EXHIBIT 10.1
EXECUTION COPY
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SHARE PURCHASE AGREEMENT
BY AND AMONG
VERINT SYSTEMS INC.,
MULTIVISION HOLDINGS LIMITED
AND
MULTIVISION INTELLIGENT SURVEILLANCE LIMITED
Dated as of September 7, 2005
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TABLE OF CONTENTS
Page
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Article I DEFINITIONS
1.1 Certain Definitions...................................................................1
Article II SALE AND PURCHASE OF SHARES
2.1 Sale and Purchase of Shares..........................................................10
Article III PURCHASE PRICE
3.1 Purchase Price.......................................................................10
3.2 Payment of Purchase Price............................................................11
3.3 Purchase Price Adjustment............................................................11
3.4 Uncollected Accounts Receivable......................................................14
Article IV CLOSING AND TERMINATION
4.1 Closing Date.........................................................................14
4.2 Termination of Agreement.............................................................14
4.3 Procedure Upon Termination...........................................................15
4.4 Effect of Termination................................................................15
Article V REPRESENTATIONS AND WARRANTIES OF SELLER
5.1 Organization and Good Standing.......................................................16
5.2 Authorization of Agreement...........................................................16
5.3 Conflicts; Consents of Third Parties.................................................16
5.4 Ownership and Transfer of the Shares; Other Assets of Seller.........................17
5.5 Capitalization.......................................................................17
5.6 Subsidiaries.........................................................................18
5.7 Corporate Records....................................................................19
5.8 Financial Statements.................................................................19
5.9 No Undisclosed Liabilities...........................................................20
5.10 Absence of Certain Developments......................................................20
5.11 Taxes................................................................................22
5.12 Real Property........................................................................24
5.13 Tangible Personal Property...........................................................26
5.14 Intellectual Property................................................................27
5.15 Material Contracts...................................................................31
5.16 Employee Benefits Plans..............................................................33
5.17 Labor................................................................................34
5.18 Litigation...........................................................................35
5.19 Compliance with Laws; Permits........................................................36
5.20 Environmental Matters................................................................36
5.21 Insurance............................................................................36
TABLE OF CONTENTS
(CONTINUED)
Page
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5.22 Notes Receivable and Accounts Payable................................................37
5.23 No Questionable Payments.............................................................37
5.24 Related Party Transactions...........................................................37
5.25 Customers and Suppliers..............................................................37
5.26 Product Warranty; Product Liability..................................................38
5.27 Banks................................................................................38
5.28 Full Disclosure......................................................................38
5.29 Financial Advisors...................................................................38
Article VI REPRESENTATIONS AND WARRANTIES OF PURCHASER
6.1 Organization and Good Standing.......................................................39
6.2 Authorization of Agreement...........................................................39
6.3 Conflicts; Consents of Third Parties.................................................39
6.4 Litigation...........................................................................40
6.5 Capitalization.......................................................................40
6.6 SEC Reports; Financial Statements....................................................40
6.7 Financial Advisors...................................................................40
Article VII COVENANTS
7.1 Pre-Closing Access to Information; Confidentiality...................................41
7.2 Conduct of the Business Pending the Closing..........................................42
7.3 Further Assurances...................................................................45
7.4 Regulatory Approvals.................................................................46
7.5 No Shop..............................................................................46
7.6 Publicity............................................................................47
7.7 Preservation of Records; Post-Closing Access; Cooperation with SEC Filings...........48
7.8 Use of Name..........................................................................49
7.9 Affiliate Transactions...............................................................50
7.10 Monthly Financial Statements.........................................................50
7.11 Notification of Certain Matters......................................................50
7.12 Seller Shareholder Approval..........................................................50
7.13 Excluded Assets......................................................................51
7.14 Dividend and Affiliate Transaction Restrictions......................................51
7.15 Shutdown of Certain Excluded Subsidiaries............................................51
Article VIII CONDITIONS TO CLOSING
8.1 Conditions Precedent to Obligations of Each Party....................................52
8.2 Conditions Precedent to Obligations of Purchaser.....................................52
8.3 Conditions Precedent to Obligations of Seller........................................54
TABLE OF CONTENTS
(CONTINUED)
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Article IX INDEMNIFICATION
9.1 Survival of Representations and Warranties...........................................55
9.2 Indemnification......................................................................55
9.3 Indemnification Procedures...........................................................56
9.4 Limitations on Indemnification; Calculation of Losses................................58
9.5 Escrow...............................................................................60
9.6 Supplemental Disclosures.............................................................61
9.7 Tax Matters..........................................................................62
9.8 Tax Treatment of Indemnity Payments..................................................66
Article X MISCELLANEOUS
10.1 Expenses.............................................................................67
10.2 Specific Performance.................................................................67
10.3 Dispute Resolution...................................................................67
10.4 Entire Agreement; Amendments and Waivers.............................................68
10.5 Governing Law........................................................................68
10.6 Notices..............................................................................68
10.7 Severability.........................................................................69
10.8 Binding Effect; Assignment...........................................................69
10.9 Non-Recourse.........................................................................70
10.10 Counterparts.........................................................................70
iii
REQUIRED SCHEDULES
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Schedule 3.3.............. NAV Accounting Principles
Schedule 5.6.............. Subsidiaries
Schedule 5.11............. Taxes
Schedule 5.12............. Company Leased Properties
Schedule 5.13............. Personal Property Leases
Schedule 5.14(a).......... Company Intellectual Property
Schedule 5.14(d).......... Intellectual Property Licenses
Schedule 5.14(e).......... Intellectual Property Contracts
Schedule 5.14(l).......... Software
Schedule 5.15(a).......... Material Contracts
Schedule 5.15(b).......... Certain Contracts
Schedule 5.16............. Employee Benefit Plans
Schedule 5.19............. Permits
Schedule 5.21............. Insurance
Schedule 5.25............. Customers and Suppliers
Schedule 5.27............. Banks
Schedule 7.9.............. Affiliate Contracts
Schedule 7.13............. Excluded Assets
Schedule 7.15............. Excluded Subsidiaries to be Shutdown
Schedule 8.2(f)........... Required Consents
Schedule 8.2(g)........... Required Employment Agreements
Schedule 8.2(o)........... Required Contract Amendments
Schedule 8.2(p)........... Required Intellectual Property Contract Amendments
EXHIBITS
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Exhibit A................. Form of Escrow Agreement
Exhibit B................. Form of Non-Competition Agreement
Exhibit C................. Form of Exclusive Supply Agreements
Exhibit D................. Luk Non-Solicitation Agreement
Exhibit E................. Mak Non-Compete
Exhibit F................. Registration Rights Agreement
Exhibit G................. Voting Agreements
iv
SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT, dated as of September 7, 2005 (the
"Agreement"), by and among Verint Systems Inc., a Delaware corporation
("Purchaser"), MultiVision Holdings Limited, a British Virgin Islands company
(the "Company"), and MultiVision Intelligent Surveillance Limited, a Bermuda
company ("Seller").
W I T N E S S E T H:
WHEREAS, Seller owns an aggregate of 10,500 Ordinary Shares (the
"Shares"), which constitutes 100% of the issued and paid up share capital of the
Company;
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires
to purchase from Seller, the Shares for the purchase price and upon the terms
and conditions hereinafter set forth;
WHEREAS, the Board of Directors of Seller has duly and validly
approved this Agreement and the transactions contemplated hereby;
WHEREAS, certain shareholders of Seller have entered into Deeds of
Undertaking (the "Voting Agreements") as of the date hereof whereby each such
shareholder has committed in its capacity as a shareholder of Seller to vote all
shares of Seller owned or controlled by such shareholder in favor of this
Agreement and the transactions contemplated hereby;
WHEREAS, Terence Luk and Purchaser have entered into a
Non-Solicitation Agreement (the "Luk Non-Solicitation Agreement') as of the date
hereof;
WHEREAS, Louis Mak and Purchaser have entered into a Non-Competition
Agreement (the "Mak Non-Compete") as of the date hereof; and
WHEREAS, certain terms used in this Agreement are defined in Section
1.1;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1. Certain Definitions.
(a) For purposes of this Agreement, the following terms shall have
the meanings specified in this Section 1.1:
1
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, and the term
"control" (including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.
"Antitrust Law" means any applicable Law that is designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade.
"Acquired Subsidiary" means any Subsidiary other than an Excluded
Subsidiary.
"Business Day" means a day that the financial markets in New York
City and Hong Kong are open for business.
"Contract" means any contract, agreement, indenture, note, bond,
mortgage, loan, instrument, lease, license or other binding arrangement,
understanding, undertaking, commitment or obligation, whether written or oral.
"Copyrights" means all copyrights (including copyrights in software
programs) and registrations and applications therefor, works of authorship and
mask work rights.
"Environmental Law" means any Law, as now or hereafter in effect, in
any way relating to the protection of human health and safety, the environment
or natural resources.
"Environmental Permit" means any Permit required by Environmental
Laws for the operation of the Company and the Acquired Subsidiaries.
"Escrow Agreement" means the Escrow Agreement to be entered into by
and among Purchaser, Seller and the Escrow Agent as of the Closing in
substantially the form of Exhibit A hereto.
"Escrow Agent" means the escrow agent for the Escrow Agreement.
"Excluded Subsidiary" means the Subsidiaries listed on Schedule 7.13.
"GAAP" means United States generally accepted accounting principles
as in effect during the time period of the relevant financial statement.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private), or any other supervisory or
regulatory body, including the SGX.
2
"ICC" means the International Chamber of Commerce.
"IFRS" means the International Financial Reporting Standards
promulgated by the International Accounting Standards Board as of the date
hereof, including International Accounting Standards and related
interpretations.
"Indebtedness" of any Person means, without duplication, (i) the
principal, accreted value, accrued and unpaid interest, prepayment and
redemption premiums or penalties (if any), unpaid fees or expenses and other
monetary obligations in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable and other accrued current liabilities arising
in the Ordinary Course of Business (other than the current liability portion of
any indebtedness for borrowed money)); (iii) all obligations of such Person
under leases required to be capitalized in accordance with IFRS; (iv) all
obligations of such Person for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction; (v) all obligations
of such Person under interest rate or currency swap transactions (valued at the
termination value thereof); (vi) the liquidation value, accrued and unpaid
dividends, prepayment or redemption premiums and penalties (if any), unpaid fees
or expenses and other monetary obligations in respect of any redeemable
preferred equity of such Person; (vii) all obligations of the type referred to
in clauses (i) through (vi) of any Persons for the payment of which such Person
is responsible or liable, directly or indirectly, as obligor, guarantor, surety
or otherwise, including guarantees of such obligations; and (viii) all
obligations of the type referred to in clauses (i) through (vii) of other
Persons secured by (or for which the holder of such obligation has an existing
right, contingent or otherwise, to be secured by) any Lien on any property or
asset of such Person (whether or not such obligation is assumed by such Person).
"Intellectual Property" means all U.S. and foreign rights under
patent, copyright, trademark or trade secret law or any other similar statutory
provision or common law doctrine.
"Intellectual Property Licenses" means (i) any grant by the Company
or any Acquired Subsidiary to another Person of any right to use any of the
Intellectual Property or Technology, and (ii) any grant by another Person to the
Company or any Subsidiary of a right to use such Person's Intellectual Property
or Technology.
"Knowledge" means, with respect to any Person that is not an
individual, the knowledge after due inquiry of such Person's directors and
executive officers and all other officers and managers having responsibility
relating to the applicable matter or, in the case of an individual, knowledge
after due inquiry.
3
"Law" means any foreign, federal, state or local law (including
common law), statute, code, ordinance, rule, regulation, Order, the listing
rules of any stock exchange or other requirement.
"Legal Proceeding" means any judicial, administrative or arbitral
actions, suits, material inquiry, proceedings or claims (including
counterclaims) by or before a Governmental Body.
"Liability" means any debt, loss, damage, adverse claim, fine,
penalty, liability or obligation (whether direct or indirect, known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, matured or
unmatured, determined or determinable, liquidated or unliquidated, or due or to
become due, and whether in contract, tort, strict liability or otherwise), and
including all costs and expenses relating thereto including all fees,
disbursements and expenses of legal counsel, experts, engineers and consultants
and other costs of investigation.
