,400,500; or (B) not owned by the Company or any Subsidiary but in
the possession of or used or useful in the business of the Company or any of the
Subsidiaries and having rental payments therefor in excess of Y.180,000 per
month or Y.1.8 million per year (collectively, the "Personal Property"); and
(ii) a description of the owner of, and any agreement relating to the use of,
each item of Personal Property not owned by the
10
Company or a Subsidiary and the circumstances under which such Property is used.
Except as disclosed in Schedule 3.9:
(a) with respect to the Personal Property owned by
the Company or any Subsidiary, the Company or the relevant Subsidiary, as the
case may be, has good and marketable title to each item of Personal Property
free and clear of all liens, leases, encumbrances, claims under bailment and
storage agreements, equities, conditional sales contracts, security interests,
charges and restrictions, except for liens, if any, for personal property taxes
not due;
(b) no officer, director, stockholder or employee of
the Company or any Subsidiary, nor any spouse, child or other relative or
affiliate thereof, owns, or holds any interest in, directly or indirectly, in
whole or in part, any of the Personal Property described in Schedule 3.9;
(c) each item of Personal Property not owned by the
Company or a Subsidiary is in such condition that upon the return of such
property to its owner in its present condition at the end of the relevant lease
term or as otherwise contemplated by the applicable agreement between the
Company or the relevant Subsidiary, as the case may be, and the owner or lessor
thereof, the obligations of the Company or the relevant Subsidiary, as the case
may be, to such owner or lessor will be discharged;
(d) the Personal Property is in good operating
condition and repair, normal wear and tear excepted, is currently used by either
the Company or the relevant Subsidiary in the ordinary course of its business
and normal maintenance has been consistently performed with respect to the
Personal Property; and
(e) the Company and the Subsidiaries own or otherwise
have the right to use all of the Personal Property now used or useful in the
operation of their business or the use of which is necessary for or useful in
the performance of any material contract, letter of intent or proposal to which
any of them is a party.
3.10 INTANGIBLE PROPERTY. For purposes of this Agreement,
"Intangible Property" shall mean all intangible property owned by, or used or
useful in connection with the business of, the Company or any of the
Subsidiaries, including, but not limited to, trade secrets, know-how, any other
confidential information of the Company or any of the Subsidiaries, Japanese and
foreign patents, utility models, designs, integrated circuit models, trade
names, trademarks, trade name and trademark registrations, domain names and
domain name registrations, copyrights and copyright registrations, and
applications for any of the foregoing. Schedule 3.10 attached hereto sets forth
a true, correct and complete list of (i) all Intangible Property owned by the
Company or any Subsidiary that is registrable under applicable law, (ii) all
Intangible Property that is owned by a party other than the Company or the
Subsidiaries, and (iii) all licenses or similar agreements or arrangements to
which the Company or any of the Subsidiaries is a party, either as licensee or
licensor, with respect to the Intangible Property. Except as otherwise disclosed
in Schedule 3.10:
11
(a) with respect to Intangible Property owned by the
Company or a Subsidiary, the Company or the relevant Subsidiary, as the case may
be, is the sole and exclusive owner of all right, title and interest in and to
the Intangible Property and all designs, permits, labels and packages used on or
in connection therewith, free and clear of all liens, security interests,
charges, encumbrances, equities or other adverse claims;
(b) the Company or the relevant Subsidiary, as the
case may be, has the right and authority to use, and to continue to use after
the Closing, the Intangible Property in connection with the conduct of its
business in the manner presently conducted, and such use or continuing use does
not and will not conflict with, infringe upon or violate any rights of any other
person, corporation or entity;
(c) none of the Company, the Subsidiaries or any of
the Stockholders has received notice of, or has any knowledge of any basis for,
a pleading or threatened claim, interference action or other judicial or
adversarial proceeding against the Company or any of the Subsidiaries that any
of the operations, activities, products, services or publications of the Company
or any of the Subsidiaries or any of their customers or distributors infringes
or will infringe any patent, trademark, trade name, copyright, trade secret or
other property right of a third party, or that the Company or any of the
Subsidiaries is illegally or otherwise using the trade secrets, formulae or
property rights of others;
(d) there are no outstanding, nor to the best
knowledge of the Company and the Stockholders, any threatened disputes or other
disagreements with respect to any licenses or similar agreements or arrangements
described in Schedule 3.10 or with respect to infringement by a third party of
any of the Intangible Property;
(e) the Intangible Property owned or licensed by the
Company or the relevant Subsidiary, as the case may be, is sufficient to conduct
the Company's or the relevant Subsidiary's business, as the case may be, as
presently conducted;
(f) the Company or the relevant Subsidiary, as the
case may be, has taken all steps reasonably necessary to protect its right,
title and interest in and to the Intangible Property and the continued use of
the Intangible Property;
(g) no officer, director, stockholder or employee of
the Company or any Subsidiary, nor any spouse, child or other relative or
affiliate thereof, owns, or holds any interest in, directly or indirectly, in
whole or in part, any of the Intangible Property; and
(h) none of the Company, the Subsidiaries or any
Stockholder has any knowledge that any third party is infringing, will infringe
or is threatening to infringe upon or otherwise violate any of the Intangible
Property in which the Company or any Subsidiary has ownership rights.
3.11 LEASES. Schedule 3.11 attached hereto sets forth (a) a
true, correct and complete list as of the date hereof of all leases, rental
agreements and licenses for the use of real property, identifying separately
each lease, rental agreement and license, to which the Company or any of the
Subsidiaries is a party (collectively, the "Leases"). True, correct and complete
copies of all Leases and all amendments, modifications and supplemental
agreements thereto,
12
have previously been delivered by the Stockholders or the Company to the Buyer.
The Leases are in full force and effect, are binding and enforceable against
each of the parties thereto in accordance with their respective terms and,
except as set forth on Schedule 3.11, have not been modified or amended since
the date of delivery to the Buyer. No party to any Lease has sent written notice
to the other claiming that such party is in default thereunder. Except as set
forth on Schedule 3.11, there has not occurred any event which would constitute
a material breach of or default in the performance of any covenant, agreement or
condition contained in any Lease, nor has there occurred any event which with
the passage of time or the giving of notice or both would constitute such a
material breach or default. Neither the Company nor any of the Subsidiaries is
obligated to pay any leasing or brokerage commission relating to any Lease and,
except as set forth on Schedule 3.11, will not have any obligation to pay any
leasing or brokerage commission upon the renewal of any Lease. Except as set
forth on Schedule 3.11, no construction, alteration or other leasehold
improvement work with respect to any of the Leases remains to be paid for or to
be performed by the Company or any of the Subsidiaries. The Financial Statements
contain adequate reserves to provide for the restoration of the property subject
to the Leases at the end of the respective Lease terms, to the extent required
by the Leases and based on currently available information.
3.12 REAL ESTATE.
(a) Schedule 3.12A attached hereto contains a true,
correct and complete list of (i) the addresses and legal descriptions of all
real property owned by the Company or any Subsidiary (the "Real Estate"), (ii)
the current use of each piece of Real Estate, including the names and positions
of each of the occupants, if any, and (iii) all liabilities, liens,
encumbrances, easements, restrictions, reservations, tenancies, agreements or
other obligations affecting the Real Estate (collectively, the "Exceptions"). On
the Closing Date, the Company or the relevant Subsidiary, as the case may be,
will have good, clear, record and marketable title to the Real Estate, free and
clear of all such Exceptions, other than the permitted exceptions set forth on
Schedule 3.12B (the "Permitted Exceptions").
(b) Except as set forth on Schedule 3.12A, no work
has been performed on or materials supplied to the Real Estate within any
applicable statutory period which could give rise to mechanics or materialman's
liens that can be enforced against the Real Estate.
(c) There is no pending or threatened condemnation or
eminent domain proceeding with respect to the Real Estate.
(d) Except as set forth on Schedule 3.12A, there are
no taxes or betterment assessments other than ordinary real estate taxes pending
or payable against the Real Estate and there are no contingencies existing under
which any assessment for real estate taxes may be retroactively filed against
the Real Estate, and there are no taxes or levies, permit fees or connection
fees which must be paid respecting existing curb cuts, sewer hookups, water-main
hookups or services of a like nature.
(e) The Real Estate is legally subdivided and
consists of separate tax lots so that it is assessed separate and apart from any
other property.
13
(f) Except as set forth on Schedule 3.12A, all
installation charges of all utility systems have been fully paid and all
outstanding service charges therefor have been paid by the Company or the
relevant Subsidiary, as the case may be. Neither the Company nor any of the
Subsidiaries has experienced any material interruption in the delivery of
adequate quantities of any utilities (including, without limitation,
electricity, natural gas, potable water, water for cooling or similar purposes
and fuel oil) or other public services (including, without limitation, sanitary
and industrial sewer service) required in the operation of its business.
(g) Except as set forth on Schedule 3.12A, the Real
Estate is not located in any special flood hazard area designated by any
governmental authority, agency or instrumentality having jurisdiction over the
Real Estate (collectively, "Governmental Agencies").
(h) The Real Estate complies with the requirements of
all building, zoning, subdivision, health, safety, environmental, pollution
control, waste products, sewage control and all other applicable statutes, laws,
codes, ordinances, rules, orders, regulations, decrees and judgments
(collectively, the "Governmental Regulations") of any and all Governmental
Agencies. The Company and its Subsidiaries have obtained, and the Stockholders
or the Company have previously provided the Buyer with copies of, all consents,
permits, licenses and approvals required by such Governmental Regulations. Such
consents, permits, licenses, variances and approvals are in full force and
effect and have been properly and validly issued. Neither the Company nor any
Subsidiary is aware of any fact, condition or reason for believing that any
Permit will not be renewable on expiration. There is no action pending or
threatened by any Governmental Agencies claiming that the Real Estate violates
any Governmental Regulations or threatening to shut down or restrict the
operations of the business of the Company or any of the Subsidiaries.
(i) There are no suits, petitions, notices or
proceedings pending, given or threatened by any persons or Governmental Agencies
before any court, Governmental Agencies or instrumentalities, administrative or
otherwise, which if given, commenced or concluded would have or could be
expected to have, an adverse effect on the business, assets, operations or
prospects of the Company and its Subsidiaries, individually or taken as a whole
(a "Material Adverse Effect").
(j) Neither the Company nor any of the Subsidiaries
has received notice from any insurer of the Real Estate threatening to cancel
any insurance coverage or requiring any changes or corrective work to the Real
Estate which has not been satisfied.
(k) All of the buildings, fixtures and other
improvements located on the Real Estate are in good operating condition and
repair, and the operation thereof as presently conducted is not in violation of
any applicable building code, zoning ordinance or other law or regulation.
(l) Schedule 3.12A sets forth a true, correct and
complete list of all title insurance policies, surveys, engineering reports,
hazardous waste reports, environmental studies, investigations and audits
prepared with respect to property currently or formerly owned, leased, operated
or controlled by the Company or any Subsidiary, copies of which have previously
been delivered by the Stockholders or the Company to the Buyer. Schedule 3.12B
14
sets forth a true, correct and complete list of all reports, audits,
investigations, surveys and studies concerning the environmental status of
property currently or formerly owned, leased, operated or controlled by the
Company or any Subsidiary of which the Company or any Subsidiary has knowledge,
but does not possess.
3.13 INVENTORY. Except as set forth on Schedule 3.13, the
inventory of the Company and the Subsidiaries (the "Inventory") consists of
items of a quality and quantity which are usable or saleable within one year
without discount in the ordinary course of the business conducted by the Company
and the Subsidiaries. The value of all items of obsolete materials and of
materials of below standard quality have been written down to realizable market
value. The values at which the Inventory is carried reflect the normal inventory
valuation policy of the Company and the Subsidiaries of stating inventory at the
average cost method, and such valuation policy as applied is in accordance with
GAAP.
3.14 ACCOUNTS RECEIVABLE. Schedule 3.14 attached hereto sets
forth a true, correct and complete list of the accounts and notes receivable of
the Company and the Subsidiaries as of September 30, 2001. All of the Company's
current accounts receivable arose out of the sales of inventory or services in
the Ordinary Course of Business and are collectible in the face value thereof
within 120 days after the date of invoice, using normal collection procedures,
net of the reserve for doubtful accounts set forth thereon, which reserve is
adequate and was determined in accordance with GAAP. Receipt by the Company of a
promissory note relating to an account receivable shall deem the account
"collected" as of the date of receipt for purposes of this representation and
warranty, provided that (a) since November 1, 2000, the maker of the promissory
note shall not have defaulted, or failed to timely make any payment, on such
promissory note or any other promissory note delivered by such maker to the
Company or a Subsidiary (other than any failure to pay an immaterial amount,
which failure was cured within 15 days thereafter) and (b) the full amount of
the promissory note is paid to the Company within 150 days after the date the
promissory note is received by the Company.
3.15 TAX MATTERS.
(a) Except as set forth on Schedule 3.15 attached
hereto, the Company and each of the Subsidiaries has, in a timely manner, filed
all tax returns and reports which are necessary or required for the conduct of
its respective business (the "Tax Returns"), and the Tax Returns properly
reflect the Taxes (as defined below) due for the periods covered thereby. All
Taxes have been properly and fully paid to the extent due and payable. "Taxes"
shall mean all governmental charges or impositions of each and every kind,
regardless of whether measured by properties, assets, wages, gross or net
income, profits, capital gains or otherwise.
(b) The Company has set up adequate reserves or
provisions (in accordance with GAAP) for the payment of Taxes not yet due and
payable in respect of all periods covered by the Tax Returns and all Taxes
payable or anticipated to be payable for any and all periods ending on or before
the Closing Date which are not covered by the Tax Returns.
(c) Except as set forth in Schedule 3.15, there are
no disputes or disagreements pending or contemplated with any tax authorities
regarding liability which could exceed Y.12 million in the aggregate or, to the
best of the knowledge of the Stockholders,
15
potential liability for any Tax (including penalties and interest) recoverable
from the Company or any Subsidiary or regarding the availability to the Company
or any Subsidiary of any relief from Tax, which liability could exceed Y.12
million in the aggregate.
(d) All documents which are liable to stamp duty and
under which the Company or any Subsidiary has any right have been properly
stamped.
3.16 BOOKS AND RECORDS. The general ledgers and books of
account of the Company and the Subsidiaries are in all material respects
complete and correct and have been maintained in accordance with good business
practice and in accordance with all applicable procedures required by laws and
regulations.
3.17 CONTRACTS AND COMMITMENTS.
(a) Schedule 3.17 attached hereto contains a true,
complete and correct list and description of the following contracts and
agreements, whether written or oral (collectively, the "Contracts"), which,
except for Contracts listed pursuant to Sections 3.17(a)(viii) through (x)
below, involve payments or receipts by the Company or any of the Subsidiaries of
more than Y.2.4 million:
(i) all loan agreements, indentures,
mortgages and guaranties to which the Company or any of the Subsidiaries is a
party or by which the Company or any of the Subsidiaries or any of their
property is bound;
(ii) all pledges, conditional sale or title
retention agreements, security agreements, equipment obligations, personal
property leases and lease purchase agreements to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries or
any of their property is bound;
(iii) all contracts, agreements, commitments,
purchase orders or other understandings or arrangements to which the Company or
any of the Subsidiaries is a party or by which the Company or any of the
Subsidiaries or any of their property is bound which (A) involve payments or
receipts by the Company or any of the Subsidiaries of more than Y.2.4 million in
the case of any single contract, agreement, commitment, understanding or
arrangement under which full performance (including payment) has not been
rendered by all parties thereto or (B) which may have a Material Adverse Effect;
(iv) all collective bargaining agreements,
employment and consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, pension plans, retirement plans, employee
stock option or stock purchase plans and group life, health and accident
insurance and other employee benefit plans, agreements, arrangements or
commitments to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries or any of their property is bound;
(v) all agency, distributor, sales
representative, franchise or similar agreements to which the Company or any of
the Subsidiaries is a party or by which the Company or any of the Subsidiaries
or any of their property is bound;
16
(vi) all contracts, agreements or other
understandings or arrangements between the Company and any of the Subsidiaries
(including, but not limited to, any tax sharing arrangements) or between the
Company or any of the Subsidiaries, on the one hand, and any of the Stockholders
or any of their Affiliated Entities, on the other hand;
(vii) all leases, whether operating, capital
or otherwise, under which the Company or any of the Subsidiaries is lessor or
lessee;
(viii) all contracts, agreements and other
documents or information relating to past disposal of waste (whether or not
hazardous);
(ix) all contracts, agreements or other
arrangements imposing a non-competition or non-solicitation obligation on the
Company or any of the Subsidiaries or in any way restricting the Company or any
of the Subsidiaries from engaging in any business activities; and
(x) any other material agreements or
contracts entered into by the Company or any of the Subsidiaries.
(b) Except as set forth on Schedule 3.17:
(i) each Contract is a valid and legally
binding agreement of the Company or the relevant Subsidiary, enforceable against
or by the Company or the relevant Subsidiary in accordance with its terms,
except as enforceability of the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by the exercise of judicial discretion in accordance with general
principles applicable to equitable and similar remedies, and the Company or the
relevant Subsidiary does not have any knowledge that any Contract is not a valid
and binding agreement of the other parties thereto;
(ii) the Company or the relevant Subsidiary
has fulfilled all material obligations required pursuant to the Contracts to
have been performed by the Company or the relevant Subsidiary, as the case may
be, on its part prior to the date hereof, and the Company or the relevant
Subsidiary, as the case may be, has no reason to believe that it will not be
able to fulfill, when due, all of its obligations under the Contracts which
remain to be performed after the date hereof;
(iii) the Company or the relevant Subsidiary
is not in breach of or default under any Contract, and no event has occurred
which with the passage of time or giving of notice or both would constitute such
a default, result in a loss of rights or result in the creation of any lien,
charge or encumbrance, thereunder or pursuant thereto;
(iv) to the best knowledge of the Company and
the Stockholders, there is no existing breach or default by any other party to
any Contract, and no event has occurred which with the passage of time or giving
of notice or both would constitute a default by such other party, result in a
loss of rights or result in the creation of any lien, charge or encumbrance
thereunder or pursuant thereto;
17
(v) there are not and, since January 1, 1998
have not been, any claims of a non-routine nature relating to the Company or any
Subsidiary by customers of the Company or any of the Subsidiaries under any
warranties, whether express or implied;
(vi) the Company and the Subsidiaries are not
restricted by any Contract from carrying on their business anywhere in the
world;
(vii) neither the Company nor any of the
Subsidiaries has any written or oral contracts to sell products or perform
services which are expected to be performed at, or to result in, a loss; and
(viii) neither the Company nor any of the
Subsidiaries has experienced any shortages of components, raw materials or other
supplies (collectively "Supplies") within the twelve (12) month period preceding
the date hereof, and the Company and the Subsidiaries have on hand, or have
reason to believe they can timely obtain, a sufficient quantity of Supplies to
satisfy all outstanding orders heretofore received and all orders anticipated to
be received from the date hereof through the first anniversary of the Closing
Date.
(c) True, correct and complete copies of all written
Contracts, and true, correct and complete summaries of all oral contracts, have
previously been disclosed by the Company or the Stockholders to the Buyer, and
copies of any of the Contracts that are requested by the Buyer shall have been
delivered to the Buyer by the Stockholders or the Company prior to the Closing.
3.18 COMPLIANCE WITH AGREEMENTS AND LAWS.
(a) The Company and the Subsidiaries each have all
requisite licenses, consents, variances, permits, certificates and approvals,
including environmental, health and safety permits, from all relevant
governmental authorities agencies and instrumentalities necessary to conduct
their respective business and own and operate their respective assets
(collectively, the "Permits"). Schedule 3.18A attached hereto sets forth a true,
correct and complete list of all such Permits, copies of which have previously
been delivered by the Company or the Stockholders to the Buyer. Neither the
Company nor any Subsidiary is aware of any fact, condition or reason for
believing that any Permit will not be renewable on expiration. Schedule 3.18B
attached hereto sets forth a true and complete list of all Permits that must be
amended, modified, changed or transferred to the Buyer in order to consummate
the transactions contemplated by this Agreement. The Company and each Subsidiary
agrees to cooperate with the Buyer in affecting each such amendment,
modification, change or transfer. Neither the Company nor any of the
Subsidiaries is in violation of any law, regulation, order, ordinance, rule or
judgment (including, without limitation, laws, regulations or ordinances
relating to building, zoning, environmental, Materials of Environmental Concern
(as defined below), land use or similar matters) relating to property it owns,
occupies, leases or controls; its business; its assets; and its operations,
which violation would have a Material Adverse Effect. The business of the
Company and the Subsidiaries (which includes matters relating to real property
owned, occupied, leased or controlled by the Company or any Subsidiary) as
conducted since their respective inceptions has not violated, and on the date
hereof does not violate any laws, ordinances, rules, judgments, regulations or
orders (including, but not limited to, any of the foregoing relating to
18
employment discrimination, occupational safety, environmental protection,
Materials of Environmental Concern, conservation, or corrupt practices), the
enforcement of which could have a Material Adverse Effect. Except as set forth
on Schedule 3.18B, neither the Company nor any of the Subsidiaries has had
notice or communication from any person, including, without limitation, any
governmental authority, agency or instrumentality or otherwise of any such
violation or noncompliance. "Materials of Environmental Concern" means any
chemicals, pollutants, contaminants, hazardous substances, solid waste,
hazardous wastes, toxic materials, oil, petroleum and petroleum products, PCBs
or asbestos.
(b) Neither the Company nor any of the Subsidiaries
is in violation of any law, ruling, order, decree, regulation, permit, common
law doctrine, or other environmental or hazardous waste requirement applicable
to the Company, any of the Subsidiaries, or any of the Real Estate, or any part
thereof, relating to health, safety, pollution, hazardous waste, Materials of
Environmental Concern, environmental or other similar matters, which has not
been entirely corrected. Neither the Company nor any of the Subsidiaries has
received, nor has any reason to believe that it will receive, notice from any
governmental authority, agency or instrumentality alleging any such violation in
respect to any of the real property currently or formerly owned, leased,
operated or controlled by the Company or any of its Subsidiaries, or any part
thereof.
(c) Neither the Company nor any Subsidiary has been
named a "potentially responsible party" or received or been informed of any
correspondence requesting information relating to locations where Materials of
Environmental Concern may be located or received or been informed of any fact,
condition or correspondence which might cause the Company or any Subsidiary to
be named a party responsible or a party potentially responsible for a release of
any Materials of Environmental Concern to the environment.
(d) There are no pending or threatened actions,
claims, charges, suits, controversies, demands, investigations or proceedings
against or involving the Company or any Subsidiary relating to: (i) exposure to
or release of any Materials of Environmental Concern; or (ii) noises,
vibrations, odors at or from any real property or facility formerly or currently
owned, leased, occupied, operated or controlled by the Company or any
Subsidiary.
(e) There have been no releases or discovery of any
Materials of Environmental Concern into the environment at any parcel of real
property or any facility formerly or currently owned, leased, operated or
controlled by the Company or any Subsidiary; or to the knowledge of the Company
or any Subsidiary, at any facility to which waste of the Company or any
Subsidiary has been transported for processing, storage or disposal. Neither the
Company nor any Subsidiary is aware of any releases of Materials of
Environmental Concern at parcels of real property or facilities other than those
owned, leased, operated or controlled by the Company or any Subsidiary that
could reasonably be expected to have an impact on the real property or
facilities currently or formerly owned, leased, operated or controlled by the
Company or any Subsidiary.
3.19 EMPLOYEE RELATIONS.
(a) The Company and each of the Subsidiaries is in
compliance with all laws respecting employment and employment practices, terms
and conditions of employment,
19
and wages and hours; none of such companies is engaged in any unfair labor
practice; there are no arrears in the payment of wages or social security or
similar taxes; nor is there currently pending (nor has there been in the last
three years) any claim by any employee or governmental agency or body that the
Company or any of the Subsidiaries was (i) not in compliance with any of such
laws, (ii) engaged in an unfair labor practice or (iii) in arrears in the
payment of wages or social security or similar taxes.
(b) Except as set forth on Schedule 3.19 attached
hereto:
(i) none of the employees of the Company or
any of the Subsidiaries is represented by any labor union;
(ii) there is not currently, nor has there
been in the last three years, any unfair labor practice complaint against the
Company or any of the Subsidiaries pending before any government agency;
(iii) there is not currently, nor has there
been in the last three years, any pending labor strike or other material labor
trouble affecting the Company or any of the Subsidiaries (including, without
limitation, any organizational drive);
(iv) there is not currently, nor has there
been in the last three years, any material labor grievance pending against the
Company or any of the Subsidiaries;
(v) there is not currently, nor has there
been in the last three years, any pending arbitration proceedings arising out of
or under any collective bargaining agreement to which the Company or any of the
Subsidiaries is a party, or to the best knowledge of the Company and the
Stockholders, any basis for which a claim may be made under any collective
bargaining agreement to which the Company or any of the Subsidiaries is a party;
and
(vi) neither the Company nor any of the
Subsidiaries has any continuing obligation for health, life, medical insurance
or other similar fringe benefits to any former employee of the Company or any
Subsidiary.