"Lien" means any lien, pledge, mortgage, deed of trust, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, proxy, voting trust or agreement, transfer restriction under any
shareholder or similar agreement, encumbrance or any other restriction or
limitation whatsoever.
"Losses" means losses, liabilities, claims, obligations,
deficiencies, demands, judgments, damages (including incidental and
consequential damages), interest, fines, claims, suits, actions, causes of
action, assessments, costs and expenses (including costs of investigation and
defense and attorneys' and other professionals' fees), or any diminution in
value, whether or not involving a third party claim.
"Marks" means all trademarks, service marks, trade names, service
names, brand names, trade dress rights, logos, Internet domain names and
corporate names and other similar identifiers, together with the goodwill
associated with any of the foregoing, and all applications, registrations and
renewals thereof.
"Material Adverse Effect" means any fact, event, circumstance or
condition that, individually or in the aggregate with any other facts, events,
circumstances or conditions has, or would reasonably be likely to have, a
material adverse effect on (x) the business, assets, properties, results of
operations or condition (financial or otherwise) of the Company or the Acquired
Subsidiaries or (y) the ability of Seller or the Company to consummate the
transactions contemplated by this Agreement or to perform their respective
obligations under this Agreement or the Seller Documents; provided, however,
that any effect resulting from changes in (i) the financial markets, or the
general economic conditions, in China, Asia generally or worldwide or (ii) the
conditions affecting the security/surveillance industry as a whole in China,
Asia generally or worldwide shall not be considered when determining if a
Material Adverse Effect has occurred.
4
"Non-Competition Agreement" means the Non-Competition Agreement to be
entered into by and between Purchaser and Seller as of the Closing in
substantially the form of Exhibit B hereto.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award of a Governmental Body.
"Ordinary Course of Business" means the ordinary and usual course of
day-to-day operations of the business of the Company and the Acquired
Subsidiaries through the date hereof, consistent with past practice as
applicable.
"Ordinary Shares" means the ordinary shares of the Company of $1.00
each, or any other share capital of the Company into which such shares are
reclassified or reconstituted.
"Patents" means all patents and applications therefor, including
continuations, divisionals, continuations-in-part, or reissues of patent
applications and patents issuing thereon, and all similar rights arising under
the Laws of any jurisdiction.
"Permits" means any approvals, authorizations, consents, licenses,
permits or certificates of a Governmental Body.
"Permitted Exceptions" means (i) all defects, exceptions,
restrictions, easements, rights of way and encumbrances disclosed in policies of
title insurance which have been delivered to Purchaser; (ii) statutory liens for
current Taxes, assessments or other governmental charges not yet delinquent or
the amount or validity of which is being contested in good faith by appropriate
proceedings, provided an appropriate reserve has been established therefor in
the Financial Statements in accordance with applicable accounting standards;
(iii) mechanics', carriers', workers', and repairers' Liens arising or incurred
by operation of law or in the Ordinary Course of Business that are not material
to the business, operations and financial condition of the Company Leased
Property so encumbered and that are not resulting from a material breach,
default or violation by the Company or any of the Acquired Subsidiaries of any
Contract or Law; and (iv) zoning, entitlement and other land use and
environmental regulations by any Governmental Body, provided that such
regulations have not been violated.
"Person" means any individual, corporation, limited liability
company, partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Body or other entity.
"Purchaser Common Stock" means the Common Stock, par value $0.001 per
share, of Purchaser, or any other share capital of Purchaser into which such
equity is reclassified or reconstituted.
"Purchaser Preferred Stock" means the Preferred Stock, par value
$0.001 per share, of Purchaser.
5
"Purchaser Indemnified Parties" means Purchaser, the Company, and
their respective directors, officers, employees, Affiliates, shareholders,
agents, attorneys, representatives, successors and assigns.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and between Purchaser and Seller.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Seller Indemnified Parties" means Seller and its Affiliates,
shareholders, agents, attorneys, representatives, successors and permitted
assigns.
"SGX" means the Singapore Exchange Securities Trading Limited.
"Shelf Registration Statement" means the registration statement
contemplated by Section 2.1(a) of the Registration Rights Agreement. "Software"
means any and all (i) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source code
or object code, (ii) databases and compilations, including any and all data and
collections of data, whether machine readable or otherwise, (iii) descriptions,
flow-charts and other work product used to design, plan, organize and develop
any of the foregoing, screens, user interfaces, report formats, firmware,
development tools, templates, menus, buttons and icons, and (iv) all
documentation including user manuals and other training documentation related to
any of the foregoing.
"Subsidiary" means any Person of which (i) a majority of the
outstanding share capital, voting securities or other equity interests are
owned, directly or indirectly, by the Company or (ii) the Company is entitled,
directly or indirectly, to appoint a majority of the board directors, board of
managers or comparable body of such Person.
"Taxes" means (i) all federal, state, local or foreign taxes,
charges, fees, imposts, levies or other assessments, including all net income,
gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, share capital, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
property and estimated taxes, customs duties or similar charges; (ii) all
interest, penalties, fines, additions to tax or additional amounts imposed by
any Taxing Authority in connection with any item described in clause (i); and
(iii) any transferee liability in respect of any items described in clauses (i)
and/or (ii) payable by reason of Contract, assumption, transferee liability,
operation of Law or otherwise.
"Taxing Authority" means any Governmental Body responsible for the
administration of any Tax.
6
"Tax Return" means any return, report or statement required to be
filed with respect to any Tax (including any attachments thereto, and any
amendment thereof) including any information return, claim for refund, amended
return or declaration of estimated Tax, and including, where permitted or
required, combined, consolidated or unitary returns for any group of entities
that includes the Company, any of the Acquired Subsidiaries.
"Technology" means, collectively, all designs, formulae, algorithms,
procedures, methods, techniques, ideas, know-how, research and development,
technical data, computer software programs, subroutines, tools, materials,
specifications, processes, software (whether in source code, object code or
human readable form), inventions (whether patentable or unpatentable and whether
or not reduced to practice), apparatus, creations, improvements, works of
authorship and other similar materials, and all recordings, graphs, drawings,
reports, analyses, and other writings, and other tangible embodiments of the
foregoing, in any form whether or not specifically listed herein, and all
related technology, that are used in, incorporated in, embodied in, displayed by
or relate to, or are used by the Company or any Acquired Subsidiary.
"Trade Secrets" means all discoveries, concepts, ideas, research and
development, know-how, formulae, inventions, compositions, manufacturing and
production processes and techniques, technical data, procedures, designs,
drawings, specifications, databases, and other proprietary or confidential
information, including customer lists, supplier lists, pricing and cost
information, and business and marketing plans and proposals of the Company and
the Acquired Subsidiaries, in each case excluding any rights in respect of any
of the foregoing that comprise or are protected by Copyrights or Patents.
"Trading Day" means a day on which shares of Purchaser Common Stock
are traded on the Nasdaq National Market.
(b) Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, the following terms have meanings set forth in the sections
indicated:
Term Section
---- -------
Accounting Referee.................................... 3.3(d)
Acquisition Transaction............................... 7.5(a)
Agreement............................................. Recitals
Arbitrators........................................... 10.3
Balance Sheet......................................... 5.8(a)
Balance Sheet Date.................................... 5.8(a)
Base Purchase Price................................... 3.1(a)
Basket Amount......................................... 9.4(a)
Claiming Party........................................ 7.7(b)
Closing............................................... 4.1
Closing Date.......................................... 4.1
Closing Statement..................................... 3.3(c)
Company............................................... Recitals
7
Term Section
---- -------
Company Intellectual Property......................... 5.14(a)
Company Lease......................................... 5.12(a)
Company Leased Property............................... 5.12(a)
Company Marks......................................... 7.8
Company Permits....................................... 5.19(b)
Company Plans......................................... 5.16(a)
Company Software...................................... 5.14(n)
Customer Contracts.................................... 5.14(e)
Defending Party....................................... 7.7(b)
Disputed Item......................................... 3.3(d)
Employees............................................. 5.16(a)
Escrow Account........................................ 9.5
Escrow Amount......................................... 9.5
Estimated NAV......................................... 3.3(b)
Estimated Purchase Price.............................. 3.3(b)
Estimated Purchase Price Adjustment................... 3.3(b)
Excluded Asset........................................ 7.13
Exclusive Supply Agreements........................... 8.2(n)
Final NAV............................................. 3.3(c)
Final Purchase Price.................................. 3.3(c)
Final Purchase Price Adjustment....................... 3.3(c)
Financial Statements.................................. 5.8(a)
Huge Hill Exclusive Supply Agreement.................. 8.2(m)
Indemnification Cap................................... 9.4(a)
Indemnification Claim................................. 9.3(b)
License............................................... 7.8
Luk Non-Solicitation Agreement........................ Recitals
Mak Non-Compete....................................... Recitals
Material Contracts.................................... 5.15(a)
NAV................................................... 3.3(a)
NAV Accounting Principles............................. 3.3(b)
Objection............................................. 3.3(d)
Objection Period...................................... 3.3(d)
Organic Change........................................ 3.1(b)
Outside Date.......................................... 4.2(a)
Per Share Value....................................... 3.1(b)
Personal Property Leases.............................. 5.13(b)
Purchaser............................................. Recitals
Purchaser Documents................................... 6.2
Purchaser SEC Reports................................. 6.6
Receivables Date...................................... 3.4
Related Persons....................................... 5.24
Representatives....................................... 7.5(a)
Response Date......................................... 3.3(d)
Rules................................................. 10.3
8
Term Section
---- -------
Scheduled Closing Date................................ 3.1(b)
Seller................................................ Recitals
Seller Documents...................................... 5.2
Seller Shareholder Approval........................... 7.12
Seller Shareholder Meeting............................ 7.12
SGX Documents......................................... 5.8(d)
Share Consideration Amount............................ 3.1(b)
Share Election........................................ 3.1(b)
Share Election........................................ 3.1(b)
Shutdown Adjustment................................... 7.15(b)
Shutdown Support Agreement............................ 7.15(a)
Shares................................................ Recitals
Sino Gear Exclusive Supply Agreement.................. 8.2(n)
Straddle Period....................................... 9.7(c)
Supplemental Disclosure............................... 9.6(a)
Supplemental Disclosure Schedules..................... 9.6(a)
Survival Period....................................... 9.1
Target NAV............................................ 3.3(a)
Tax Claim............................................. 9.7(d)(i)
Tax Expert............................................ 9.7(f)
True-up Amount........................................ 3.3(c)
Uncollected Accounts Receivable....................... 3.4
Unresolved Claims..................................... 9.5
Unsolicited Offer..................................... 7.5(d)
Voting Agreements..................................... Recitals
(c) Other Definitional and Interpretive Matters. Unless otherwise
expressly provided, for purposes of this Agreement, the following rules of
interpretation shall apply:
Calculation of Time Period. When calculating the period of time before
which, within which or following which any act is to be done or step taken
pursuant to this Agreement, the date that is the reference date in calculating
such period shall be excluded. If the last day of such period is a non-Business
Day, the period in question shall end on the next succeeding Business Day.
Dollars. Any reference in this Agreement to $ shall mean U.S. dollars
and any reference in this Agreement to HK$ shall mean Hong Kong dollars.
Exhibits/Schedules. The Exhibits and Schedules to this Agreement are
hereby incorporated and made a part hereof and are an integral part of this
Agreement. All Exhibits and Schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein. Any capitalized terms used in any Schedule or Exhibit but not otherwise
defined therein shall be defined as set forth in this Agreement.
9
Gender and Number. Any reference in this Agreement to gender shall
include all genders, and words imparting the singular number only shall include
the plural and vice versa.
Headings. The provision of a Table of Contents, the division of this
Agreement into Articles, Sections and other subdivisions and the insertion of
headings are for convenience of reference only and shall not affect or be
utilized in construing or interpreting this Agreement. All references in this
Agreement to any "Section" are to the corresponding Section of this Agreement
unless otherwise specified.
Herein. The words such as "herein," "hereinafter," "hereof," "hereby"
and "hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise requires.