(c) Schedule 3.19 sets forth a true, correct and
complete list of the following:
(i) the position of each director, officer
and employee of the Company and the Subsidiaries;
(ii) all remuneration and other benefits paid
to or conferred on each director, officer and employee of the Company and the
Subsidiaries since January 1, 2000 through the date of this Agreement;
(iii) the period of service of each director,
officer and employee of the Company and the Subsidiaries and the accrued leave,
annual leave and sick leave entitlements of each employee of the Company and the
Subsidiaries, and such accruals are reflected in the Financial Statements in
accordance with GAAP; and
20
(iv) each written or oral contract of service
or consultance to which the Company or any of the Subsidiaries are a party.
(d) Except as disclosed in Schedule 3.19 hereto, no
amount due to or in respect of any director, officer or employee or former
director, former officer or former employee of the Company is in arrears and
unpaid other than his/her current salary for the relevant period at the date of
this Agreement.
(e) For purposes of this Section 3.19, the term
"employee" shall be construed to include sales agents and other independent
contractors who spend a majority of their working time on the business of the
Company or any of the Subsidiaries and who, to the knowledge of the Company, are
paid yearly compensation of Y.4.8 million or more with respect to services
rendered for the Company.
3.20 EMPLOYEE BENEFIT PLANS.
(a) A list of all employee benefit plans maintained
by the Company or the Subsidiaries (the "Employee Plans") is provided on
Schedule 3.20 attached hereto. No Employee Plan provides benefits, including,
without limitation, death or medical benefits (whether or not insured) with
respect to any current or former employee of the Company and the Subsidiaries
beyond his or her retirement or other termination of service (other than (i)
coverage mandated by applicable statute, (ii) retirement or death benefits under
any funded employee pension plan, (iii) disability benefits under any employee
welfare plan that have been fully provided for by insurance or otherwise, (iv)
deferred compensation benefits accrued as liabilities on the books of the
Company or the Subsidiaries, or (v) benefits in the nature of severance
payments).
(b) Except as otherwise contemplated herein, the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any employee or former employee of the Company and the Subsidiaries to
severance pay, unemployment compensation or any other payment, (ii) accelerate
the time of payment or vesting, or increase the amount of compensation due to
any such employee or former employee or (iii) result in any payment or series of
payments by the Company or the Subsidiaries to any person.
(c) Each of the Employee Benefit Plans has been
administered in compliance with all applicable laws, rules regulations.
(d) Neither the Company nor any of the Subsidiaries
has announced any plan or legally binding commitment to create any additional
employee benefit plans or to amend or modify any existing employee benefit plan.
3.21 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as set forth on Schedule 3.21 attached
hereto, since June 30, 2001, neither the Company nor any of the Subsidiaries has
entered into any transaction which is not in the usual and Ordinary Course of
Business, and, without limiting the generality of the foregoing, neither the
Company nor any of the Subsidiaries has:
21
(i) incurred any material obligation or
liability for borrowed money;
(ii) discharged or satisfied any lien or
encumbrance or paid any obligation or liability other than current liabilities
reflected in the Current Balance Sheet;
(iii) mortgaged, pledged or subjected to
lien, charge or other encumbrance any of their respective properties or assets;
(iv) sold or purchased, assigned or
transferred any of its tangible assets or cancelled any debts or claims, except
for inventory sold and raw materials purchased in the Ordinary Course of
Business;
(v) made any material amendment to or
termination of any Contract or done any act or omitted to do any act which would
cause the breach of any Contract;
(vi) suffered any losses of personal or real
property, whether insured or uninsured, and whether or not in the control of the
Company or the relevant Subsidiary, as the case may be, in excess of Y.6.0
million in the aggregate, or waived any rights of any value;
(vii) authorized any declaration or payment
of dividends by the Company or any Subsidiary which is not wholly owned by the
Company, or paid any such dividends, or authorized any transfer of assets of any
kind whatsoever by the Company or any such Subsidiary to any of their respective
stockholders with respect to any shares of their capital stock;
(viii) authorized or issued recall notices
for any of its products or initiated any safety investigations;
(ix) received notice of any litigation,
warranty claim or products liability claims;
(x) made any material change in the terms,
status or funding condition of any Employee Plan, as defined in Section 3.20
hereof;
(xi) engaged any new employee for a salary in
excess of Y.7.2 million per annum;
(xii) made, or committed to make, any changes
in the compensation payable to any officer, director, employee or agent of the
Company or any Subsidiary, or any bonus payment or similar arrangements made to
or with any of such officers, directors, employees or agents;
(xiii) incurred any capital expenditure in
excess of Y.6.0 million in any one instance or Y.12.0 million in the aggregate;
22
(xiv) made any material alteration in the
manner of keeping the books, accounts or records of the Company or any
Subsidiary, or in the accounting practices therein reflected; or
(xv) suffered any material adverse change in
the consolidated results of operations, condition (financial or otherwise),
assets, liabilities (whether absolute, accrued, contingent or otherwise),
business or prospects of the Company and the Subsidiaries taken as a whole.
(b) Neither the Company nor any of the
Stockholders have knowledge of any existing or threatened occurrence, event or
development which, as far as can be reasonably foreseen, could have a Material
Adverse Effect.
3.22 CUSTOMERS; MARKET LEADERSHIP. Schedule 3.22 attached
hereto sets forth a true, correct and complete list of the names and locations
of each of the top 20 customers (based on annual sales) of the Company and the
Subsidiaries (the "Customers"). The aggregate sales amounts by the Company and
the Subsidiaries to each of the Customers during the 12 months ended June 30,
2001, and the name of the company responsible for the majority of such sales,
are set forth on Schedule 3.22 opposite the applicable Customer's name. Prior to
the Closing, the Company will amend Schedule 3.22 to include the aggregate sales
amounts by the Company and the Subsidiaries to each of the Customers during the
five months ending November 30, 2001. Except as set forth on Schedule 3.22, the
Company's and each of its Subsidiaries' relationships with the Customers are
good. To the best knowledge of the Company and the Subsidiaries, no Customer has
any material complaints with respect to the Company's or any Subsidiary's
products, personnel or business practices. To the best knowledge of the Company
and the Subsidiaries, no Customer intends to effect or is considering a
reduction, discontinuance or other adverse change in its relationship with the
Company or the relevant Subsidiary. The Company is one of the two leaders in the
worldwide mass flow controller market. To the best knowledge of the Company and
the Subsidiaries, there are no facts or circumstances relating to any of the
Customers that would jeopardize the generation of new sales or the continued
market leadership position of the Company for the foreseeable future.
3.23 SUPPLIERS. Schedule 3.23 attached hereto sets forth a
true, correct and complete list of (i) the names and locations of each of the
suppliers of the Company and the Subsidiaries and (ii) the present sole source
suppliers of significant goods or services, other than utilities, for any
product with respect to which practical alternative sources of supply are not
available on comparable terms and conditions, indicating the contractual
arrangements for continued supply from each such supplier. Except as set forth
on Schedule 3.23, (a) the Company and each of the Subsidiaries has good
relations with all of its suppliers, and (b) neither the Company nor any of the
Subsidiaries is more than 30 days in arrears in any trade accounts payable or
other payments owing to any supplier (other than trade accounts payable to the
Company by any of the Subsidiaries).
3.24 WARRANTY AND PRODUCT LIABILITY CLAIMS. Schedule 3.24
attached hereto contains a true, correct and complete list of all warranty and
product liability claims in excess of Y.240,000 made against the Company or any
of the Subsidiaries from July 1, 1998 through the date hereof, the current
status of all such claims and the costs of all actions taken in satisfaction
23
of such claims. All information relative to such claims and those made after the
date hereof shall be available to the Buyer from and after the date hereof.
3.25 PREPAYMENTS AND DEPOSITS. Schedule 3.25 attached hereto
sets forth all prepayments and deposits, which have been received by the Company
or any of the Subsidiaries as of the date hereof, from customers for products to
be shipped, or services to be performed, after the Closing Date.
3.26 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND
STOCKHOLDERS. Except as set forth on Schedule 3.26 attached hereto and except
for intercompany indebtedness payable among the Company and any Subsidiary or
among the Subsidiaries, neither the Company nor any of the Subsidiaries is
indebted, directly or indirectly, to any person who is an officer, director or
stockholder of any of the foregoing entities or any affiliate of any such person
in any amount whatsoever other than for salaries for services rendered or
reimbursable business expenses, all of which have been reflected on the Current
Financial Statements, and no such officer, director, stockholder or affiliate is
indebted to the Company or any of the Subsidiaries except for advances made to
employees of the Company or any of the Subsidiaries in the Ordinary Course of
Business to meet reimbursable business expenses anticipated to be incurred by
such obligor.
3.27 BANKING FACILITIES. Schedule 3.27 attached hereto sets
forth a true, correct and complete list of:
(a) each bank, savings and loan or similar financial
institution in which the Company or any of the Subsidiaries has an account or
safe deposit box and the accounts and safe deposit boxes maintained by the
Company or any of the Subsidiaries thereat; and
(b) the names of all persons authorized to draw on
each such account or to have access to any such safe deposit box facility,
together with a description of the authority (and conditions thereof, if any) of
each such person with respect thereto.
3.28 POWERS OF ATTORNEY AND SURETYSHIPS. Except as set forth
on Schedule 3.28 attached hereto, neither the Company nor any of the
Subsidiaries has any general or special powers of attorney outstanding (whether
as grantor or grantee thereof) or has any obligation or liability (whether
actual, accrued, accruing, contingent or otherwise) as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any person, corporation, partnership, joint venture, association,
organization or other entity, except as endorser or maker of checks or letters
of credit, respectively, endorsed or made in the Ordinary Course of Business.
3.29 CONFLICTS OF INTEREST. Except as set forth on Schedule
3.29 attached hereto, no officer, director or Stockholder of the Company or any
Subsidiary nor, to the best knowledge of the Company and the Stockholders, any
affiliate of any such person, now has or within the last three (3) years had,
either directly or indirectly:
(a) except for a portfolio investment, an equity or
debt interest in any corporation, partnership, joint venture, association,
organization or other person or entity which
24
furnishes or sells or during such period furnished or sold services or products
to the Company or any of the Subsidiaries, or purchases or during such period
purchased from the Company or any of the Subsidiaries any goods or services, or
otherwise does or during such period did business with the Company or any of the
Subsidiaries; or
(b) a beneficial interest in any contract, commitment
or agreement to which the Company or any of the Subsidiaries is or was a party
or under which any of them is or was obligated or bound or to which any of their
respective properties may be or may have been subject, other than stock options
and other contracts, commitments or agreements between the Company or any of the
Subsidiaries and such persons in their capacities as employees, officers,
directors of the Company or such Subsidiary.
3.30 REGULATORY APPROVALS. All consents, approvals,
authorizations or other requirements prescribed by any law, rule or regulation
which must be obtained or satisfied by the Company or any of the Subsidiaries
and which are necessary for the execution and delivery by the Stockholders and
the Company of this Agreement or any documents to be executed and delivered by
the Stockholders or the Company in connection herewith are set forth on Schedule
3.30 attached hereto and have been, or prior to the Closing Date will be,
obtained and satisfied.
3.31 DISCLOSURE. The information concerning the Company and
the Subsidiaries set forth in this Agreement, the Exhibits and Schedules
attached hereto and any document, statement or certificate furnished or to be
furnished to the Buyer pursuant hereto, does not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated herein or therein or necessary to make the statements and facts contained
herein or therein, in light of the circumstances in which they are made, not
false and misleading in any material respect. The Stockholders and the Company
have disclosed to the Buyer all material facts pertaining to the transactions
contemplated by this Agreement and the Exhibits hereto. Copies of all documents
heretofore or hereafter delivered or made available to the Buyer pursuant to
this Agreement were or will be (prior to the Closing Date) complete and accurate
copies of such documents.
3.32 ENGLISH LANGUAGE AGREEMENT. This Agreement has been
prepared in English. Any translations of this Agreement or any portion thereof
have been for reference purposes only and shall not control the content or
interpretation of any provision of this Agreement. Each of the officers and
directors of the Company who have participated in the preparation and/or
negotiation of this Agreement either (a) has a sufficient command of the English
language to understand the full intent of each provision of this Agreement or
(b) has consulted with such advisors of the Company who have such command of the
English language to ensure that such officer and/or director understands the
full intent of each provision of this Agreement.