Including. The word "including" or any variation thereof means
"including, without limitation" and shall not be construed to limit any general
statement that it follows to the specific or similar items or matters
immediately following it.
(d) The parties hereto have participated jointly in the negotiation
and drafting of this Agreement and, in the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as jointly
drafted by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
ARTICLE II
SALE AND PURCHASE OF SHARES
2.1 Sale and Purchase of Shares. Upon the terms and subject to the
conditions contained herein, on the Closing Date, Seller agrees to sell to
Purchaser, free and clear of any and all Liens, and Purchaser agrees to purchase
from Seller, the Shares.
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price.
(a) The aggregate purchase price to be paid by Purchaser for the
Shares shall be an amount in cash (subject to Section 3.1(b)) equal to
forty-eight million two hundred thousand U.S. dollars ($48,200,000) (as
increased by the Shutdown Adjustment, the "Base Purchase Price"), subject to
adjustment as provided in Sections 3.3 and 7.15(b).
(b) Notwithstanding anything to the contrary contained in Section
3.1(a), at any time on or prior to the fourth (4th) Business Day before the date
that is scheduled by the parties to be the Closing Date (the "Scheduled Closing
Date"), Purchaser may, in its sole and absolute discretion, elect (the "Share
Election") to pay up to seventy percent (70%) of the Estimated Purchase Price
10
(such elected amount, the "Share Consideration Amount"), in the form of
Purchaser Common Stock. For purposes of this Agreement, the per share value of
Purchaser Common Stock (the "Per Share Value") shall be equal to the average
closing price of the Purchaser Common Stock as reported on the Nasdaq National
Market for a period of twenty (20) Trading Days ending on the date that is five
(5) Business Days (if such day is not a Trading Day, then ending on the Trading
Day immediately preceding such day) prior to the Closing Date, as equitably
adjusted for any Organic Change to Purchaser Common Stock that occurs during or
after such measurement period. An "Organic Change" shall mean any
recapitalization, reorganization, forward or reverse split, merger,
consolidation, spin-off, combination, repurchase, or exchange of equity or other
securities, any capital share dividend or other special and nonrecurring
dividend or distribution (whether in the form of cash, securities or other
property), liquidation, dissolution or any other similar transactions or events
that affect the Purchaser Common Stock. In the event that the Closing does not
occur on the Scheduled Closing Date (or any new Scheduled Closing Date) for any
reason, (i) the parties will schedule a new Scheduled Closing Date and (ii)
Purchaser may revoke its existing Share Election and make a new Share Election.
3.2 Payment of Purchase Price. On the Closing Date, Purchaser shall
pay:
(a) to Seller the Estimated Purchase Price less the Escrow Amount,
which shall be paid to Seller (i) by wire transfer of immediately available
funds into accounts designated in writing by Seller not less than three (3)
Business Days prior to the Closing Date and, (ii) if Purchaser makes the Share
Election pursuant to Section 3.1(b), by delivery to Seller of the number of
shares of Purchaser Common Stock equal to the Share Consideration Amount,
provided that Purchaser shall pay cash in lieu of any fractional shares of
Purchaser Common Stock; and
(b) to the Escrow Agent the Escrow Amount in cash payable by wire
transfer of immediately available funds for deposit into the Escrow Account.
3.3 Purchase Price Adjustment.
(a) The target consolidated net asset value (the "NAV") of the Company
and the Acquired Subsidiaries as of the Closing Date is one hundred and
thirty-three million four hundred thousand Hong Kong dollars (HK$ 133,400,000)
(such target NAV, the "Target NAV").
(b) At least three (3) Business Days prior to the Closing Date, Seller
shall prepare and deliver to Purchaser a statement setting forth a reasonably
detailed calculation of Seller's good faith estimate of (i) the NAV of the
Company and the Acquired Subsidiaries as of the Closing Date (the "Estimated
NAV"), prepared in accordance with (A) the books and records of the Company and
the Acquired Subsidiaries, and (B) the accounting principles for NAV set forth
in Schedule 3.3 (the "NAV Accounting Principles") and (ii) an adjustment to the
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Base Purchase Price (such adjustment, the "Estimated Purchase Price Adjustment",
and the sum of the Base Purchase Price and the Estimated Purchase Price
Adjustment being the "Estimated Purchase Price")), which may be positive or
negative, equal to the Estimated NAV minus the Target NAV. The purchase price to
be paid by Purchaser on the Closing Date pursuant to Section 3.2 will be
increased (or decreased by such amount if negative) by the amount of the
Estimated Purchase Price Adjustment.
(c) Purchaser shall prepare and deliver to Seller, within ninety (90)
days following the Closing Date, a statement (the "Closing Statement") setting
forth a reasonably detailed calculation of (i) the NAV of the Company and the
Acquired Subsidiaries as of the Closing Date (the "Final NAV"), prepared in
accordance with (A) the books and records of the Company and the Acquired
Subsidiaries and (B) the NAV Accounting Principles, (ii) a reasonably detailed
explanation of each variance from the Estimated NAV, (iii) an aggregate
adjustment to the Base Purchase Price (such adjustment, the "Final Purchase
Price Adjustment", and the sum of the Base Purchase Price and the Final Purchase
Price Adjustment being the "Final Purchase Price")), which may be positive or
negative, equal to the Final NAV minus the Target NAV, and (iv) a true-up amount
(the "True-up Amount"), which may be positive or negative, equal to the
Estimated Purchase Price Adjustment minus the Final Purchase Price Adjustment.
(d) Seller shall have twenty (20) days from its receipt of the Closing
Statement (the "Objection Period") to review the Closing Statement. Purchaser
shall grant Seller and its Affiliates and Representatives access at reasonable
times and places to all books and records of the Company and the Acquired
Subsidiaries that are reasonably requested by Seller in connection with Seller's
review of the Closing Statement. Upon the expiration of the Objection Period,
Seller shall be deemed to have accepted, and shall be bound by, the Closing
Statement and the calculation therein of the Final Purchase Price Adjustment,
unless Seller shall have informed Purchaser in writing of its disagreement with
the Closing Statement prior to the expiration of the Objection Period (the
"Objection"), specifying each disputed item and setting forth in reasonable
detail the basis for each such dispute (each, a "Disputed Item"). Purchaser
shall have twenty (20) days from the date on which it receives the Objection
(the date on which such twenty (20) day period ends, the "Response Date") to
review and respond to such Objection. If Purchaser and Seller are able to
negotiate a mutually agreeable resolution of each Disputed Item, and each signs
a certificate to that effect, the Closing Statement and the calculation therein
of the Final Purchase Price Adjustment, and, if applicable, the True-up Amount,
as adjusted to reflect such resolution, shall be deemed final, non-appealable
and binding for purposes of this Agreement. If within twenty (20) days of the
Response Date any Disputed Items have not been resolved, Seller and Purchaser
shall refer such Disputed Items to an accounting expert (the "Accounting
Referee"), who shall be a partner in the Hong Kong office of the accounting firm
of Ernst & Young (or if unable or unwilling to accept such mandate, an
independent accountant to be mutually agreed upon by Seller and Purchaser) and
who shall accept its appointment within five (5) days after such referral, to
make a final, non-appealable and binding determination as to such remaining
Disputed Items pursuant to the terms hereof. If Purchaser and Seller cannot
agree on the selection of a partner at an independent accounting firm to act as
the Accounting Referee, the parties shall request the ICC to appoint such a
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partner (who must be an active or recently retired accounting expert with
substantial experience with complex financial transactions of the type set forth
in this Agreement) and such appointment shall be conclusive and binding on the
parties. The Accounting Referee shall be directed to make a determination in
accordance with Section 3.3(f) below of the Disputed Items promptly, but no
later than thirty (30) days, after acceptance of its appointment. Seller and
Purchaser agree to use their commercially reasonable efforts to effect the
selection and appointment of the Accounting Referee pursuant to this Section
3.3(e), including executing an engagement agreement with the Accounting Referee
providing for reasonable and customary compensation and other terms of such
engagement. Seller and Purchaser shall make readily available to the Accounting
Referee all relevant books, records and employees of the Company and the
Acquired Subsidiaries that are reasonably requested by the Accounting Referee in
connection with the Accounting Referee's review of any Disputed Items; provided
that Seller, Purchaser and their respective Affiliates shall not be obligated to
provide any information the disclosure of which would jeopardize any
professional privilege available to such Person relating to such information or
which would cause such Person to breach a confidentiality obligation to which it
is bound; and provided further that Seller, Purchaser and their respective
Affiliates shall use their best efforts to minimize the effects of any such
limitations.
(e) If Disputed Items are referred to the Accounting Referee for
resolution pursuant to Section 3.3(d) above, the Accounting Referee (i) shall
determine only with respect to the Disputed Items submitted whether and to what
extent, if any, the Final Purchase Price Adjustment set forth in the Closing
Statement and, if applicable, the True-up Amount requires adjustment, (ii) shall
utilize the NAV Accounting Principles without modification and (iii) shall not
assign a value to any item greater than the greatest value for such item claimed
by either party or less than the smallest value for such item claimed by either
party. Any finding by the Accounting Referee shall be a reasoned award stating
in reasonable detail the findings of fact on which it is based, shall be final,
non-appealable and binding upon the parties and shall be the sole and exclusive
remedy between the parties regarding the Disputed Items so presented. The fees
and expenses of the Accounting Referee shall be borne by Seller and Purchaser in
the same proportion that the dollar amount of Disputed Items which are not
resolved in favor of Seller or Purchaser, as applicable, bears to the total
dollar amount of Disputed Items resolved by the Accounting Referee. For
illustration purposes only, (A) if the total amount of Disputed Items by Seller
is $1,000, and Seller is awarded $500 by the Accounting Referee, Seller and
Purchaser shall bear the Accounting Referee's fees and expenses equally; or (B)
if the total amount of Disputed Items by Seller is $1,000, and Seller is awarded
$250 by the Accounting Referee, Seller shall bear seventy-five percent (75%) and
Purchaser shall bear twenty-five percent (25%) of the Accounting Referee's fees
and expenses. Each of Seller and Purchaser shall bear the fees, costs and
expenses of its own accountants and all of its other expenses incurred in
connection with matters contemplated by this Section 3.3.
(f) If the True-up Amount is a positive number, then Seller shall pay
to Purchaser such amount in cash. If the True-up Amount is a negative number,
then Purchaser shall pay to Seller such amount in cash. Payment of the True-up
Amount calculated pursuant to this Section 3.3 shall be made (i) if no Objection
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is made by Seller during the Objection Period, within five (5) Business Days
following the expiration of the Objection Period or (ii) if Seller submits an
Objection within the Objection Period, within five (5) Business Days following
final resolution of all Disputed Items by the parties or the Accounting Referee.
Payment of the True-up Amount shall be made by wire transfer of immediately
available funds to an account designated by the parties receiving such funds.
3.4 Uncollected Accounts Receivable. Within five (5) Business Days of
the date (the "Receivables Date") that is one hundred and eighty (180) days
after the Closing Date, Seller shall pay to Purchaser an amount equal to the
Uncollected Accounts Receivable. For purposes of this Agreement, "Uncollected
Accounts Receivable" means the accounts receivable of the Company and the
Acquired Subsidiaries as of the Closing Date to the extent that they are not
collected on or prior to the Receivables Date. From and after the Receivables
Date, Purchaser shall use commercially reasonable efforts, consistent with the
Company's and the Acquired Subsidiaries' past practices of collecting accounts
receivable, to collect any Uncollected Accounts Receivable, and shall remit to
Seller any proceeds thereof within five (5) Business Days of receipt thereof.
ARTICLE IV
CLOSING AND TERMINATION
4.1 Closing Date. The consummation of the sale and purchase of the
Shares provided for in Section 2.1 hereof (the "Closing") shall take place in
Hong Kong (or at such other place as the parties may designate in writing) at
2:30 p.m. local time on the date (the "Closing Date") which is the fourth (4th)
Business Day after the satisfaction or waiver of all of the conditions set forth
in Article VIII (other than conditions that by their nature are to be satisfied
at Closing, but subject to the satisfaction or waiver of those conditions at
such time), unless another time, date or place is agreed to by the parties
hereto.
4.2 Termination of Agreement. This Agreement may be terminated prior
to the Closing as follows:
(a) At the election of Seller or Purchaser on or after the date which
is six (6) months after the date hereof (the "Outside Date"), if the Closing
shall not have occurred on or before such date, provided that (i) the
terminating party is not in material default of any of its obligations hereunder
and (ii) the right to terminate this Agreement pursuant to this Section 4.2(a)
shall not be available to any party whose breach of any provision of this
Agreement has been the cause of, or resulted, directly or indirectly, in, the
failure of the Closing to be consummated by the Termination Date;
(b) by mutual written consent of Seller and Purchaser;
(c) in the event that a Material Adverse Effect has occurred, by
written notice from Purchaser to Seller that there has been a Material Adverse
Effect;
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(d) by Seller or Purchaser if there shall be in effect a final
non-appealable Order of a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; it being agreed that the parties hereto shall
promptly appeal any adverse determination which is not non-appealable (and
pursue such appeal with reasonable diligence); provided, however, that the right
to terminate this Agreement under this Section 4.2(d) shall not be available to
a party if such Order was primarily due to the failure of such party to perform
any of its obligations under this Agreement;
(e) by Purchaser if either Seller or the Company shall have breached
or failed to perform any of its representations, warranties, covenants or
agreements set forth in this Agreement, or if any representation or warranty of
Seller or the Company shall have become untrue, in either case such that the
conditions set forth in Sections 8.2(a) or 8.2(b) would not be satisfied and
such breach is incapable of being cured or, if capable of being cured, shall not
have been cured within ten (10) days following receipt by Seller of notice of
such breach from Purchaser;
(f) by Seller if Purchaser shall have breached or failed to perform
any of its representations, warranties, covenants or agreements set forth in
this Agreement, or if any representation or warranty of Purchaser shall have
become untrue, in either case such that the conditions set forth in Sections
8.3(a) or 8.3(b) would not be satisfied and such breach is incapable of being
cured or, if capable of being cured, shall not have been cured within ten (10)
days following receipt by Purchaser of notice of such breach from Seller;
(g) by Seller or Purchaser if the Seller Shareholder Approval shall
not have been obtained at the Seller Shareholder Meeting; or
(h) by Purchaser if Seller has provided any Supplemental Disclosure
pursuant to Section 9.6(b).
4.3 Procedure Upon Termination. In the event of termination and
abandonment by Purchaser and/or Seller pursuant to Section 4.2 hereof, written
notice thereof shall forthwith be given to the other party or parties, and this
Agreement shall terminate, and the purchase of the Shares hereunder shall be
abandoned, without further action by Purchaser or Seller.
4.4 Effect of Termination. In the event that this Agreement is validly
terminated as provided herein, then each of the parties shall be relieved of
their duties and obligations arising under this Agreement after the date of such
termination and such termination shall be without liability to Purchaser, Seller
or the Company; provided, however, that the obligations of the parties set forth
in this Section 4.4 and Section 7.6, Article X and, to the extent necessary to
effectuate the foregoing enumerated provisions, Article I hereof, shall survive
any such termination and shall be enforceable hereunder; provided further,
however, that nothing in this Section 4.4 shall relieve Purchaser, Seller or the
Company of any liability for a breach of this Agreement prior to the effective
date of termination.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser that except as
specifically disclosed in the disclosure schedules attached hereto:
5.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Bermuda, and
the Company is a corporation duly organized, validly existing and in good
standing under the laws of the British Virgin Islands. Each of Seller and the
Company has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now conducted. The
Company is duly qualified or authorized to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction in which it owns or
leases real property and each other jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification or
authorization, except where the failure to be so qualified, authorized or in
good standing would not have a Material Adverse Effect.
5.2 Authorization of Agreement. Each of Seller and the Company has
full corporate power and authority to execute and deliver this Agreement and
each other agreement, document, instrument or certificate contemplated by this
Agreement or to be executed by such party in connection with the consummation of
the transactions contemplated by this Agreement (the "Seller Documents"), and,
subject to obtaining the Seller Shareholder Approval, to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and each of the Seller Documents, and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized and approved by all necessary corporate action on the part of Seller
and the Company, as applicable, subject to obtaining the Seller Shareholder
Approval. This Agreement has been, and each Seller Document will be at or prior
to the Closing, duly and validly executed and delivered by Seller and the
Company, as applicable, and (assuming due authorization, execution and delivery
by the other parties hereto and thereto, and subject to obtaining the Seller
Shareholder Approval) this Agreement constitutes, and each Seller Document when
so executed and delivered will constitute, the legal, valid and binding
obligation of Seller and the Company, as applicable, enforceable against each of
Seller and the Company in accordance with its respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
5.3 Conflicts; Consents of Third Parties.
(a) Neither the execution and delivery by Seller of this Agreement and
of the Seller Documents, nor the compliance by Seller with any of the provisions
hereof or thereof will (i) conflict with, or result in the breach of, any
16
provision of the certificate of incorporation or by-laws (or equivalent
organizational documents) of Seller, (ii) conflict with, violate, result in the
breach of, or constitute a default under any note, bond, mortgage, indenture,
license, agreement or other obligation to which Seller is a party or by which
Seller or its properties or assets are bound or (iii) violate any statute, rule,
regulation or Order of any Governmental Body by which Seller is bound, except,
in the case of clauses (ii) and (iii), for such violations, breaches or defaults
as would not, individually or in the aggregate, have a Material Adverse Effect
on the ability of Seller to consummate the transactions contemplated by this
Agreement.
(b) None of the execution and delivery of this Agreement by the
Company, or the Seller Documents by the Company or any of the Acquired
Subsidiaries to which any is a party, the consummation of the transactions
contemplated hereby or thereby, or compliance by the Company and any Acquired
Subsidiaries with any of the provisions hereof or thereof will conflict with, or
result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or give
rise to any obligation of the Company or any Acquired Subsidiaries to make any
payment under, or to the increased, additional, accelerated or guaranteed rights
or entitlements of any Person under, or result in the creation of any Liens upon
any of the properties or assets of the Company or any Acquired Subsidiary under,
any provision of (i) the organizational documents of the Company or any Acquired
Subsidiary, (ii) any material Contract or Permit to which the Company or any
Acquired Subsidiary is a party or by which any of the properties or assets of
the Company or any Acquired Subsidiary are bound, (iii) any Order of any
Governmental Body applicable to the Company or any Acquired Subsidiary or any of
the properties or assets of the Company or any Acquired Subsidiary or by which
any of the properties or assets of the Company or any Acquired Subsidiary are
bound or (iv) any applicable Law.
(c) No consent, waiver, approval, Order, Permit or authorization of,
or declaration or filing with, or notification to, any Person or Governmental
Body is required on the part of Seller, the Company or any Acquired Subsidiary
in connection with (i) the execution and delivery of this Agreement or the
Seller Documents, the compliance by Seller and the Company with any of the
provisions hereof or thereof, or the consummation of the transactions
contemplated hereby or thereby or (ii) the continuing validity and effectiveness
immediately following the Closing of any Permit or Contract of the Company or
any Acquired Subsidiary.
5.4 Ownership and Transfer of the Shares; Other Assets of Seller.
Seller is the record and beneficial owner of all of the Shares, free and clear
of any and all Liens. Seller has the power and authority to sell, transfer,
assign and deliver the Shares as provided in this Agreement, and such delivery
will convey to Purchaser legal and beneficial title to the Shares, with full
title guarantee, free and clear of any and all Liens.
5.5 Capitalization.
(a) The authorized share capital of the Company consists of 50,000
Ordinary Shares. As of the date hereof, there are 10,500 Ordinary Shares issued
and outstanding and no Ordinary Shares are held by the Company as treasury
shares. All of the issued and outstanding Ordinary Shares were duly authorized
for issuance and are validly issued and fully paid up and were not issued in
violation of any preemptive or similar rights. The Shares represent all of the
outstanding Ordinary Shares.
17
(b) There is no existing option, warrant, call, right or Contract of
any character to which Seller or the Company is a party requiring, and there are
no securities of the Company outstanding which upon conversion or exchange would
require, the issuance, sale or transfer of any additional capital shares or
other equity securities of the Company or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase capital
shares or other equity securities of the Company. There are no obligations,
contingent or otherwise, of the Company or the Acquired Subsidiaries to (i)
repurchase, redeem or otherwise acquire any Ordinary Shares or the share capital
or other equity interests of any Acquired Subsidiary or (ii) provide material
funds to, or make any material investment in (in the form of a capital
contribution, loan or otherwise), or provide any guarantee with respect to the
obligations of, any Person. There are no outstanding share appreciation, phantom
shares, profit participation or similar rights of the Company or any of the
Acquired Subsidiaries. There are no bonds, debentures, notes or other
indebtedness of the Company or the Acquired Subsidiaries having the right to
vote or consent (or, convertible into, or exchangeable for, securities having
the right to vote or consent) on any matters on which shareholders (or other
equityholders) of the Company or the Acquired Subsidiaries may vote. There are
no voting trusts, irrevocable proxies or other Contracts to which Seller, the
Company or any Acquired Subsidiary is a party or is bound with respect to the
voting or consent rights of any Ordinary Shares or the equity interests of any
Acquired Subsidiary.
5.6 Subsidiaries. Schedule 5.6 sets forth the name of each Subsidiary,
and, with respect to each Subsidiary, the jurisdiction in which it is
incorporated or organized, the number of shares of its authorized share capital,
the number and class of shares thereof duly issued and outstanding, the names of
all shareholders or other equity owners, the number of capital shares owned by
each shareholder or the amount of equity owned by each equity owner and, with
respect to each of the Acquired Subsidiaries, the jurisdictions, if any, in
which it is qualified to do business. Each Subsidiary is a duly organized and
validly existing corporation in good standing under the laws of the jurisdiction
of its incorporation or organization and is duly qualified or authorized to do
business as a foreign corporation or entity and is in good standing under the
laws of each jurisdiction in which the conduct of its business or the ownership
of its properties requires such qualification or authorization, except where the
failure to be so qualified, authorized or in good standing has not had and would
not reasonably be likely to have a Material Adverse Effect. Each Acquired
Subsidiary has all requisite corporate or entity power and authority to own its
properties and carry on its business as presently conducted. The outstanding
capital shares or equity interests of each Acquired Subsidiary are validly
issued, fully paid and non-assessable and were not issued in violation of any
preemptive or similar rights. All such shares or other equity interests
represented as being owned by the Company or any of the Acquired Subsidiaries
are owned by them free and clear of any and all Liens. No capital shares of any
Acquired Subsidiary are held by such Acquired Subsidiary. There is no existing
18
option, warrant, call, right or Contract to which any Acquired Subsidiary is a
party requiring, and there are no convertible securities of any Acquired
Subsidiary outstanding which upon conversion would require, the issuance of any
capital shares or other equity interests of any Acquired Subsidiary or other
securities convertible into capital shares or other equity interests of any
Acquired Subsidiary. As of the date of this Agreement, the Company does not own,
directly or indirectly, any capital shares or equity securities of any Person
other than the Subsidiaries. There are no material restrictions on the ability
of the Acquired Subsidiaries to make distributions of cash to their respective
equity holders.
5.7 Corporate Records.
(a) Seller or the Company has provided to Purchaser in the data room
or delivered to Purchaser pursuant to Purchaser's request true, correct and
complete copies of the constitutional documents of the Company and each of the
Acquired Subsidiaries, in each case as amended and in effect on the date hereof,
including all amendments thereto.
(b) The minute books of the Company and each Acquired Subsidiary
previously made available to Purchaser contain true, correct and materially
complete records of all meetings for at least the last three (3) years prior to
the date hereof, and properly reflect all other corporate action of the
shareholders and board of directors (including committees thereof) of the
Company and the Acquired Subsidiaries during such time (if required). The share
certificate books and share transfer ledgers of the Company and the Acquired
Subsidiaries previously made available to Purchaser are true, correct and
materially complete. All share transfer taxes or duties levied, if any, or
payable with respect to all transfers of shares of the Company and the Acquired
Subsidiaries prior to the date hereof have been paid and appropriate transfer
tax or duty stamps affixed.