4. REPRESENTATIONS OF THE BUYER AND THE PARENT.
Each of the Parent and the Buyer jointly and severally represents and
warrants to each Stockholder as follows:
25
4.1 ORGANIZATION AND AUTHORITY. The Buyer is a corporation
(kabushiki kaisha) duly organized and validly existing under the laws of Japan,
and has all requisite power and authority to own its properties and to carry on
its business as now being conducted. The Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite power and authority to own its properties and to carry on
its business as now being conducted. The Parent owns, directly or indirectly
through its subsidiaries, all of the outstanding capital stock of the Buyer.
Each of the Buyer and the Parent has full power to execute and deliver this
Agreement and the agreements contemplated herein to which it will be a party,
and each of the Buyer and the Parent has full power to consummate the
transactions contemplated hereby and thereby. Certified copies of the corporate
registry of the Buyer, and the Certificate of Incorporation of the Parent, have
been previously made available to the Stockholders, are complete and correct,
and no amendments have been made thereto or have been authorized since the date
thereof.
4.2 CAPITALIZATION OF THE PARENT. On September 30, 2001, the
Parent's authorized capital stock consisted of (a) 55 million shares of common
stock, $0.001 par value, of which 31,810,745 shares were issued and outstanding,
and (b) 1,000,000 shares of preferred stock, $0.001 par value per share, none of
which were issued or outstanding.
4.3 AUTHORIZATION. The execution and delivery of this
Agreement by each of the Parent and the Buyer, and the agreements provided for
herein, and the consummation by each of the Parent and the Buyer of the
transactions contemplated hereby and thereby, have been, or will be prior to the
Closing, duly authorized by all requisite corporate action. This Agreement and
all such other agreements and written obligations entered into and undertaken in
connection with the transactions contemplated hereby constitute the valid and
legally binding obligations of each of the Parent and the Buyer, enforceable
against such party in accordance with their respective terms, except as
enforceability of the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by the exercise of judicial discretion in accordance with general
principles applicable and similar remedies. Except as will be set forth in
Schedule 4.3 as of the Closing Date, the execution, delivery and performance of
this Agreement and the agreements provided for herein, and the consummation by
each of the Buyer and the Parent of the transactions contemplated hereby and
thereby, will not, with or without the giving of notice or the passage of time
or both, (a) violate the provisions of any law, rule or regulation applicable to
the Buyer or the Parent; (b) violate the provisions of the Articles of
Incorporation of the Buyer or the Certificate of Incorporation of the Parent;
(c) violate any judgment, decree, order or award of any court, governmental body
or arbitrator specifically naming the Buyer or the Parent; or (d) conflict with
or result in the breach or termination of any term or provision of, or
constitute a default under, or cause any acceleration under, or cause the
creation of any lien, charge or encumbrance upon the properties or assets of the
Buyer or the Parent pursuant to, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Buyer or the Parent is a party or by which
either the Buyer or the Parent is or may be bound. As of the Closing, Schedule
4.3 will set forth a true, correct and complete list of all consents and
approvals of third parties that are required in connection with the consummation
by each of the Parent and the Buyer of the transactions contemplated by this
Agreement.
26
4.4 REGULATORY APPROVALS. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or regulation
which must be obtained or satisfied by the Parent or the Buyer and which are
necessary for the consummation of the transactions contemplated by this
Agreement have been, or will be prior to the Closing Date, obtained and
satisfied.
4.5 PARENT REPORTS AND FINANCIAL STATEMENTS. The Parent has
previously furnished to the Stockholders the Annual Report of the Parent on Form
10-K for the year ended December 31, 2000, and the Quarterly Reports of the
Parent on Form 10-Q for the quarters ended March 31, 2001, June 30, 2001 and
September 30, 2001 (collectively, the "Parent Reports"). The financial
statements of the Parent included in the Parent Reports (i) comply as to form
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto and (ii) fairly present the consolidated
financial condition, results of operations and cash flows of the Parent as of
the respective dates thereof and for the periods referred to therein in
accordance with GAAP.
4.6 INVESTMENT REPRESENTATION. The Buyer is acquiring the
Shares from each Stockholder for its own account for investment and not with a
view to, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the same; and, except as
contemplated by this Agreement and the agreements contemplated herein, the Buyer
has no present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof.
5. ACCESS TO INFORMATION; PUBLIC ANNOUNCEMENTS.
5.1 ACCESS TO MANAGEMENT, PROPERTIES AND RECORDS.
(a) From the date of this Agreement until the Closing
Date, the Stockholders and the Company shall afford the officers, attorneys,
accountants and other authorized representatives of the Buyer and the Parent
free and full access upon reasonable notice and during normal business hours to
all management personnel, offices, properties, books and records of the Company
and the Subsidiaries, so that the Buyer and the Parent may have full opportunity
to make such investigation as it shall desire to make of the management,
business, properties (including conducting environmental surveys and property
appraisals) and affairs of the Company and the Subsidiaries, and the Buyer and
the Parent shall be permitted to make abstracts from, or copies of, all such
books and records and to take survey samples from such real property. The
Stockholders and the Company shall furnish to the Buyer or the Parent, as
applicable, such financial and operating data and other information as to the
business of the Company and the Subsidiaries as the Buyer or the Parent shall
reasonably request.
(b) The Stockholders and the Company shall authorize
the release to the Buyer and the Parent of all files pertaining to the business
or operations of the Company and the Subsidiaries held by any governmental
authorities, agencies or instrumentalities. The Stockholders' and the Company's
authorization shall specifically waive all previous claims of privilege or other
restrictions, and in any case where a release by a present or former officer,
director, partner, member, or employee of the Company or any Subsidiary is
necessary, the Stockholders and the Company shall exercise their best efforts to
obtain such a release.
27
(c) All information concerning the Company or its
Subsidiaries that is disclosed to the Buyer or the Parent shall be treated as
confidential information protected from unauthorized disclosure pursuant to the
Confidentiality Agreement referred to in Section 17.
5.2 PUBLIC ANNOUNCEMENTS. The parties agree that prior to the
Closing Date any and all general public pronouncements or other general public
communications by any party hereto concerning this Agreement and the purchase
and sale of the Shares, and the timing, manner and content of such disclosures,
shall be subject to the mutual agreement of the Company, the Stockholders'
Representative and the Buyer, except to the extent that such pronouncement or
communication is required by applicable law or regulation, including without
limitation the regulations of the Nasdaq National Market.
5.3 INFORMATION TO MINORITY STOCKHOLDERS. The Stockholders and
the Company shall provide or make available to each of the Minority Stockholders
all of the information relating to the transactions contemplated by this
Agreement or the Company's business, operations, financial condition and
prospects that (a) is required by applicable law to be provided to such person
in connection with his, her or its (i) evaluation of a Minority
Stock Purchase
Agreement or the transactions contemplated thereby, or (ii) execution and
delivery of a Minority
Stock Purchase Agreement; or (b) has been requested by
such Minority Stockholder in connection with his, her or its evaluation of a
Minority
Stock Purchase Agreement and the transactions contemplated thereby. The
Stockholders who are members of management of the Company shall make themselves
available to the Minority Stockholders in order to give the Minority
Stockholders the opportunity to ask questions (and receive answers) relating to
the transactions contemplated by this Agreement or the Company's business,
operations, financial condition and prospects. For purposes of this Section 5.3,
references to the Company's business, operations, financial condition and
prospects shall mean the business, operations, financial condition and prospects
of the Company and its Subsidiaries.
6. PRE-CLOSING COVENANTS.
From and after the date hereof and until the Closing Date:
6.1 CONDUCT OF BUSINESS. The Company shall, and shall cause
the Subsidiaries to, carry on their business diligently and substantially in the
same manner as heretofore conducted and shall not, and shall cause the
Subsidiaries not to, (a) make or institute any unusual or new methods of
manufacture, purchase, sale, shipment or delivery, lease, management, accounting
or operation, or (b) ship or deliver any quantity of products in excess of
normal shipment or delivery levels, except as agreed to in writing by the Buyer.
All of the property of the Company and the Subsidiaries shall be used, operated,
repaired and maintained in a normal business manner consistent with past
practice.
6.2 ABSENCE OF MATERIAL CHANGES. Without the prior written
consent of the Buyer, the Company shall not, and shall cause the Subsidiaries
not to:
(a) take any action to amend its respective charter,
or bylaws (if any)
28
(b) issue any stock, bonds or other corporate
securities or grant any option or issue any warrant to purchase or subscribe for
any of such securities or issue any securities convertible into such securities;
(c) incur any debt for borrowed money or incur any
other obligation or liability (absolute or contingent) that (i) is in excess of
Y.30 million, except current liabilities incurred and obligations under
contracts entered into in the Ordinary Course of Business, or (ii) causes the
Company's Total Debt (as defined in Section 8.10) to exceed Y.4.6 billion;
(d) declare or make any payment or distribution to
its stockholders with respect to its stock or purchase or redeem any shares of
its capital stock;
(e) mortgage, pledge, or subject to any lien, charge
or any other encumbrance any of their respective assets or properties;
(f) sell, assign, or transfer any of its assets,
except for inventory sold in the Ordinary Course of Business, at a normal profit
margin, and for not less than replacement cost;
(g) cancel any debts or claims, except in the
Ordinary Course of Business;
(h) merge or consolidate with or into any corporation
or other entity;
(i) make, accrue or become liable for any bonus,
profit sharing or incentive payment, except for accruals under existing plans,
if any, or increase the rate of compensation payable or to become payable by it
to any of its officers, directors or employees, other than increases in the
Ordinary Course of Business;
(j) make any election or give any consent under any
relevant tax statutes or make any termination, revocation or cancellation of any
such election or any consent or compromise or settle any claim for past or
present tax due;
(k) waive any rights of material value;
(l) modify, amend, alter or terminate any of its
material contracts;
(m) take or permit any act or omission constituting a
breach or default under any contract, indenture or agreement by which it or its
properties are bound;
(n) fail to (i) preserve the possession and control
of its assets and business, (ii) keep in faithful service its present officers
and key employees, (iii) preserve the goodwill of its consumers, suppliers,
agents, brokers and others having business relations with it, and (iv) keep and
preserve its business existing on the date hereof;
(o) fail to operate its business and maintain its
books, accounts and records in the customary manner and in the Ordinary Course
of Business and maintain in good repair its business premises, fixtures,
machinery, furniture and equipment;
29
(p) enter into any lease, contract, agreement or
understanding, other than those entered into in the Ordinary Course of Business
calling for payments which in the aggregate do not exceed Y.12 million for each
such lease, contract, agreement or understanding;
(q) incur any capital expenditure in excess of Y.12
million in any instance or Y.24 million in the aggregate;
(r) engage any new employee for a salary in excess of
Y.7.3 million per annum;
(s) materially alter the terms, status or funding
condition of any Employee Plan; or
(t) commit or agree to do any of the foregoing in the
future.
6.3 DELIVERY OF INTERIM FINANCIAL STATEMENTS.
(a) As promptly as possible following execution of
this Agreement, the Stockholders or the Company shall deliver to the Buyer and
the Parent the unaudited balance sheet of the Company and the Subsidiaries as of
September 30, 2001 and the related unaudited statements of income, stockholders'
equity, retained earnings and cash flows for the quarter then ended (the
"September 2001 Financial Statements"), certified by the chief financial officer
of the Company to the effect that such interim financial statements fairly
present the financial condition of the Company as of the date thereof and for
the period covered thereby.
(b) As promptly as possible following November 30,
2001, but in any event at least 2 business days prior to the Closing, the
Stockholders or the Company shall deliver to the Buyer and the Parent the
balance sheet of the Company and the Subsidiaries as of November 30, 2001 and
the related statements of income, stockholders' equity, retained earnings and
cash flows for the quarter then ended (the "November 2001 Financial Statements"
and, together with the September 2001 Financial Statements and the December 2001
Financial Statements (as defined in Section 11.5), the "Interim Financial
Statements"), certified by the chief financial officer of the Company to the
effect that such interim financial statements fairly present the financial
condition of the Company as of the date thereof and for the period covered
thereby. The Company shall cause its independent accountants to perform agreed
upon procedures on the November 2001 Financial Statements and shall deliver the
results of such procedures (the "Interim Report") to the Buyer and the Parent at
least 2 business days prior to the Closing. The Buyer's independent accountants
also shall be entitled to review the November 2001 Financial Statements and the
performance by the Company's independent accountants of the agreed upon
procedures. The Buyer's independent accountants shall be given full access to
the information made available to, and work papers of, the Company's independent
accountants, as well as such further information as the Buyer's independent
accountants shall request in connection with their review of the November 2001
Financial Statements. Any comments of the Buyer's independent accountants with
respect to the November 2001 Financial Statements shall be addressed or
reflected in the Interim Report, if the Buyer's independent accountants deem
such comments to be relevant to the Interim Report.