5.8 Financial Statements.
(a) Seller or the Company has provided to Purchaser in the data room
or delivered to Purchaser pursuant to Purchaser's request copies of the audited
consolidated balance sheets of Seller and its consolidated subsidiaries as of
March 31, 2005, 2004 and 2003 and the related audited consolidated statements of
income and of cash flows of Seller and its consolidated subsidiaries for the
years then ended (such audited statements, including the related notes and
schedules thereto, are referred to herein as the "Financial Statements"). Each
of the Financial Statements is complete and correct in all material respects,
has been prepared in accordance with IFRS consistently applied by Seller without
modification of the accounting principles used in the preparation thereof
throughout the periods presented and presents a true and fair view in all
material respects the consolidated financial position, results of operations and
cash flows of Seller and its consolidated subsidiaries, including the Company
and the Acquired Subsidiaries, as at the dates and for the periods indicated
therein. The audited consolidated balance sheet of Seller and its consolidated
subsidiaries as at March 31, 2005 is referred to herein as the "Balance Sheet"
and March 31, 2005 is referred to herein as the "Balance Sheet Date."
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(b) All books, records and accounts of Seller and its consolidated
subsidiaries, including the Company and the Acquired Subsidiaries, are accurate
and complete in all material respects and are maintained in all material
respects in accordance with good business practice and all applicable Laws.
Seller and its consolidated subsidiaries, including the Company and the Acquired
Subsidiaries, maintain systems of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization, (ii) transactions are
recorded as necessary to permit the preparation of financial statements in
conformity with IFRS and to maintain accountability for assets, (iii) access to
material assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for material assets
is compared with the actual levels at reasonable intervals and appropriate
action is taken with respect to any differences.
(c) The reports of Seller's independent auditors regarding Seller's
consolidated financial statements in the SGX filings have not been withdrawn,
supplemented or modified, and none of Seller or its consolidated subsidiaries,
including the Company and the Acquired Subsidiaries, has received any
communication from its independent auditors concerning any such withdrawal,
supplement or modification. Seller has provided to Purchaser in the data room or
delivered to Purchaser pursuant to Purchaser's request copies of all issued
annual reports, auditors' reports, letters from its auditors to management
regarding accounting practices and systems of internal controls, and all written
responses to such letters from management, whether the same are issued to Seller
or any of its consolidated subsidiaries, for the past three (3) financial years.
Seller or the Company has also provided to Purchaser in the data room or
delivered to Purchaser pursuant to Purchaser's request copies of all
announcements and circulars issued in the past three (3) financial years.
5.9 No Undisclosed Liabilities. None of Seller, the Company or any
Subsidiary has any Indebtedness, Liabilities (whether or not required under IFRS
to be reflected on a balance sheet or the notes thereto) or obligations of any
kind other than those (i) specifically reflected on and properly reserved
against in the Balance Sheet, (ii) incurred in the Ordinary Course of Business
since the Balance Sheet Date or (iii) that are immaterial to the Company and the
Acquired Subsidiaries taken as a whole.
5.10 Absence of Certain Developments. Except as expressly contemplated
by this Agreement, since the Balance Sheet Date: (a) the Company and the
Acquired Subsidiaries have conducted their respective businesses only in the
Ordinary Course of Business; and (b) there has not been any event, change,
occurrence or circumstance that has had or, to the Knowledge of Seller or the
Company, would reasonably be likely to have a Material Adverse Effect. Without
limiting the generality of the foregoing, since the Balance Sheet Date:
(i) there has not been any damage, destruction or loss, whether
or not covered by insurance, with respect to the property and assets
of the Company or any Acquired Subsidiary having a replacement cost of
more than $100,000 for any single loss or $500,000 for all such
losses;
20
(ii) there has not been any declaration, setting aside or payment
of any dividend or other distribution in respect of any capital shares
of the Company or any repurchase, redemption or other acquisition by
the Company or any Acquired Subsidiary of any outstanding capital
shares or other securities of, or other ownership interest in, the
Company or any Acquired Subsidiary;
(iii) neither the Company nor any Acquired Subsidiary has (A)
awarded or paid any bonuses to employees of the Company or any
Acquired Subsidiary with respect to the fiscal year ended March 31,
2005, except to the extent accrued on the Balance Sheet, (B) entered
into (1) any employment agreement outside of the Ordinary Course of
Business or (2) any deferred compensation, severance or similar
agreement (nor amended any such agreement), (C) agreed to increase,
outside of the Ordinary Course of Business, the compensation payable
or to become payable by it to any of the Company's or any Acquired
Subsidiary's directors, officers or employees, or (D) agreed to
increase, outside the Ordinary Course of Business, the coverage or
benefits available under any severance pay, termination pay, vacation
pay, company awards, salary continuation for disability, sick leave,
deferred compensation, bonus or other incentive compensation,
insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with such directors, officers or
employees;
(iv) there has not been any material change by the Company or any
Acquired Subsidiary in accounting or Tax reporting principles, methods
or policies;
(v) neither the Company nor any Acquired Subsidiary has made or
rescinded any election relating to Taxes or settled or compromised any
claim relating to Taxes other than those of a de minimus value;
(vi) neither the Company nor any Acquired Subsidiary has failed
to promptly pay and discharge current liabilities except where
disputed in good faith by appropriate proceedings;
(vii) neither the Company nor any Acquired Subsidiary has made
any loans, advances or capital contributions to, or investments in,
any Person or, outside of the Ordinary Course of Business, paid any
fees or expenses to Seller or any director, officer, partner,
shareholder or Affiliate of Seller;
(viii) neither the Company nor any Acquired Subsidiary has (A)
mortgaged, pledged or subjected to any Lien any of its assets, except
for Permitted Exceptions, or (B) acquired any material assets or sold,
assigned, transferred, conveyed, leased or otherwise disposed of any
material assets of the Company or any Acquired Subsidiary, except in
the case of clause (B) for assets acquired, sold, assigned,
transferred, conveyed, leased or otherwise disposed of in the Ordinary
Course of Business;
21
(ix) neither the Company nor any Acquired Subsidiary has
discharged or satisfied any Lien, or paid any obligation or Liability,
except in the Ordinary Course of Business;
(x) neither the Company nor any Acquired Subsidiary has canceled
or compromised any debt or claim or amended, canceled, terminated,
relinquished, waived or released any Contract or right except in the
Ordinary Course of Business and which, in the aggregate, would not be
material to the Company and the Acquired Subsidiaries taken as a
whole;
(xi) neither the Company nor any Acquired Subsidiary has made or
committed to make any capital expenditures or capital additions or
betterments in excess of $100,000 individually or $500,000 in the
aggregate;
(xii) neither Company nor any Acquired Subsidiary has issued,
created, incurred, assumed or guaranteed any Indebtedness;
(xiii) neither the Company nor any Acquired Subsidiary has
instituted or settled any material Legal Proceeding; and
(xiv) neither Seller nor the Company has agreed or committed to
do anything set forth in this Section 5.10.
5.11 Taxes.
(a) All Returns required to be filed by or on behalf of the Company
and any Subsidiary have been duly and timely (including any extensions or grace
periods) filed with the appropriate Taxing Authority in all jurisdictions in
which such Tax Returns are required to be filed (after giving effect to any
valid extensions of time in which to make such filings), and all such Tax
Returns are true, correct and materially complete. No other entity files Tax
Returns for or on behalf of the Company or any Subsidiary. All Taxes payable by
or on behalf of the Company and any Subsidiary have been duly and timely
(including any extensions or grace periods) paid. With respect to any period
prior to the date of this Agreement or prior to the Closing Date, as the case
may be, for which Tax Returns have not yet been filed or for which Taxes are not
yet due or owing, or for which Taxes have otherwise not yet been paid, such Tax
liability does not exceed the accruals or reserves for such Tax liability in the
Financial Statements and its books and records. All required estimated Tax
payments sufficient to avoid any underpayment penalties or interest have been
made by or on behalf of the Company and each Subsidiary.
(b) The Company and each Acquired Subsidiary has complied in all
material respects with all applicable Laws relating to the payment and
withholding of Taxes and has duly and timely (including any extensions or grace
periods) withheld and paid over to the appropriate Taxing Authority all amounts
required to be so withheld and paid under all applicable Laws.
22
(c) Seller or the Company has provided to Purchaser in the data room
or delivered to Purchaser pursuant to Purchaser's request materially complete
copies of (i) all income or franchise Tax Returns, if available, of the Company
and the Acquired Subsidiaries relating to the taxable years ended March 31,
2005, 2004 and 2003 and (ii) any audit report issued by a Taxing Authority
within the last three (3) years relating to any Taxes due from or with respect
to the Company or any Acquired Subsidiary.
(d) Schedule 5.11 lists to the Knowledge of Seller or the Company (i)
all material types of Taxes paid, and all types of Tax Returns filed by or on
behalf of the Company or any Acquired Subsidiary, and (ii) all of the
jurisdictions that impose such Taxes and/or duty to file such Tax Returns.
Neither the Company nor any Acquired Subsidiary has received notice that any
claim has been made by a Taxing Authority in a jurisdiction where the Company or
any Acquired Subsidiary does not file Tax Returns such that it is or may be
subject to taxation by that jurisdiction.
(e) All deficiencies asserted or assessments made as a result of any
examinations by any Taxing Authority of the Tax Returns of, or including, the
Company or any Acquired Subsidiary have been fully paid, and there are no other
audits or, to the Knowledge of Seller or the Company, investigations by any
Taxing Authority in progress, nor has Seller, the Company or any of the Acquired
Subsidiaries received any notice from any Taxing Authority that it intends to
conduct such an audit or investigation.
(f) Neither the Company nor any Acquired Subsidiary nor any other
Person on their behalf has (i) agreed to or is required to make any material
adjustments or has any Knowledge that any Taxing Authority has proposed any such
material adjustment, or has any application pending with any Taxing Authority
requesting permission for any material changes in accounting methods that relate
to the Company or any Acquired Subsidiary, (ii) executed or entered into a
"closing" or settlement agreement with any Taxing Authority with respect to any
Tax liability of the Company or any Acquired Subsidiary, (iii) requested any
extension of time within which to file any Tax Return, which Tax Return has
since not been filed within such extension of time, (iv) been granted any
extension for the assessment or collection of Taxes, which Taxes have not since
been paid when due, or (v) granted to any Person any power of attorney that is
currently in force with respect to any Tax matter.
(g) Neither the Company nor any Acquired Subsidiary is a party to any
tax sharing, allocation, indemnity or similar agreement or arrangement (whether
or not written) pursuant to which it will have any obligation to make any
payments pursuant to such agreement or arrangement after the Closing.
(h) Neither the Company nor any Acquired Subsidiary has been subject
to any private letter ruling or comparable rulings of any Taxing Authority
within the past three (3) years.
(i) There are no liens as a result of any unpaid Taxes upon any of the
assets of the Company or any Acquired Subsidiary.
23
(j) Without limiting the scope of any other representation or
warranty, all capital contributions have been made in respect of MultiVision
Intelligent Surveillance (Zhu Hai) Limited to maintain its favorable tax
treatment in China, except to the extent that the cash distributions to be made
by the Company and the Acquired Subsidiaries immediately prior to the Closing,
as contemplated by this Agreement, reduce the share capital of MultiVision
Intelligent Surveillance (Zhu Hai) Limited.
(k) There is no taxable income of the Company or any of the Acquired
Subsidiaries that will be required under applicable tax law to be reported by
Purchaser or any of its Affiliates, including the Company or any of the Acquired
Subsidiaries, for a taxable period beginning after the Closing Date which
taxable income was received and enjoyed prior to the Closing Date.
Indemnification or other liability for breaches of this Section 5.11(k) shall be
limited to the amount of the tax that would have been borne by Seller, the
Company or the Subsidiaries had the sale of the Shares herein not taken place.
(l) Neither the Company nor any non-U.S. Acquired Subsidiary has or
was required to file any United States Tax Returns.
(m) Neither the Company nor any Acquired Subsidiary has filed with the
U.S. Internal Revenue Service any Tax elections for U.S. Tax purposes.
(n) Neither the Company nor any non-U.S. Acquired Subsidiary has any
investment (directly or indirectly) in United States real property.
(o) The Company and the Acquired Subsidiaries have properly maintained
all intercompany agreements and concurrent and supporting documentation as
required under all applicable tax laws, such that no transfer pricing amounts
will be denied as deductions or will be considered to have created income to the
Company or any of the Acquired Subsidiaries of a type other than that specified
in the intercompany agreement in any jurisdiction either by reason of a lack of
proper agreements or supporting documentation or by reason of a non-compliance
with the "arm's length" principle as defined under applicable tax laws.
(p) Neither the Company nor any of the Acquired Subsidiaries has
agreed to participate in, or cooperate with, an international boycott.
5.12 Real Property.
(a) Neither the Company nor the Acquired Subsidiaries own any real
property or interests in real property. Schedule 5.12 sets forth a complete list
of all real property and interests in real property leased by the Company and
the Acquired Subsidiaries (the "Company Leased Properties") as lessee or lessor,
including a description of each such Company Leased Property (including the name
of the third party lessor or lessee and the date of the lease or sublease and
all amendments thereto). The Company Leased Properties constitute all interests
in real property currently used, occupied or currently held for use in
connection with the business of the Company and the Acquired Subsidiaries and
which are necessary for the continued operation of the business of the Company
and the Acquired Subsidiaries as the business is currently conducted. All
24
Company Leased Property, buildings, fixtures and improvements thereon leased by
the Company and the Acquired Subsidiaries are (i) in good condition (except for
ordinary wear and tear), and all mechanical and other systems located thereon
are in good condition (except for ordinary wear and tear), and, to the Knowledge
of Seller or the Company, no condition exists requiring material repairs,
alterations or corrections, and (ii) suitable, sufficient and appropriate in all
respects for their current uses. To the Knowledge of Seller or the Company, none
of the improvements located on the Company Leased Properties constitute a legal
non-conforming use or otherwise require any special dispensation, variance or
special permit under any Laws. Seller or the Company has provided to Purchaser
in the data room or delivered to Purchaser pursuant to Purchaser's request true,
correct and materially complete copies of all Contracts related to the Company
Leased Property (each such Contract, a "Company Lease"), together with all
amendments, modifications or supplements thereto, if any, as of the date of
delivery.
(b) The Company and the Acquired Subsidiaries, as applicable, have a
valid and enforceable leasehold interest under each of the Company Leases, free
and clear of all Liens other than Permitted Exceptions, and each of the Company
Leases is in full force and effect. The Company is not in material default under
any of the Company Leases, and, to the Knowledge of Seller or the Company, no
events have occurred and no circumstances exist which, if not remedied, and
whether with or without notice or the passage of time or both, would result in
such a material default. Neither the Company nor any Acquired Subsidiary has
received or given any notice of any default or event that, to the Knowledge of
Seller or the Company, with notice or lapse of time, or both, would constitute a
default by the Company or any Acquired Subsidiary under any of the Company
Leases and, to the Knowledge of Seller or the Company, no other party is in
material default thereof, and no party to the Company Leases has exercised any
termination rights with respect thereto.
(c) The Company and the Acquired Subsidiaries have all certificates of
occupancy and Permits of any Governmental Body necessary for the current use and
operation of each Company Leased Property, and the Company and the Acquired
Subsidiaries have fully complied with all material conditions of the Permits
applicable to them. None of Seller, the Company or any Acquired Subsidiary has
received any notice of any default, violation or event that, to the Knowledge of
Seller or the Company, with notice or lapse of time, or both, would constitute a
default or violation by the Company or any Acquired Subsidiary in the due
observance of any Permit
(d) There does not exist any actual or, to the Knowledge of Seller or
the Company, threatened or contemplated condemnation (or order not to occupy) or
compulsory acquisition proceedings by a Governmental Body that affect any
Company Leased Property or any part thereof, and neither Seller nor the Company
has received any notice, oral or written, of the intention of any Governmental
Body or other Person to take or use all or any part thereof.
25
(e) Neither Seller nor the Company has received any written notice
from any insurance company that has issued a policy with respect to any Company
Leased Property requiring performance of any structural or other repairs or
alterations to such Company Leased Property.
(f) Neither the Company nor any Acquired Subsidiary owns or holds, and
is not obligated under or a party to, any sublease, option to purchase, right of
occupancy, right of first refusal or other contractual right to purchase,
acquire, sell, assign or dispose of any real estate or any portion thereof or
interest therein, other than lease renewal options.
5.13 Tangible Personal Property.
(a) The Company and the Acquired Subsidiaries have legal and
beneficial title to all of the items of tangible personal property reflected on
the Balance Sheet (except as sold or disposed of subsequent to the date thereof
in the Ordinary Course of Business and not in violation of this Agreement), free
and clear of any and all Liens, other than the Permitted Exceptions. All such
items of tangible personal property which, individually or in the aggregate, are
material to the operation of the business of the Company and the Acquired
Subsidiaries are in good condition and in a state of good maintenance and repair
(ordinary wear and tear excepted) and are suitable for the purposes used.
(b) Schedule 5.13 sets forth all leases of personal property
("Personal Property Leases") involving annual payments in excess of $5,000
relating to personal property used in the business of the Company or any of the
Acquired Subsidiaries or to which the Company or any of the Acquired
Subsidiaries is a party. All of the items of personal property under the
Personal Property Leases are in good condition and repair (ordinary wear and
tear excepted) and are suitable for the purposes used, and such property is in
all material respects in the condition required of such property by the terms of
the lease applicable thereto during the term of the lease. Seller or the Company
has provided to Purchaser in the data room or delivered to Purchaser pursuant to
Purchaser's request true, correct and materially complete copies of the Personal
Property Leases, together with all amendments, modifications or supplements
thereto as of the date of such delivery.
(c) The Company and each of the Acquired Subsidiaries have a valid and
enforceable leasehold interest under each of the Personal Property Leases under
which it is a lessee, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity). Each of the Personal Property Leases is in full force and effect and
neither the Company nor any Acquired Subsidiary has received or given any notice
of any default or event that, to the Knowledge of Seller or the Company, with
notice or lapse of time, or both, would constitute a default by the Company or
any Acquired Subsidiary under any of the Personal Property Leases and, to the
Knowledge of Seller or the Company, no other party is in material default
thereof, and neither the Company or any Acquired Subsidiary has exercised any
termination rights with respect to a Personal Property Lease or received notice
of the exercise of any termination right by any other party to a Personal
Property Lease.
26
5.14 Intellectual Property.
(a) Schedule 5.14(a) sets forth an accurate and complete list of all
Patents, registered Marks, registered Copyrights, material unregistered Marks
and material unregistered Copyrights owned by the Company or the Acquired
Subsidiaries, and lists the jurisdictions in which each such item of
Intellectual Property has been issued or registered or in which any such
application for such issuance and registration has been filed (the "Company
Intellectual Property"). Each item of the Company's Intellectual Property and
Technology is valid (except that with respect to Patents, each Patent is valid
only to the Knowledge of Seller), enforceable and subsisting; all necessary
registration, maintenance and renewal fees in connection with registered Company
Intellectual Property have been paid and all necessary documents and
certificates in connection with registered Company Intellectual Property have
been filed with the relevant patent, copyright, trademark or other authorities
in the United States or foreign jurisdictions, as the case may be, for the
purposes of perfecting or maintaining such registered Company Intellectual
Property. There are no actions that must be taken by the Company or the Acquired
Subsidiaries within ninety (90) days of the Closing Date for the purposes of
obtaining, maintaining, perfecting or renewing any such registrations and
applications.
(b) The Company or the Acquired Subsidiaries owns, licenses or
otherwise possesses legally enforceable rights, to use all Company Intellectual
Property and all of the Intellectual Property and Technology used in and
necessary to conduct the business and operations of the Company or the Acquired
Subsidiaries as presently conducted, including the design, development,
manufacture, use, import, marketing, sale, distribution, and provision of
products, technology and services, and each of the Copyrights listed on Schedule
5.14(a) in any works of authorship prepared by or for the Company or the
Acquired Subsidiaries that resulted from or arose out of any work performed by
or on behalf of the Company or the Acquired Subsidiaries or by any employee,
officer, consultant or contractor of any of them, in each case, is free and
clear of all Liens or obligations to others (except for those specified licenses
included in Schedule 5.14(d)).
(c) The Intellectual Property and Technology owned or otherwise
commercially exploited by the Company or any of the Acquired Subsidiaries, and
the development, manufacturing, licensing, marketing, importation, offer for
sale, sale or use of the Technology or the products of the Company or the
Acquired Subsidiaries in connection with the business as presently conducted,
and the Company's or any of the Acquired Subsidiaries' present business
practices and methods do not infringe, violate or constitute an unauthorized use
or misappropriation of any Intellectual Property right of any third party
(including pursuant to any non-disclosure agreements or obligations to which the
Company or any of the Acquired Subsidiaries or any of their present or former
employees is a party). The Intellectual Property and Technology owned by or
licensed to the Company or any of the Acquired Subsidiaries includes all of the
27
Intellectual Property rights used by the Company and the Acquired Subsidiaries
to conduct their businesses in the manner in which such business is currently
being conducted. For the avoidance of doubt, Seller shall not be in breach of
this Section 5.14(c) for any infringement of any Intellectual Property right of
any third party in respect of the use or other exploitation by the Company or
the Acquired Subsidiaries first arising after the Closing Date of (i) material
unregistered Marks owned by the Company and the Acquired Subsidiaries or (ii)
material unregistered Copyrights owned by the Company and the Acquired
Subsidiaries which do not relate to applications or software developed by the
Company and the Acquired Subsidiaries.
(d) Except with respect to licenses of commercial off-the-shelf
Software, Schedule 5.14(d) sets forth a complete and accurate list of all
Intellectual Property Licenses pursuant to which the Company or the Acquired
Subsidiaries licenses or otherwise is authorized to use any Intellectual
Property or Technology used in the business of the Company and the Acquired
Subsidiaries as currently conducted. Each of the Intellectual Property Licenses
has been duly approved or recorded with appropriate government authorities if
applicable, is in full force and effect and is the legal, valid and binding
obligation of the Company and/or the Acquired Subsidiaries, enforceable in
accordance with its terms. Neither the Company nor any Acquired Subsidiary is in
default under any Intellectual Property License, nor, to the Knowledge of Seller
or the Company, is any other party to any Intellectual Property License in
default thereunder, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder. Neither the
Company nor any Acquired Subsidiary has exercised any termination rights with
respect to an Intellectual Property License or received notice of the exercise
of any termination right by any other party to an Intellectual Property License.
Following the Closing, the Company will continue to exercise all of the
Company's rights under such Intellectual Property Licenses to the same extent
and in the same manner the Company would have been able to had the transaction
not occurred, and without the payment of any additional consideration and
without the necessity of any third party consent. Except pursuant to the
licenses set forth on Schedule 5.14(d), neither the Company nor any of the
Acquired Subsidiaries is required, obligated, or under any liability whatsoever,
to make any payments by way of royalties, fees or otherwise or provide any other
consideration of any kind, to any third party with respect to use of any
Intellectual Property or Technology used in the businesses of the Company and
the Acquired Subsidiaries as currently conducted other than commercial
off-the-shelf Software.
(e) Schedule 5.14(e) sets forth a complete and accurate list of all
Contracts (other than with respect to subsections (i) and (iii) below, Contracts
of the Company or any Acquired Subsidiary to provide products or services to
their customers or clients ("Customer Contracts")) to which the Company or the
Acquired Subsidiaries is a party (i) granting any Intellectual Property
Licenses, (ii) containing a covenant not to compete or otherwise limiting the
ability of the Company or any Acquired Subsidiary to use or exploit fully any of
their Intellectual Property or Technology or (iii) containing an agreement to
indemnify any other person against any claim of infringement of, violation,
misappropriation or unauthorized use of any Intellectual Property. Seller or the
Company has provided to Purchaser in the data room or delivered to Purchaser
pursuant to Purchaser's request true, correct and materially complete copies of
each Contract set forth on Schedule 5.14(e), together with all amendments,
modifications or supplements thereto.