30
6.4 COMMUNICATIONS WITH CUSTOMERS AND SUPPLIERS.
(a) Unless instructed otherwise by the Buyer in
writing, the Company shall, and shall cause each of the Subsidiaries to,
continue to accept customer orders in the Ordinary Course of Business for all
products offered by the Company and the Subsidiaries but expected to be shipped
after the Closing Date.
(b) The Company and the Buyer shall, and the Company
shall cause the Subsidiaries to, cooperate in communications with suppliers and
customers to advise them of the transfer of the Shares to the Buyer on the
Closing Date and to facilitate continuity in the existing relationships with
suppliers and customers.
(c) The Company shall, and shall cause each of the
Subsidiaries to, provide the Buyer and the Parent with access to the Customers
in order to enable the Buyer and the Parent to conduct due diligence reviews
("Customer Reviews") of any and all aspects of the Customers' current and
anticipated future relationships with the Company and the Subsidiaries. The
Company shall use its best efforts to assist the Buyer and the Parent in
arranging and facilitating Customer Reviews, at the Buyer's or the Parent's
request.
6.5 COMPLIANCE WITH LAWS. The Company shall, and shall cause
each of the Subsidiaries to, comply with all laws and regulations which are
applicable to it or to the conduct of its business and will perform and comply
with all contracts, commitments and obligations by which they are bound.
6.6 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES. None of
the Stockholders nor the Company shall, and the Company shall cause the
Subsidiaries not to, take any actions which would result in any of the
representations or warranties set forth in Sections 2 and 3 hereof being untrue.
Neither the Parent nor the Buyer shall take any actions which would result in
any of the representations or warranties set forth in Section 4 hereof being
untrue.
6.7 CONTINUING OBLIGATION TO INFORM. From time to time prior
to the Closing, the Company and the Stockholders will deliver or cause to be
delivered to the Buyer supplemental information concerning events subsequent to
the date hereof which would render any statement, representation or warranty in
this Agreement or any information contained in any Schedule attached hereto
inaccurate or incomplete in any material respect at any time after the date
hereof until the Closing Date. None of such supplemental information shall
constitute an amendment of any statement, representation or warranty in this
Agreement or any Schedule, Exhibit or document furnished pursuant hereto unless
the provisions of Section 17 regarding amendments are complied with.
6.8 EXCLUSIVE DEALING. None of the Stockholders nor the
Company will, directly or indirectly, through any officer, director, agent or
otherwise, (a) solicit, initiate or encourage submission of proposals or offers
from any person relating to an acquisition or purchase of all or a material
portion of the assets of or an equity interest in the Company or any of the
Subsidiaries or any merger, consolidation or business combination with the
Company or any of the Subsidiaries, or (b) participate in any discussions or
negotiations regarding, or furnish to any other person, any non-public
information with respect to or otherwise cooperate in any
31
way with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other person to do or seek any of the foregoing. The Stockholders
and the Company agree to, and shall cause the Subsidiaries to, promptly notify
the Buyer of any such proposal or offer, or any inquiry or contact with respect
thereto received by the Company, any of the Stockholders or any Subsidiary.
6.9 REPORTS, TAXES. The Company shall, and shall cause the
Subsidiaries to, duly and timely file all reports or returns required to be
filed with federal, state, local and foreign authorities and will promptly pay
all federal, state, local and foreign taxes, assessments and governmental
charges levied or assessed upon them or any of their properties (unless
contesting such in good faith and adequate provision has been made therefor).
7. BEST EFFORTS TO OBTAIN SATISFACTION OF CONDITIONS AND CONTINUATION
OF CREDIT.
The Stockholders, the Company, the Buyer and the Parent
covenant and agree to, and the Stockholders and the Company shall cause the
Subsidiaries to, use their best efforts to (a) obtain the satisfaction of the
conditions specified in this Agreement, and (b) cause the Company's banks and
other lenders to continue in place the Company's credit arrangements on at least
as favorable terms as are currently applicable to the Company.
8. CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE PARENT.
The obligations of the Buyer and the Parent under this
Agreement are subject to the fulfillment, at the Closing Date, of the following
conditions precedent, each of which may be waived in writing in the sole
discretion of the Buyer:
8.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE
STOCKHOLDERS AND THE COMPANY; COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The
representations and warranties of the Stockholders and the Company set forth in
this Agreement shall be true and correct as of the date of this Agreement and
shall be true and correct in all material respects as of the Closing Date as
though made as of the Closing Date. Each of the Stockholders and the Company
shall have performed and complied with, and the Stockholders and the Company
shall have caused each of the Subsidiaries to perform and comply with, all
terms, conditions, covenants, obligations, agreements and restrictions required
by this Agreement to be performed or complied with by each of them prior to or
at the Closing Date. At the Closing, the Stockholders and the Company shall have
delivered to the Buyer a certificate signed by the Stockholders' Representative
on behalf of the Stockholders and the President of the Company, as to their
compliance with this Section 8.1.
8.2 NO MATERIAL ADVERSE CHANGE. From the date of the Current
Balance Sheet until the Closing, there shall be no material adverse change in
the Company's business, financial condition, prospects, assets, properties or
operations. Without the prior written consent of the Buyer, neither the Company
nor the Subsidiaries shall have taken any of the actions set forth in Section
6.2 hereof.
8.3 GOVERNMENTAL APPROVALS. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by the
32
Stockholders, the Company or the Subsidiaries of the transactions contemplated
by this Agreement and the operation of the business of the Company and the
Subsidiaries by the Buyer, shall have consented to, authorized, permitted or
approved such transactions. Without limiting the generality of the foregoing,
the Buyer and the Parent shall not be obligated to complete the transactions
contemplated by this Agreement, if doing so would violate the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1974.
8.4 CONSENT OF LESSORS AND OTHER THIRD PARTIES. The
Stockholders, the Company and the Subsidiaries shall have received (without the
payment of any consideration, the waiving of any right or the incurring of any
new obligation or liability by the Company, the Buyer or the Parent) all
requisite consents and approvals of all lessors and other third parties (other
then the Company's banks) whose consent or approval is required in order for the
Stockholders and the Company to consummate the transactions contemplated by this
Agreement, including without limitation those set forth on Schedule 3.4 attached
hereto. All such consents and approvals shall be in form and substance
reasonably acceptable to the Buyer.
8.5 ADVERSE PROCEEDINGS. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or which
might affect the right of the Buyer to own the Shares or to own or operate the
business of the Company and the Subsidiaries after the Closing.
8.6 OPINION OF COUNSEL. The Buyer shall have received an
opinion of Hatasawa & Wakai, counsel to the Stockholders, the Company and the
Subsidiaries (except Aera Corporation), dated as of the Closing Date, in
substantially the form attached hereto as Exhibit C-1, and an opinion of
Fulbright & Xxxxxxxx, counsel to Aera Corporation, dated as of the Closing Date,
in substantially the form attached hereto as Exhibit C-2, and as to such other
matters as may be reasonably requested by the Buyer or its counsel.
8.7 NON-COMPETITION AGREEMENTS. On or prior to the Closing
Date, each of the Continuing Directors (as defined in Section 11.4) shall have
entered into a non-competition and non-solicitation agreement with the Company
and the Buyer, in substantially the forms attached hereto as Exhibit D
(collectively, the "Non-Competition Agreements"), and each of the
Non-Competition Agreements shall be in full force and effect as of the Closing.
8.8 ENVIRONMENTAL REPORT. On or prior to the Closing Date, the
Buyer shall be reasonably satisfied with the results of any environmental survey
of any property of the Company or any Subsidiary, whether such surveys are
currently existing or conducted by or on behalf of the Buyer in connection with
the transactions contemplated by this Agreement.
8.9 CUSTOMER RELATIONSHIPS. The Buyer and the Parent shall not
have learned, whether through the Customer Reviews or otherwise, of any facts or
circumstances that (a) indicate that the representations and warranties set
forth in Section 3.22 relating to the Customers are not accurate and complete in
all material respects, (b) are reasonably likely to result in such
representations and warranties not being accurate and complete in all material
respects following the Closing, or (c) are reasonably likely to have a material
adverse effect on the Company's sales to or relationship with any Customer. Such
facts or circumstances include
33
without limitation a Customer's stated intent to discontinue or significantly
reduce (other than as a result of economic or industry conditions) its business
with the Company or any of the Subsidiaries, a Customer's stated dissatisfaction
with the quality of products purchased from or offered by the Company, the
failure of the Company to have in its current product offerings products that
meet the current and anticipated mass flow control needs of any of the
Customers, a Customer complaint with respect to the Company's products,
technology, personnel or business practices such that the Buyer and the Parent
reasonably believe that the Customer is likely to reduce or discontinue the
level of its purchases from the Company, and any other material issue in respect
of the Company's or a Subsidiary's relationship with a Customer, which issue
cannot be remedied in the ordinary course of business.
8.10 SATISFACTORY NOVEMBER 2001 FINANCIAL STATEMENTS. The
November 2001 Financial Statements, after agreed upon procedures have been
performed and any adjustments suggested or referred to in the Interim Report
have been made, shall reflect the following financial results:
o Total revenues for the five months ended November 30,
2001 not less than Y.2.4 billion
o Gross margin for the five months ended November 30,
2001 not less than 30%
o Stockholders' equity as of November 30, 2001 not less
than Y.3.0 billion
o Total Debt as of November 30, 2001 not more than
Y.4.3 billion
"Total Debt" for purposes of this Section 8.10 and Sections 6.2 and 11.5 shall
mean the aggregate of (a) short-term debt of Current Liabilities, (b) current
maturities of long-term debt of Current Liabilities and (c) long-term debt, less
current maturities, of Long-Term Liabilities (as such capitalized terms are used
in the Audited Financial Statements and the November 2001 Financial Statements).
8.11 EXERCISE OF WARRANT. On or prior to the Closing Date, Xx.
Xxxxxx shall have exercised his warrant to purchase 5,000 shares of Common Stock
of the Company (the "Aoyama Warrant"), in accordance with the terms of the
warrant, and shall have paid to the Company the warrant exercise price of Y.100
million.
8.12 REPAYMENT OF AOYAMA LOANS. On or prior to the Closing
Date, Hisanori Aoyama shall have repaid to the Company (a) the full amount of
principal and unpaid interest outstanding as of the time of repayment under the
loan agreement dated as of November 10, 2000 between Xx. Xxxxxx and the Company,
and (b) all other amounts owing on or prior to the Closing by Xx. Xxxxxx to the
Company.
8.13 AOYAMA INDEMNIFICATION AGREEMENT. The Aoyama
Indemnification Agreement shall be in full force and effect.
8.14 SALE OF SHARES OF COMMON STOCK BY SELLING MINORITY
STOCKHOLDERS. The Selling Minority Stockholders shall, simultaneously with the
Closing and in accordance with
34
Minority
Stock Purchase Agreements, sell to the Buyer that number of Minority
Shares that, together with the Shares, represent at least 97.1% of the issued
and outstanding shares of capital stock of the Company at the Closing.
8.15 CLOSING DELIVERIES. The Buyer shall have received at or
prior to the Closing such documents, instruments or certificates as the Buyer
may reasonably request including, without limitation:
(a) the stock certificates representing the Shares;
(b) such certificates of the Company's officers and
directors and of the Stockholders and such other documents evidencing
satisfaction of the conditions specified in this Section 8 as the Buyer shall
reasonably request;
(c) a certified copy of the commercial registry
(tokibo-tohon) of the Company issued by the Japanese Legal Affairs Bureau as to
the legal existence of the Company in Japan and certificates of the appropriate
governmental agency as to the legal existence and good standing (if applicable)
of each of the Subsidiaries in their respective jurisdictions of organization;
(d) certificates of an authorized director of the
Company attesting to the incumbency of the Company's officers, the authenticity
of the resolutions authorizing the transactions contemplated by this Agreement
(an executed original of such resolutions to be attached to such certificate),
and the authenticity and continuing validity of the Articles of Incorporation
delivered pursuant to Section 3.1;
(e) where required by the applicable Lease, estoppel
certificates from each lessor from whom the Company or any Subsidiary leases
real or personal property consenting to the acquisition of the Shares by the
Buyer and the other transactions contemplated hereby, and representing that
there are no outstanding claims against the Company or such Subsidiary under
such Lease;
(f) where required by the applicable Lease, estoppel
certificates from each tenant to whom the Company or any Subsidiary leases real
property consenting to the acquisition of the Shares by the Buyer and the other
transactions contemplated hereby, and representing that there are no outstanding
claims against the Company or such Subsidiary under such Lease;
(g) certificates of appropriate governmental
officials in each jurisdiction (other than Japan) in which the Company or any
Subsidiary is required to qualify to do business as a foreign corporation as to
the due qualification and good standing (including tax) of the Company or
Subsidiary, as the case may be;
(h) written resignation of the Company's statutory
auditor, effective upon the Closing;
35
(i) the written resignation of each non-employee
officer and director of the Company or a Subsidiary as the Buyer, on or prior to
December 20, 2001, shall have requested the Company or the Stockholders to
obtain;
(j) the original corporate minute books of the
Company and all corporate seals;
(k) a cross receipt executed by the Stockholders;
(l) stock certificates representing the Minority
Shares being sold by the Selling Minority Stockholders, which together with the
Shares, will equal 97.1% or more of all the outstanding shares of capital stock
of the Company; and
(m) the Minority Stock Purchase Agreements, executed
by the Selling Minority Stockholders, and any certificates, documents or other
papers required to be delivered by the Selling Minority Stockholders at the
closing of the Minority Stock Purchase Agreements.
9. CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDERS.
The obligations of the Stockholders under this Agreement are subject to
the fulfillment, at the Closing Date, of the following conditions precedent,
each of which may be waived in writing in the sole discretion of the
Stockholders' Representative, who shall have the power and authority to bind all
of the Stockholders:
9.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE
BUYER AND THE PARENT; COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The
representations and warranties of the Buyer and the Parent set forth in this
Agreement shall be true and correct as of the date of this Agreement and shall
be true and correct as of the Closing Date as though made as of the Closing
Date, except to the extent that the inaccuracy of any such representation or
warranty is the result of events or circumstances occurring subsequent to the
date of this Agreement and any such inaccuracies, individually or in the
aggregate, would not have a material adverse effect on the ability of the
parties to consummate the transactions contemplated by this Agreement (it being
agreed that any materiality qualifications contained in certain representations
and warranties shall be disregarded in determining whether any such inaccuracies
would have a material adverse effect for purposes of this Section 9.1). The
Buyer shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
9.2 CORPORATE PROCEEDINGS. All corporate and other proceedings
required to be taken on the part of the Buyer and the Parent to authorize or
carry out this Agreement shall have been taken.
9.3 GOVERNMENTAL APPROVALS. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by the Buyer of the transactions contemplated by
this Agreement shall have consented to, authorized, permitted or approved such
transactions.
36
9.4 CONSENTS OF LESSORS AND OTHER THIRD PARTIES; RELEASE OF
GUARANTEE. The Buyer shall have received all requisite consents and approvals of
all lessors and other third parties (other than the Buyer's banks) whose consent
or approval is required in order for the Buyer to consummate the transactions
contemplated by this Agreement. Effective on or prior to the Closing, Xx. Xxxxxx
shall be released from all guarantee obligations relating to the Company's bank
indebtedness and equipment leases, which guarantee obligations are set forth on
Schedule 9.4 attached hereto.
9.5 ADVERSE PROCEEDINGS. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or which
might affect the right of the Stockholders to transfer the Shares.
9.6 DIRECTORS' AND STATUTORY AUDITOR'S RELEASES. The Buyer
shall have provided to each of the persons serving as a director or statutory
auditor of the Company immediately prior to the Closing a release substantially
in the form attached hereto as Exhibit E.
9.7 OPINION OF COUNSEL. The Stockholders shall have received
opinions of Mitsui, Yasuda, Wani & Maeda, Japanese counsel to the Buyer and the
Parent, dated as of the Closing Date, in substantially the form attached hereto
as Exhibit F-1 and of Xxxxxx Xxxx & Priest LLP, U.S. counsel to the Buyer and
the Parent, dated as of the Closing Date, in substantially the form attached
hereto as Exhibit F-2, and as to such other matters as may be reasonably
requested by the Stockholders' Representative or its counsel.
9.8 CLOSING DELIVERIES. The Stockholders shall have received
at or prior to the Closing such documents, instruments or certificates as the
Stockholders' Representative may reasonably request including, without
limitation:
(a) such certificates of the Buyer's officers and
such other documents evidencing satisfaction of the conditions specified in this
Section 9 as the Stockholders' Representative shall reasonably request;
(b) a certified copy of the corporate registry of the
Buyer issued by the local legal affairs bureau as to the legal existence of the
Buyer in Japan, and a certificate of the Secretary of State of Delaware as to
the legal existence and good standing of the Parent in Delaware;
(c) a certificate of each of the Secretary of the
Parent and an authorized director of the Buyer attesting to the incumbency of
the Buyer's and the Parent's officers, respectively, the authenticity of the
resolutions authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents and by-laws
delivered pursuant to Section 4.1;
(d) payment of the Purchase Price less the Escrow
Amount and the amount deliverable to the Escrow Agent pursuant to the Aoyama
Indemnification Agreement; and
37
(e) a cross receipt executed by the Buyer.
10. INDEMNIFICATION.
10.1 BY THE STOCKHOLDERS AND THE COMPANY. Subject to the
limitations set forth in this Section 10, if the Closing occurs, the
Stockholders, jointly and severally, hereby indemnify and hold harmless the
Buyer and the Company, and if the Closing does not occur, the Stockholders and
the Company, jointly and severally, hereby indemnify and hold harmless the
Buyer, from and against all claims, damages, losses, liabilities, costs and
expenses (including, without limitation, settlement costs and any legal,
accounting or other expenses for investigating or defending any actions or
threatened actions) (collectively, "Losses") in connection with each and all of
the following:
(a) any misrepresentation or breach of any
representation or warranty made by any of the Stockholders or the Company in
this Agreement;
(b) any breach of any covenant, agreement or
obligation of any of the Stockholders or the Company contained in this Agreement
or any other agreement, instrument or document contemplated by this Agreement
(excluding such breaches by the Company occurring after the Closing);
(c) any misrepresentation contained in any statement,
certificate or schedule furnished by any of the Stockholders or the Company
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement;
(d) any violation by the Company of, or any failure
by the Company to comply with, any law, ruling, order, decree, common law
doctrine, regulation or zoning, environmental or permit requirement applicable
to the Company, its assets or its business, occurring or commencing before the
Closing Date, whether or not any such violation or failure to comply has been
disclosed to the Buyer, including any costs incurred by the Buyer (A) in order
to bring the Company into compliance with environmental laws as a consequence of
noncompliance with such laws on or before the Closing Date or (B) in connection
with the transfer of the Shares;
(e) any warranty claim or product liability claim
relating to (i) products manufactured or sold by the Company prior to the
Closing Date or (ii) the Company's business or operation prior to the Closing
Date;
(f) any tax liabilities or obligations of the Company
relating to the Company's business or operation prior to the Closing Date;
(g) any claims against, or liabilities or obligations
of, the Company with respect to obligations under Employee Plans which are
outstanding on or prior to the Closing Date;
(h) the release or threatened release of any Material
of Environmental Concern on or affecting any real property or facility formerly
or currently owned, leased,
38
occupied or controlled by the Company or any Subsidiary, which occurred prior to
the Closing Date;
(i) the release or threatened release of any Material
of Environmental Concern at any facility or location to which waste of the
Company or any Subsidiary has been transported prior to the Closing for
processing, treatment, storage or disposal; and
(j) any forward contract or option or other hedging
instrument purchased or entered into by the Buyer or the Parent in anticipation
of the Closing, if the Closing does not occur as a result of the Company's or
any Stockholder's failure to satisfy the conditions set forth in Section 8;
provided that, if the Closing occurs, the Stockholders shall not be liable to
the Buyer under this Section 10.1 to the extent that such Losses were
specifically reserved for on the Current Balance Sheet, and provided further
that, if the Closing occurs, the Stockholders shall be liable for such Losses in
excess of such reserves, subject to the limitations set forth in this Section
10.
10.2 BY THE BUYER AND THE PARENT. The Buyer and the Parent,
jointly and severally, hereby indemnify and hold harmless the Stockholders and,
if the Closing does not occur, the Stockholders and the Company, from and
against all losses in connection with each and all of the following:
(a) any misrepresentation or breach of any
representation or warranty made by the Buyer or the Parent in this Agreement;
(b) any breach of any covenant, agreement or
obligation of the Buyer or the Parent contained in this Agreement or any other
agreement, instrument or document contemplated by this Agreement; and
(c) any misrepresentation contained in any statement,
certificate or schedule furnished by the Buyer or the Parent pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement.
10.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall
arise for indemnification under this Section 10, the Buyer, the Company or the
Stockholders, as the case may be, seeking indemnification (the "Indemnified
Party"), shall promptly notify the Stockholders' Representative (in the case
that the Buyer, or, if the Closing occurs, the Company is seeking
indemnification) or the Buyer (in the case that the Stockholders or, if the
Closing does not occur, the Company is seeking indemnification) (in each case,
the "Indemnifying Party") of the claim and, when known, the facts constituting
the basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice shall specify, if known, the amount or an estimate of
the amount of the liability arising therefrom. The Indemnified Party shall not
settle or compromise any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent, which shall not be
unreasonably withheld or delayed, of the Indemnifying Party, (who, in the case
of the Stockholders Representative shall have the power and authority to bind
all of the Stockholders); provided, however, that if suit shall have been
instituted against the Indemnified Party and the Indemnifying Party shall not
have taken control of such suit after
39
notification thereof as provided in Section 10.4 of this Agreement, the
Indemnified Party shall have the right to settle or compromise such claim upon
giving notice to the Indemnifying Party as provided in Section 10.4.
10.4 DEFENSE. In connection with any claim which may give rise
to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person other than the Indemnified Party, the Indemnifying Party,
at the sole cost and expense of the Indemnifying Party (or, in the case of the
Stockholders' Representative, at the sole cost and expense of the Stockholders),
may, upon written notice to the Indemnified Party, assume the defense of any
such claim or legal proceeding if the Indemnifying Party acknowledges to the
Indemnified Party in writing the obligation of the Indemnifying Party (or in the
case of the Stockholders' Representative, the Stockholders) to indemnify the
Indemnified Party with respect to all elements of such claim. If the
Indemnifying Party assumes the defense of any such claim or legal proceeding,
the Indemnifying Party shall select counsel reasonably acceptable to the
Indemnified Party to conduct the defense of such claims or legal proceedings and
at the sole cost and expense of the Indemnifying Party (or in the case of the
Stockholders' Representative, the sole cost and expense of the Stockholders)
shall take all steps necessary in the defense or settlement thereof. The
Indemnifying Party shall not consent to a settlement of, or the entry of any
judgment arising from, any such claim or legal proceeding, without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed). The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with its own
counsel and at its own expense. If the Indemnifying Party does not assume the
defense of any such claim or litigation resulting therefrom within 30 days after
the date such claim is made: (a) the Indemnified Party may defend against such
claim or litigation in such manner as it may deem appropriate, including, but
not limited to, settling such claim or litigation, after giving notice of the
same to the Indemnifying Party, on such terms as the Indemnified Party may deem
appropriate, and (b) the Indemnifying Party shall be entitled to participate in
(but not control) the defense of such action, with its counsel and at its own
expense (or in the case of the Stockholders' Representative, at the expense of
the Stockholders). If the Indemnifying Party (or, in the case of the
Stockholders' Representative, the Stockholders) thereafter seeks to question the
manner in which the Indemnified Party defended such third party claim or the
amount or nature of any such settlement, the Indemnifying Party (or, in the case
of the Stockholders, the Stockholders' Representative) shall have the burden to
prove by a preponderance of the evidence that the Indemnified Party did not
defend or settle such third party claim in a reasonably prudent manner.