28
(f) No Trade Secret or any other non-public, proprietary information
material to the business of the Company or any Acquired Subsidiary as presently
conducted has been authorized to be disclosed or has been actually disclosed by
the Company or any of the Acquired Subsidiaries to any employee or any third
party other than pursuant to a written non-disclosure agreement including
restrictions on the disclosure and use of the Intellectual Property and
Technology consistent with standard practices in the industry in which the
Company and the Acquired Subsidiaries operate. The Company and the Acquired
Subsidiaries have executed valid written agreements with all of their employees
by which the employees have acknowledged the "work for hire" status of all
Intellectual Property and Technology they may develop during their employment
and by which they have assigned to the Company or the Acquired Subsidiaries all
of their rights in and to such Intellectual Property and Technology and agreed
to hold all Trade Secrets and confidential information of the Company and the
Acquired Subsidiaries in confidence both during and after their employment. The
Company and the Acquired Subsidiaries have executed valid written agreements
with all consultants and contractors who have been retained in connection with
the development of Intellectual Property and Technology by which the consultants
and contractors have assigned to the Company or the Acquired Subsidiaries all of
their rights in and to such Intellectual Property and Technology and agreed to
hold all Trade Secrets and confidential information of the Company and the
Acquired Subsidiaries in confidence both during and after the term of their
engagements.
(g) As of the date hereof, neither the Company nor any of the Acquired
Subsidiaries is the subject of any pending or, to the Knowledge of Seller or the
Company, threatened Legal Proceedings which involve a claim of infringement,
misappropriation, unauthorized use, or violation of any intellectual property
rights by any Person against the Company or the Acquired Subsidiaries or
challenging the ownership, use, validity or enforceability of, any material
Intellectual Property or Technology. Neither the Company nor any Acquired
Subsidiary has received notice of any such threatened claim and, to the
Knowledge of Seller or the Company, there are no facts or circumstances that
would form the basis for any claim of infringement, unauthorized use,
misappropriation or violation or any intellectual property rights by any Person
against the Company or any Acquired Subsidiary, or challenging the ownership,
use, validity or enforceability of any material Intellectual Property or
Technology. All of the Company's or the Acquired Subsidiaries' rights in and to
material Intellectual Property and Technology are valid and enforceable.
(h) To the Knowledge of Seller or the Company, no Person is
infringing, violating, misusing or misappropriating any material Intellectual
Property or Technology of the Company or any Acquired Subsidiary, and no such
claims have been made against any Person by the Company or any Acquired
Subsidiary.
(i) There are no Orders to which the Company or any Acquired
Subsidiary is a party or by which the Company or any Acquired Subsidiary is
bound which restrict, in any material respect, the right to use any of the
Intellectual Property or Technology.
29
(j) Except as expressly contemplated by this Agreement, neither the
execution of this Agreement, the consummation of the transactions contemplated
by this Agreement nor the conduct of the business and operations of the Company
and the Acquired Subsidiaries as presently conducted will result in (i)
Purchaser's granting to any third party any right to any Intellectual Property
or Technology owned by, or licensed to, the Company and the Acquired
Subsidiaries, (ii) Purchaser's being bound by, or subject to, any non-compete or
other restriction on the operation or scope of its business or (iii) Purchaser's
being obligated to pay any royalties or other amounts to any third party in
excess of those payable by Company or the Acquired Subsidiaries prior to the
Closing.
(k) No present or former employee has any right, title, or interest,
directly or indirectly, in whole or in part, in any material Intellectual
Property or Technology owned or used by the Company or any Acquired Subsidiary.
To the Knowledge of Seller or the Company, no employee, consultant or
independent contractor of the Company or any Acquired Subsidiary is, as a result
of or in the course of such employee's, consultant's or independent contractor's
engagement by the Company or any Acquired Subsidiary, in default or breach of
any material term of any employment agreement, non-disclosure agreement,
assignment of invention agreement or similar agreement. The Company and the
Acquired Subsidiaries are not in breach of any material term of any employment
agreement, non-disclosure agreement, assignment of invention agreement or
similar agreement. All such agreements which are in force on the date hereof
comply with the applicable Laws and regulations.
(l) Schedule 5.14(l) sets forth a complete and accurate list of (i)
all Software that is owned exclusively by the Company or any Acquired Subsidiary
that is material to the operation of the business and (ii) all Software that is
used by the Company or any Acquired Subsidiary in the business that is not
exclusively owned by the Company or any Acquired Subsidiary, excluding Software
available (A) on reasonable terms through commercial distributors or (B) in
consumer retail stores for a license fee of no more than $1,000.
(m) No open source or public software or freeware, including but not
limited to any version of any software licensed pursuant to any GNU public
license, was used in the development or modification of any software that has
been incorporated into or utilized in the products or services of the Company or
any Acquired Subsidiary that would in any way limit the ability to make, use or
sell such products or that would diminish or transfer the rights of ownership in
any Intellectual Property or Software of the Company to a third party, and
neither the Company nor any of the Acquired Subsidiaries is in default or
subject to claims of infringement based on such use. No open source code used by
the Company or any Acquired Subsidiary has been modified or embedded in any way
that creates an obligation to disclose such source code (or any Intellectual
Property or Software of the Company or any of the Acquired Subsidiaries), or
would result in a default or would subject the Company or the Acquired
Subsidiaries to claims of infringement.
30
(n) All Software owned or used by the Company ("Company Software"),
other than Company Software available (i) on reasonable terms through commercial
distributors or (ii) in consumer retail stores for a license fee of no more than
$1,000, is free of any material bugs or defects and is and shall be useable in
the same form in the Ordinary Course of Business after the execution of this
Agreement. There are no "time bombs" or other intentionally harmful components
in any Company Software. All Company Software, other than Company Software
available (i) on reasonable terms through commercial distributors or (ii) in
consumer retail stores for a license fee of no more than $1,000, is free from
significant programming errors and operates in substantial conformity with its
user documentation and other descriptions and standards applicable thereto
provided by Company and such Software does not contain any known virus. The
Company has used reasonable measures, consisting of scanning by means of
commercially available scanning products to detect and remove any known virus.
Company Software and, to the Knowledge of Seller or the Company, all commercial
off-the-shelf Software used by the Company, does not have any timer, clock,
counter or other limiting design, instruction or routine that would erase data
or programming or cause a computer to become inoperable or otherwise incapable
of being used in the full manner for which it was designed.
5.15 Material Contracts.
(a) Schedule 5.15 sets forth, by reference to the applicable
subsection of this Section 5.15(a), all of the following outstanding Contracts
to which the Company or any of the Acquired Subsidiaries is a party
(collectively, the "Material Contracts"):
(i) Contracts with Seller or an Affiliate thereof (including the
Excluded Subsidiaries) or any current or former officer, director,
shareholder or Affiliate of the Company or any of the Acquired
Subsidiaries, excluding employment Contracts with any current or
former officer or director of the Company or any Acquired Subsidiary;
(ii) Contracts with any labor union or association representing
any employee of the Company or any of the Acquired Subsidiaries;
(iii) Contracts for (A) the sale of any of the assets of the
Company or any of the Acquired Subsidiaries other than in the Ordinary
Course of Business or (B) for the grant to any person of any
preferential rights to purchase any of its assets;
(iv) Contracts for joint ventures, strategic alliances,
partnerships, licensing arrangements, or sharing of profits or
proprietary information;
(v) Contracts containing covenants of the Company or any of the
Acquired Subsidiaries not to compete in any line of business or with
any person in any geographical area or not to solicit or hire any
Person with respect to employment or covenants of any other person not
to compete with the Company or any of the Acquired Subsidiaries in any
line of business or in any geographical area or not to solicit or hire
any Person with respect to employment;
31
(vi) Contracts relating to the acquisition (by merger, purchase
of equity or assets or otherwise) by the Company or any of the
Acquired Subsidiaries of any operating business or assets material to
the business of the Company or the Acquired Subsidiaries or the equity
of any other Person;
(vii) Contracts relating to the incurrence, assumption or
guarantee of any Indebtedness or imposing a Lien other than a
Permitted Exception on any of its assets, including indentures,
guarantees, loan or credit agreements, sale and leaseback agreements
or purchase money obligations incurred in connection with the
acquisition of property, mortgages, pledge agreements, security
agreements, or conditional sale or title retention agreements;
(viii) purchase Contracts giving rise to Liabilities of the
Company or any of the Acquired Subsidiaries in excess of $50,000;
(ix) all Contracts other than Customer Contracts providing for
payments by or to the Company or any of the Acquired Subsidiaries in
excess of $100,000 in any fiscal year or $200,000 in the aggregate
during the term thereof, and Customer Contracts providing for payments
to the Company or any of the Acquired Subsidiaries in excess of
$250,000 in any fiscal year or $500,000 in the aggregate during the
term thereof. Notwithstanding the foregoing, any Customer Contract
providing for payments to the Company or any of the Acquired
Subsidiaries in excess of $100,000 in any fiscal year or $200,000 in
the aggregate during the term thereof shall be deemed to be a
"Material Contract" for all purposes of this Agreement other than the
first sentence of this Section 5.15(a)(ix);
(x) all Contracts obligating the Company or any of the Acquired
Subsidiaries to provide or obtain products or services for a period
exceeding one year or requiring the Company to purchase or sell a
stated portion of its requirements or outputs, excluding employment
Contracts;
(xi) Contracts under which the Company or any of the Acquired
Subsidiaries has made advances or loans to any other Person;
(xii) Contracts providing for severance, retention, change in
control or other similar payments;
(xiii) Contracts for the employment of any individual on a
full-time, part-time or consulting or other basis providing annual
compensation in excess of $40,000;
(xiv) outstanding agreements of guaranty, surety or
indemnification, direct or indirect, by the Company or any of the
Acquired Subsidiaries; and
(xv) Contracts that are otherwise material to the Company and the
Acquired Subsidiaries taken as a whole.
32
(b) Each of the Material Contracts is in full force and effect and is
the legal, valid and binding obligation of the Company and/or the Acquired
Subsidiaries, enforceable against each of them in accordance with its terms.
Neither the Company nor any Acquired Subsidiary is in material default under any
Material Contract, nor, to the Knowledge of Seller or the Company, is any other
party to any Material Contract in material default thereunder, and, to the
Knowledge of Seller or the Company, no event has occurred that with the lapse of
time or the giving of notice or both would constitute a material default
thereunder. Neither the Company nor any Acquired Subsidiary has given notice of
any significant dispute or exercised any termination rights with respect to a
Material Contract or received notice of a significant dispute or the exercise of
any termination right by any other party to a Material Contract. Seller or the
Company has provided to Purchaser in the data room or delivered to Purchaser
pursuant to Purchaser's request true, correct and materially complete copies of
all of the Material Contracts, together with all amendments, modifications or
supplements thereto as of the date of such delivery. The Contracts listed on
Schedule 5.15(b) are terminable by, as applicable, the Company or the relevant
Acquired Subsidiary at any time for any reason without penalty or fee to, or
other payment by (other than for goods or services previously received), the
Company or any of the Acquired Subsidiaries, and do not otherwise subject the
Company or any of the Acquired Subsidiaries to any fixed payment obligation
without a right to receive a corresponding benefit.
5.16 Employee Benefits Plans.
(a) Schedule 5.16 sets forth a correct and complete list of all
employee benefit plans, employee pension plans, programs, agreements, policies,
arrangements or payroll practices, including bonus plans, employment, consulting
or other compensation agreements, collective bargaining agreements, incentive,
equity or equity-based compensation, or deferred compensation arrangements,
change in control, termination or severance plans or arrangements, share
purchase, severance pay, sick leave, vacation pay, salary continuation for
disability, hospitalization, medical insurance, life insurance and scholarship
plans and programs maintained by Seller, the Company or any of the Acquired
Subsidiaries or to which Seller, the Company or any of the Acquired Subsidiaries
contributed or is obligated to contribute thereunder for current or former
employees of the Company or any of the Acquired Subsidiaries (the "Employees")
(collectively, the "Company Plans"). Neither the Company nor any Acquired
Subsidiary is part of or is obligated to contribute to any multiemployer plan.