10.5 PAYMENT OF INDEMNIFICATION OBLIGATION. The Company and
each of the Stockholders hereby agrees that any claim for indemnification by the
Buyer, or the Company (if the Closing occurs), under this Section 10 or under
any other provision of this Agreement shall be satisfied first from amounts
remaining in the Reserve Account in accordance with the Escrow Agreement. To the
extent that funds in the Reserve Account are insufficient to satisfy the claim,
the amount of the shortfall shall be paid to the Buyer or to the Company (if the
Closing occurs), as appropriate, directly by the Stockholders, or by the
Stockholders and the Company (if the Closing does not occur), jointly and
severally. All indemnification by an Indemnifying Party hereunder (to the extent
not satisfied in the manner specified in the preceding sentence), and any
indemnification by the Company if the Closing does not occur (to the extent not
satisfied in the
40
manner specified in the preceding sentence), shall be effected by immediate
payment of cash or delivery of a cashier's or certified check in the amount of
the indemnification liability.
10.6 SURVIVAL OF REPRESENTATIONS; CLAIMS FOR INDEMNIFICATION.
(a) All representations and warranties made by any of
the Parties in this Agreement, or in any instrument or document furnished in
connection with this Agreement or the transactions contemplated hereby, shall
survive the Closing and any investigation at any time made by or on behalf of
the Indemnified Party, and continue until 18 months after the Closing Date, and
shall not be affected by any examination made for or on behalf of an Indemnified
Party, except that (i) the representations and warranties contained in Sections
2, 3.1, 3.2, 3.3, 3.4, 4.1, 4.2 or 4.3 of this Agreement and in any certificate
delivered pursuant to this Agreement (insofar as such certificate relates to the
representations and warranties contained in such sections) shall survive the
Closing and continue without limitation, (ii) the representations and warranties
contained in Section 3.15 of this Agreement and in any certificate delivered
pursuant to this Agreement (insofar as such certificate relates to the
representations and warranties contained in such section) shall survive the
Closing and continue until the fourth anniversary of the Closing Date, except
for such representations and warranties relating to Aera Corporation, which
shall survive the Closing and continue until the third anniversary of the filing
of the final Aera Corporation tax return relating to the taxable period up to
the Closing, and (iii) the representations and warranties contained in Section
3.18 of this Agreement and in any certificate delivered pursuant to this
Agreement (insofar as such certificate relates to the representations and
warranties contained in such section) shall survive the Closing and continue
until the second anniversary of the Closing Date, except for such
representations and warranties relating to Aera Corporation, which shall survive
the Closing and continue until the third anniversary of the Closing Date. Any
claim asserted in writing prior to the expiration of the representation or
warranty that is the basis for such claim shall survive until such claim is
finally resolved and satisfied. Any claim not asserted in writing prior to the
expiration of the representation or warranty shall expire on the date that such
representation or warranty expires, and the Parties hereto covenant not to xxx,
and not to permit any other Indemnified Party to xxx, any Stockholder or the
Company (if the Closing does not occur) with respect to any such claims.
(b) Notwithstanding anything to the contrary herein:
(i) the Stockholders, and the Company (if the
Closing does not occur), shall not be liable under Section 10.1 unless and until
the aggregate Losses exceed Y.24 million, at which point the Stockholders, and
the Company (if the Closing does not occur), shall become liable for all of the
aggregate Losses; and
(ii) in no event shall the maximum liability
of the Stockholders (or, if the Closing does not occur, the combined maximum
liability of the Stockholders and the Company) under Section 10.1 exceed Y.1
billion.
provided that, in each case, such limitation shall not apply to a claim relating
to a breach of the representations and warranties set forth in Section 2.
41
(c) The Reserve Account is intended to secure the
indemnification obligations of the Stockholders, and the Company (if the Closing
does not occur), under this Agreement. However, subject to the limitation
provided in Section 10.6(b)(ii), the rights of the Buyer under this Section 10
shall not be limited to the Reserve Account nor shall the Reserve Account be the
exclusive means for the Buyer to enforce such rights.
(d) If the Closing occurs, no Stockholder shall have
any right of contribution against the Company with respect to any breach of any
of the representations, warranties, covenants or agreements under this Agreement
relating to the Company.
11. POST-CLOSING AGREEMENTS.
11.1 PROPRIETARY INFORMATION. The Stockholders agree that from
and after the Closing Date:
(a) Each of the Stockholders and each of their
Affiliates shall hold in confidence, and shall use their best efforts to have
all officers, directors and personnel who continue after the Closing to be
employed by any such Stockholder or any Affiliate thereof to hold in confidence,
all knowledge and information of a secret or confidential nature with respect to
the business of the Company and the Subsidiaries and not to disclose, publish or
make use of the same without the consent of the Buyer, except to the extent that
such information shall have become public knowledge other than by breach of this
Agreement by any of the Stockholders.
(b) If (i) the employment of an officer, director or
other employee of a Stockholder or any Affiliate thereof, to whom secret or
confidential knowledge or information concerning the business of the Company or
the Subsidiaries has been disclosed, is terminated and (ii) such individual is
subject to an obligation to maintain such knowledge or information in confidence
after such termination, the Stockholders shall, upon request by the Buyer, take
all reasonable steps at their expense to enforce such confidentiality obligation
in the event of an actual or threatened breach thereof. Any legal counsel
retained by any such Stockholder in connection with any such enforcement or
attempted enforcement shall be selected by such Stockholder, but shall be
subject to the approval of the Buyer, which approval shall not be unreasonably
withheld.
(c) Each Stockholder agrees that the remedy at law
for any breach of this Section 11.1 would be inadequate and that the Buyer shall
be entitled to injunctive relief in addition to any other remedy it may have
upon breach of any provision of this Section 11.1.
11.2 NO SOLICITATION OR HIRING OF FORMER EMPLOYEES. Except as
provided by law, for a period of two years after the Closing Date, no
Stockholder nor any Affiliate thereof shall (a) solicit any person who was an
employee, officer, director, partner or member of either the Company or any of
the Subsidiaries on the date hereof or the Closing Date to terminate his
employment or other fiduciary relationship with the Buyer (or the Company or any
of the Subsidiaries, as the case may be) or to become an employee, officer,
director, partner or member of such Stockholder or Affiliate, or (b) hire or
enter into a fiduciary relationship with any person who was such an employee,
officer, director, partner or member on the date hereof or on the Closing Date.
42
11.3 SEVERANCE AND RETIREMENT PAYMENTS. Within fifteen
business days following the Closing, the Company shall make a severance payment
to Xxxxxxxxx Xxxxxx and a retirement payment to Hisanori Aoyama, in the
respective amounts set forth on Schedule 11.3, provided that, in the case of the
severance payment, Xx. Xxxxxx is a statutory auditor of the Company immediately
prior to the Closing and that his service as such is terminated effective as of
the Closing.
11.4 COMPENSATION OF THE CONTINUING DIRECTORS.
(a) Following the Closing, (i) each of Xxxxx Xxxxxxxx
and Xxxxxx Xxxxxx (collectively, the "Continuing Directors") shall be a director
of the Company, and (ii) each of Hisanori Aoyama and Xxxxxx Xxxxxx shall be an
employee of the Company, the Buyer or one of such companies' respective
affiliates. Each of the Continuing Directors shall serve for a term of two years
commencing on the Closing Date, which term will be subject to renewal, on the
compensation terms set forth on Schedule 11.4.
(b) The retirement reserves that will be applicable
to the Continuing Directors as of the Closing Date is set forth on Schedule
11.4. Following the Closing until such time as the Continuing Directors have
been paid their retirement reserves, neither the Company nor the Buyer shall
cause any amendment to the Regulations Relating to Officers of the Company that
are in effect as of the date of this Agreement in any manner which would
adversely affect the Continuing Directors' retirement reserves. Until such time
as all of the Continuing Directors have retired and have been paid their
retirement reserves by the Company, the Parent shall maintain aggregate cash and
cash equivalents, as set forth in the Parent's consolidated financial statements
prepared in accordance with GAAP, at least equal to the amount of the retirement
reserves not paid to the Continuing Directors as of the date of the financial
statements (the "Remaining Reserves"). Compliance with this covenant shall be
monitored at the time that the Parent publicly files its quarterly financial
statements with the United States Securities and Exchange Commission. For
purposes of determining the Parent's compliance with this covenant, the amount
of the Remaining Reserves shall be converted into Japanese yen based upon the
exchange rate, as quoted by The Wall Street Journal, between the U.S. dollar and
the Japanese yen as of the date of the applicable financial statements.
11.5 DECEMBER 2001 FINANCIAL STATEMENTS. (a) Following the
Closing, the Buyer shall use commercially reasonable efforts to prepare the
balance sheet of the Company and the Subsidiaries as of December 31, 2001 and
the related statements of income, stockholders' equity, retained earnings and
cash flows for the six months then ended (the "December 2001 Financial
Statements"). The December 2001 Financial Statements shall be audited by the
Company's independent accountants. The Buyer's independent accountants also
shall be entitled to review the December 2001 Financial Statements and the
performance by the Company's independent accountants of the audit. The Buyer's
independent accountants shall be given full access to the information made
available to, and work papers of, the Company's independent accountants, as well
as such further information as the Buyer's independent accountants shall request
in connection with their review. Any comments of the Buyer's independent
accountants with respect to the December 2001 Financial Statements shall be
addressed or reflected in the audit report prepared by the Company's independent
accountants, if the Buyer's independent accountants deem such comments to be
relevant to the audit report. The Stockholders covenant
43
and warrant that the audited December 2001 Financial Statements will reflect the
following financial results:
o Stockholders' equity as of December 31, 2001 not less
than the lesser of (a) Y.3.0 billion and (b) the
stockholders' equity set forth in the November 2001
Financial Statements; and
o Total Debt as of December 31, 2001 not more than
Y.4.3 billion.
In the event of a breach of either prong of the foregoing covenant and warranty,
the amount of the shortfall shall be deemed to be a "Loss" for purposes of
Section 10.1 and the Buyer shall be entitled to recovery for such Loss in
accordance with Section 10; provided, however, that in the event that neither
the stockholders' equity nor the total debt comply with the foregoing, the Buyer
shall be entitled to recovery only for the amount of the shortfall in respect of
either the stockholders' equity or total debt, at Buyer's option.
12. TERMINATION OF AGREEMENT; OPTION TO PROCEED; DAMAGES.
12.1 TERMINATION BY LAPSE OF TIME. This Agreement shall
terminate at 5:00 p.m. Tokyo Time, on March 31, 2002, if the transactions
contemplated hereby have not been consummated, unless such date is extended by
the written consent of the Company, the Buyer and the Stockholders'
Representative (whose consent shall bind each of the Stockholders).
12.2 TERMINATION BY AGREEMENT OF THE PARTIES. This Agreement
may be terminated by the mutual written agreement of the parties hereto. In the
event of such termination by agreement, the Buyer shall not have any further
obligation or liability to the Stockholders or the Company under this Agreement,
and the Stockholders and the Company shall have no further obligation or
liability to the Buyer under this Agreement.
12.3 TERMINATION BY REASON OF BREACH. This Agreement may be
terminated by the Stockholders, if at any time prior to the Closing there shall
occur a breach of any of the representations, warranties or covenants of the
Buyer or the Parent or the failure by the Buyer or the Parent to perform any
condition or obligation hereunder. This Agreement may be terminated by the
Buyer, if at any time prior to the Closing there shall occur a breach of any of
the representations, warranties or covenants of the Stockholders or the Company
(including those made with respect to, or otherwise relating to, any of the
Subsidiaries) or the failure of the Stockholders or the Company to perform any
condition or obligation hereunder (including those made with respect to, or
otherwise relating to, any of the Subsidiaries) (such a breach or failure of any
of the Stockholders or the Company shall be referred to herein as a "Pre-Closing
Breach").
12.4 OPTION TO PROCEED.
(a) In the event of a Pre-Closing Breach by the
Stockholders or the Company, or the inability of the Stockholders to give title,
make conveyance or deliver possession of any of the Shares, or the inability of
the Stockholders or the Company to satisfy all of the terms and conditions
precedent to Closing as set forth in this Agreement, all as herein stipulated,
the Buyer may elect by written notice given to the Stockholders' Representative
and
44
the Company at or prior to the Closing Date either to (i) terminate this
Agreement, or (ii) extend the scheduled Closing Date by 30 days, during which
period the Stockholders shall use their best efforts to cure the Pre-Closing
Breach, remove all Share Encumbrances, if any, not permitted by the terms of
this Agreement, remove all other defects in title, and to deliver possession and
good, clear and marketable title to the Shares, and the Stockholders or the
Company (as the case may be) shall use their best efforts to satisfy all other
conditions to Closing as provided herein, and to make the assets of the Company
and the Subsidiaries conform to the provisions herein, as the case may be. If
the Stockholders or the Company (as the case may be) are unable, upon expiration
of such 30-day period, to cure the Pre-Closing Breach, remove all such
encumbrances and defects and to satisfy all such conditions to Closing, the
Buyer may elect, by written notice given to the Stockholders' Representative and
the Company, to (x) terminate this Agreement, (y) proceed with the Closing, or
(z) extend the Closing Date for an additional 30 days.
(b) If the Buyer elects to extend the Closing Date
for an additional 30 days pursuant to clause (z) of paragraph (a) above, the
Buyer and the Stockholders' Representative shall, within the 30-day period
specified in clause (z) of paragraph (a) above, agree upon the amount of the
diminution in the value of the Shares being transferred to the Buyer as a result
of the Pre-Closing Breach or the cost to the Buyer of curing the applicable
breach, failure or defect (the "Adjustment Amount"), and the Base Price shall be
reduced by the Adjustment Amount. The Buyer and the Stockholders' Representative
shall use their best efforts to agree upon the Adjustment Amount within such
30-day period; provided, however, that if the Buyer and the Stockholders'
Representative cannot agree upon the Adjustment Amount within such 30-day
period, the Buyer may terminate this Agreement.
12.5 AVAILABILITY OF REMEDIES AT LAW. In the event this
Agreement is terminated pursuant to the provisions of this Section 12, the
parties hereto shall have available to them all remedies afforded to them by
applicable law.
13. DISPUTE RESOLUTION.
13.1 GENERAL. In the event that any dispute should arise
between the parties hereto with respect to any matter covered by this Agreement,
including, without limitation, the calculation of the Adjustment Amount, the
occurrence of a Pre-Closing Breach or any claims for indemnification under
Section 10 hereof, the parties hereto shall resolve such dispute in accordance
with the procedures set forth in this Section 13.
13.2 CONSENT OF THE PARTIES. In the event of any dispute
between the parties with respect to any matter covered by this Agreement, the
parties shall first use their best efforts to resolve such dispute among
themselves. If the parties are unable to resolve the dispute within 30 calendar
days after the commencement of efforts to resolve the dispute, or within 30
calendar days after the Closing Date in connection with any dispute in the
Adjustment Amount, the dispute will be submitted to arbitration in accordance
with Section 13.3 hereof.
13.3 ARBITRATION.
(a) Either the Parent or the Buyer, on the one hand,
or the Stockholders' Representative or (if the Closing does not occur) the
Company, on the other hand,
45
may submit any matter referred to in Section 13.1 hereof to arbitration by
notifying the other party hereto and the Escrow Agent, in writing, of such
dispute. Within 10 days after receipt of such notice, the Parent and/or the
Buyer and the Stockholders' Representative and/or the Company shall designate in
writing one arbitrator to resolve the dispute; provided, that if the parties
hereto cannot agree on an arbitrator within such 10-day period, the arbitrator
shall be selected by the Japan Commercial Arbitration Association ("JCAA"). The
arbitrator so designated shall not be an employee, consultant, officer, director
or stockholder of any party hereto or any Affiliate of any party to this
Agreement.
(b) Within 15 days after the designation of the
arbitrator, the arbitrator, the Parent and/or the Buyer and the Stockholders'
Representative and/or the Company shall meet, at which time the Parent and/or
the Buyer and the Stockholders' Representative and/or the Company shall be
required to set forth in writing all disputed issues and a proposed ruling on
each such issue.
(c) The arbitrator shall set a date for a hearing,
which shall be no later than 30 days after the submission of written proposals
pursuant to paragraph (b) above, to discuss each of the issues identified by the
Parent and/or the Buyer and the Stockholders' Representative and/or the Company.
Each such party shall have the right to be represented by counsel. The
arbitration shall be governed by the rules of the JCAA; provided, that the
arbitrator shall have sole discretion with regard to the admissibility of
evidence.
(d) The arbitrator shall use his best efforts to rule
on each disputed issue within 30 days after the completion of the hearings
described in paragraph (c) above. The determination of the arbitrator as to the
resolution of any dispute shall be binding and conclusive upon all parties
hereto. All rulings of the arbitrator shall be in writing and shall be delivered
to the parties hereto and the Escrow Agent.
(e) The prevailing party in any arbitration shall be
entitled to an award of reasonable attorneys' fees incurred in connection with
the arbitration. The non-prevailing party shall pay such fees, together with the
fees of the arbitrator and the costs and expenses of the arbitration.
(f) Any arbitration pursuant to this Section 13.3
shall be conducted in Japanese and shall be located in Tokyo, Japan. Any
arbitration award may be entered in and enforced by any court having
jurisdiction thereover.
14. BROKERS.
14.1 FOR THE STOCKHOLDERS, THE COMPANY AND THE SUBSIDIARIES.
Each of the Stockholders and the Company represents and warrants that no person,
firm or corporation has acted in the capacity of broker or finder on its behalf
(and, in the case of the Company, on behalf of the Subsidiaries) to bring about
the negotiation of this Agreement. The Stockholders jointly and severally agree
to indemnify and hold harmless the Buyer against any claims or liabilities
asserted against it, the Company or the Subsidiaries by any person acting or
claiming to act as a broker or finder on behalf of the Stockholders, the Company
or any of the Subsidiaries.
46
14.2 FOR THE BUYER. The Buyer agrees to pay all fees, expenses
and compensation owed to any person, firm or corporation who has acted in the
capacity of broker or finder on its behalf to bring about the negotiation of
this Agreement. The Buyer agrees to indemnify and hold harmless the Stockholders
against any claims or liabilities asserted against them by any person acting or
claiming to act as a broker or finder on behalf of the Buyer or the Parent.
15. NOTICES.
Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or sent by
certified mail, postage prepaid or facsimile, addressed as follows or to such
other address of which the parties may have given notice:
To the Buyer: Advanced Energy Japan K.K.
Towa Edogawabashi Building
000, Xxxxxxxx-xxx, Xxxxxxxx-xx
Xxxxx, Xxxxx
Attn: President
Fax: 00-0-0000-0000
To the Parent: Advanced Energy Industries, Inc.
0000 Xxxxx Xxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Attn: Chief Executive Officer
Fax: 000-000-0000
In each case with Xxxxxx Xxxx & Priest LLP
copies to (delivery of 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
which copies shall not Xxx Xxxxxxx, XX 00000
constitute notice to Attn: Xxxxxxx X. X. Xxxx, Esq.
the Buyer or the Fax: 000-000-0000
Parent):
and
Mitsui, Yasuda, Wani & Maeda
Akasaka 2.14 Plaza Building
14-32, Xxxxxxx 0-xxxxx, Xxxxxx-xx
Xxxxx 000-0000
Xxxxx
Attn: Yoshitada Ogiso
Fax: (00) 0000-0000
47
To the Stockholders: c/o Hisanori Aoyama, as the Stockholders' Representative
00-0, Xxxxxxxxx 0-xxxxx
Xxxx-xxx
Xxxxx 000-0000
Xxxxx
Fax: 00-00-000-0000
To the Company: Aera Japan Limited
0000-0 Xxxxxxxx-Xxx
Xxxxxxxx-Xxx
Xxxxx, Xxxxx
Attn: President
Fax: 00-000-00-0000
In each case with Hatasawa & Wakai
copies to (delivery of Haix Xxxxxxxx-Xxx Bld.
which copies shall not 10-10, Xxxxxxxx-Xxx, 2-Chome
constitute notice to Chiyoda-Ku, Tokyo 102-0093
the Stockholders or Japan
the Company): Attn: Tamotsu Hatasawa
Fax: 00-0-0000-0000
Unless otherwise specified herein, such notices or other communications shall be
effective (a) on the date delivered, if delivered personally, (b) five (5)
business days after being sent, if sent by registered or certified mail, and (c)
upon receipt, if sent by facsimile.
16. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Buyer, on the one hand, and the Stockholders and the Company, on the other
hand, may not assign their respective obligations hereunder without the prior
written consent of the other party; provided, however, that the Buyer may assign
this Agreement, and its rights and obligations hereunder, to a subsidiary or
Affiliate of the Buyer. Any assignment in contravention of this provision shall
be void. No assignment shall release any of the parties hereto from any
obligation or liability under this Agreement.
17. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS.
This Agreement, all Schedules and Exhibits hereto, all
agreements and instruments to be delivered by the parties pursuant hereto and
the Confidentiality Agreement dated March 19, 2001 by and between the Parent and
the Company represent the entire understanding and agreement between the parties
hereto with respect to the subject matter hereof and supersede all prior oral
and written and all contemporaneous oral negotiations, commitments and
understandings between such parties. The Parent and the Buyer by the consent of
their
48
respective Boards of Directors or officers authorized by such Boards, the
Company by the consent of its Board of Directors or officers authorized by such
Board, and the Stockholders holding a majority of the Shares (who shall have the
authority to bind all of the Stockholders) may amend or modify this Agreement,
in such manner as may be agreed upon, by a written instrument executed by the
Parent, the Buyer, the Company and such majority of the Stockholders.
If the provisions of any Schedule or Exhibit to this Agreement
are inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this Agreement.
18. SEVERABILITY.
Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provision of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.
19. INVESTIGATION OF THE PARTIES.
All representations and warranties contained herein which are
made to the best knowledge of a party shall require that such party make
reasonable investigation and inquiry with respect thereto to ascertain the
correctness and validity thereof. The "best knowledge" or "awareness" of an
entity means the best knowledge of the officers, directors, partners and members
of such entity and in the case of the Company, that of the Stockholders.
20. EXPENSES.
Except as otherwise expressly provided herein, the Buyer, the
Stockholders and the Company will pay all fees and expenses (including, without
limitation, legal and accounting fees and expenses) incurred by them in
connection with the transactions contemplated hereby. If the Closing occurs,
legal fees reasonably incurred by the Stockholders and the Company, up to
$300,000 in the aggregate, will be paid by the Company or the Buyer. Any legal
fees in excess of $300,000, as well as all other fees and expenses, incurred by
the Company or the Stockholders in connection with the transactions contemplated
hereby shall be paid by the Stockholders. In no event will any of the fees or
expenses incurred in connection with this transaction by the Stockholders or the
Stockholders' Representative, including without limitation the fees and expenses
of counsel to the Stockholders, be billed to or paid by or secured or guaranteed
by the Company or any Subsidiary. Each Stockholder shall be responsible for
payment of all income, sales or transfer taxes arising out of the conveyance of
the Shares owned by such Stockholder.
21. LEGAL FEES.
In the event that legal proceedings are commenced by the Buyer
or the Parent against the Stockholders (or against the Company, if the
transactions contemplated hereby are not consummated), or by the Stockholders
against the Buyer, in connection with this Agreement
49
or the transactions contemplated hereby, the party or parties which do not
prevail in such proceedings shall pay the reasonable attorneys' fees and other
costs and expenses, including investigation costs, incurred by the prevailing
party in such proceedings. The Stockholders shall be jointly and severally
liable for their obligations under this Section 21. If the transactions
contemplated hereby are not consummated, the Stockholders and the Company shall
be jointly and severally liable for their obligations under this Section 21.
22. PARENT'S COMMITMENT.
The Parent hereby agrees to cause the Buyer and the Company
(if the Closing occurs) to perform any and all obligations and liabilities
provided under this Agreement.
23. GOVERNING LAW.
This Agreement shall be governed by and construed in
accordance with the laws of Japan.
24. SECTION HEADINGS.
The section headings are for the convenience of the parties
and in no way alter, modify, amend, limit or restrict the contractual
obligations of the parties.
25. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which shall be one
and the same document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of and on the date first above written.
COMPANY:
AERA JAPAN LIMITED
By: /s/ Hisanori Aoyama
----------------------------------------
Name: Hisanori Aoyama
--------------------------------------
Title: Representative Director & President
-------------------------------------
BUYER:
ADVANCED ENERGY JAPAN K.K.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
--------------------------------------
Title: Attorney-in-Fact
-------------------------------------
PARENT:
ADVANCED ENERGY INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
--------------------------------------
Title: Chief Executive Officer
-------------------------------------
STOCKHOLDERS:
/s/ Hisanori Aoyama
-------------------------------------------
Hisanori Aoyama
/s/ Takenobu Inagaki
-------------------------------------------
Takenobu Inagaki
51
/s/ Xxxxxx Xxxxxx
-------------------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxx Xxxxxxxx
-------------------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxxxx Xxxxxx
-------------------------------------------
Xxxxxx Xxxxxx
52