(b) Correct and complete copies of the following documents, with
respect to each of the Company Plans (other than a multiemployer plan), have
been made available or delivered to Purchaser by the Company, to the extent
applicable: (i) any plans, all amendments thereto and related trust documents,
insurance contracts or other funding arrangements, and amendments thereto; (ii)
the most recent Tax forms for the Company Plans and all schedules thereto and
the most recent actuarial report, if any; (iii) written communications to
employees relating to the Company Plans; and (iv) written descriptions of all
non-written agreements relating to the Company Plans.
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(c) The Company Plans have been maintained in all material respects in
accordance with their terms and with all provisions of applicable Law.
(d) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the Company Plans (including workers compensation) or by Law, to any funds or
trusts established thereunder or in connection therewith have been made by the
due date thereof (including any valid extension), and all contributions for any
period ending on or before the Closing Date that are not yet due will have been
paid or sufficient accruals for such contributions and other payments in
accordance with IFRS are duly and properly provided for on the Balance Sheet.
(e) There is no material violation of applicable Law with respect to
the filing of applicable reports, documents and notices regarding the Company
Plans with any Governmental Body or the furnishing of such documents to the
participants in or beneficiaries of the Company Plans.
(f) None of the Company Plans provides for post-employment life or
health insurance, benefits or coverage for any participant or any beneficiary of
a participant.
(g) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment becoming due to any Employee, (ii) increase any benefits otherwise
payable under any Company Plan or (iii) result in the acceleration of the time
of payment or vesting of any such benefits under any Company Plan.
(h) Neither the Company nor any of the Acquired Subsidiaries has a
contract, plan or commitment, whether legally binding or not, to create any
additional Company Plan or to modify any existing Company Plan.
(i) No equity or other security issued by the Company or any of the
Acquired Subsidiaries forms or has formed a material part of the assets of any
Company Plan.
5.17 Labor.
(a) Neither the Company nor any of the Acquired Subsidiaries is a
party to any labor or collective bargaining agreement and there are no labor or
collective bargaining agreements which pertain to employees of the Company or
any of the Acquired Subsidiaries.
(b) No Employees are represented by any labor organization. No labor
organization or group of employees of the Company or any of the Acquired
Subsidiaries has made a pending demand for recognition, and there are no
representation proceedings or petitions seeking a representation proceeding
34
presently pending or, to the Knowledge of Seller or the Company, threatened to
be brought or filed, with a labor relations tribunal. To the Knowledge of Seller
or the Company, there is no organizing activity involving the Company or any of
the Acquired Subsidiaries pending or threatened by any labor organization or
group of employees of the Company or any of the Acquired Subsidiaries.
(c) There are no (i) strikes, work stoppages, slowdowns, lockouts or
arbitrations or (ii) material grievances or other labor disputes pending or, to
the Knowledge of Seller or the Company, threatened against or involving the
Company or any of the Acquired Subsidiaries. There are no unfair labor practice
charges, formal grievances or formal complaints pending or, to the Knowledge of
Seller or the Company, threatened by or on behalf of any employee or group of
employees of the Company.
(d) None of Seller, the Company or any of the Acquired Subsidiaries
have received notice of any complaints, charges or claims against the Company or
any of the Acquired Subsidiaries that could be brought or filed, with any
Governmental Body or based on, arising out of, in connection with or otherwise
relating to the employment or termination of employment, or failure to employ,
by the Company or any of the Acquired Subsidiaries of any individual. Each of
the Company and the Acquired Subsidiaries is in compliance with all Laws
relating to the employment of labor, including all such Laws relating to wages,
hours, and any similar mass layoff or plant closing Law, collective bargaining,
discrimination, civil rights, safety and health, workers' compensation and the
collection and payment of withholding and/or social security taxes and any
similar tax except for immaterial non-compliance.
5.18 Litigation. There is no Legal Proceeding pending or threatened in
writing against, and, to the Knowledge of Seller or the Company, there is no
material Legal Proceeding threatened orally against, Seller, the Company or any
of the Acquired Subsidiaries (or to the Knowledge of Seller or the Company,
pending or threatened, against any of the officers, directors or employees of
the Company or any of the Acquired Subsidiaries with respect to their business
activities on behalf of the Company), or to which Seller, the Company or any of
the Acquired Subsidiaries is otherwise a party before any Governmental Body; nor
to the Knowledge of Seller or the Company is there any reasonable basis for any
such Legal Proceeding that would have a Material Adverse Effect or would
reasonably be likely to have a Material Adverse Effect. Neither the Company nor
any Acquired Subsidiary is engaged in any legal action to recover monies due it
or for damages sustained by it. There are no Legal Proceedings pending or, to
the Knowledge of Seller or the Company, threatened that are reasonably likely to
prohibit or restrain the ability of Seller to perform its obligations under this
Agreement or consummate the transactions contemplated hereby. To the Knowledge
of Seller or the Company, there are no investigations of Seller, the Company or
any of the Acquired Subsidiaries by or on behalf of any Governmental Body.
35
5.19 Compliance with Laws; Permits.
(a) The Company and the Acquired Subsidiaries are in compliance in all
material respects with all Laws of any Governmental Body applicable to its
business, operations or assets. Neither the Company nor any Acquired Subsidiary
has received notice of any material violation, or been charged with any
violation, of any Laws. To the Knowledge of Seller or the Company, neither the
Company nor any Acquired Subsidiary is under investigation with respect to the
violation of any Laws and there are no facts or circumstances which could form
the basis for any such violation.
(b) Schedule 5.19 contains a list of all Permits which are required
for the operation of the business of the Company and the Acquired Subsidiaries
as presently conducted and as presently intended to be conducted ("Company
Permits"), other than those the failure of which to possess is immaterial. The
Company and the Acquired Subsidiaries currently have all Permits which are
required for the operation of their respective businesses as presently
conducted, other than those the failure of which to possess is immaterial. None
of the Company or any of the Acquired Subsidiaries is in default or violation,
and, to the Knowledge of Seller or the Company, no event has occurred which,
with notice or the lapse of time or both, would constitute a default or
violation, in any material respect of any term, condition or provision of any
Company Permit. None of the Company Permits will be impaired or in any material
way affected by the consummation of the transactions contemplated by this
Agreement.
5.20 Environmental Matters. The operations of the Company and each of
the Acquired Subsidiaries are and have been in compliance with all applicable
Environmental Laws which compliance includes obtaining, maintaining in good
standing and complying with all Environmental Permits and no action or
proceeding is pending to revoke, modify or terminate any such Environmental
Permit.
5.21 Insurance. The Company and the Acquired Subsidiaries have
insurance policies in full force and effect and comply with all requirements of
Law and all agreements to which the Company or any of the Acquired Subsidiaries
is a party or by which it is bound. Set forth in Schedule 5.21 is a list of all
insurance policies held by or applicable to the Company or any of the Acquired
Subsidiaries setting forth, in respect of each such policy, the policy name,
policy number, carrier and type. None of the policies may be terminated upon
consummation of the transactions contemplated hereby. To the Knowledge of Seller
or the Company, no event relating to the Company or any of the Acquired
Subsidiaries has occurred which would reasonably be likely to result in a
retroactive upward adjustment in premiums under any such insurance policies or
which would reasonably be likely to result in a prospective upward adjustment in
such premiums. Excluding insurance policies that have expired and been replaced
in the Ordinary Course of Business, no insurance policy has been cancelled other
than by the Company or the Acquired Subsidiaries within the last two (2) years
and, to the Knowledge of Seller or the Company, no threat has been made to
cancel any insurance policy of the Company or any of the Acquired Subsidiaries
during such period. All such insurance will remain in full force and effect
immediately following the consummation of the transactions contemplated hereby.
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5.22 Notes Receivable and Accounts Payable. The Company and the
Acquired Subsidiaries have no notes receivable. All accounts payable of the
Company and the Acquired Subsidiaries reflected in the Balance Sheet or arising
after the date thereof are the result of bona fide transactions in the Ordinary
Course of Business and have been paid or are not yet due and payable.
5.23 No Questionable Payments. No current or former director, officer,
or employee of Seller, the Company or any Subsidiary, directly or indirectly,
(i) has used or is using any funds of Seller, the Company or any Subsidiary for
any contribution, gift, entertainment or other expense relating to political
activity, (ii) has used or is using any funds of Seller, the Company or any
Subsidiary for any improper payment to any foreign or domestic government
official or employee or (iii) has made any bribe, payoff, influence payment or
kickback using funds of Seller, the Company or any Subsidiary which, with
respect to clauses (i)-(iii), was in violation of any applicable Law in effect
as of the date of such event.
5.24 Related Party Transactions. No employee, officer, director,
shareholder, partner or member of the Company or any of the Subsidiaries, any
member of his or her immediate family or any of their respective Affiliates
("Related Persons") (i) owes any amount to the Company or any of the Acquired
Subsidiaries nor does the Company or any of the Acquired Subsidiaries owe any
amount to, or has the Company or any of the Acquired Subsidiaries committed to
make any loan or extend or guarantee credit to or for the benefit of, any
Related Person, (ii) is involved in any business arrangement with the Company or
any of the Acquired Subsidiaries (whether written or oral), (iii) owns any
property or right, tangible or intangible, that is used by the Company or any of
the Acquired Subsidiaries or (iv) has any claim or cause of action against the
Company or any of the Acquired Subsidiaries, except with respect to clauses (i)
- - (iv) above, employment agreements and petty cash advances to employees in the
Ordinary Course of Business.
5.25 Customers and Suppliers.
(a) Schedule 5.25 sets forth a list of the ten (10) largest customers
and the ten (10) largest suppliers of the Company and the Acquired Subsidiaries,
as measured by the dollar amount of purchases therefrom or thereby, during each
of the fiscal years ended March 31, 2005, 2004 and 2003, showing the approximate
total sales by the Company and the Acquired Subsidiaries to each such customer
and the approximate total purchases by the Company and the Acquired Subsidiaries
from each such supplier, during such period.
(b) Since the Balance Sheet Date, no customer or supplier listed on
Schedule 5.25 has terminated its relationship with the Company or any of the
Acquired Subsidiaries or materially reduced or changed the pricing or other
terms of its business with the Company or any of the Acquired Subsidiaries and,
to the Knowledge of Seller or the Company, no customer or supplier listed on
Schedule 5.25 has notified the Company or the Acquired Subsidiaries that it
intends to terminate or materially reduce or change the pricing or other terms
of its business with the Company or any of the Acquired Subsidiaries.
37
5.26 Product Warranty; Product Liability.
(a) Each product manufactured, sold or delivered by the Company or any
of the Acquired Subsidiaries in conducting its business has been in conformity
in all material respects with all product specifications and all express and
implied warranties. Neither the Company nor any of the Acquired Subsidiaries has
any material liability for replacement or repair of any such products or other
damages in connection therewith not reserved against on the Balance Sheet.
Neither the Company nor any of the Acquired Subsidiaries has sold any products
or delivered any services that included an warranty for a period of longer than
one (1) year which has not since expired.
(b) Neither the Company nor any of the Acquired Subsidiaries has
committed any act or failed to commit any act, which would result in, and to the
Knowledge of Seller or the Company, there has been no occurrence which would
give rise to or form the basis of, any product liability or liability for breach
of warranty (whether covered by insurance or not) on the part of the Company or
any of the Acquired Subsidiaries with respect to products sold or services
rendered prior to the Closing.
5.27 Banks. Schedule 5.27 contains a complete and correct list of the
names and locations of all banks in which Company or any Acquired Subsidiary has
accounts or safe deposit boxes and the names of all persons authorized to draw
thereon or to have access thereto. No person holds a power of attorney to act on
behalf of the Company or any Acquired Subsidiary.
5.28 Full Disclosure. No representation or warranty of Seller
contained in this Agreement or in any of the Seller Documents and no written
statement made by or on behalf of Seller to Purchaser or any of its Affiliates
pursuant to this Agreement or any of the Seller Documents or otherwise in
connection with the transactions contemplated hereby or thereby contains an
untrue statement of a material fact or, to the Knowledge of Seller or the
Company, omits to state a material fact necessary to make the statements
contained herein or therein not misleading; provided, however, that Seller does
not make any representation or warranty with respect to the accuracy of any
projections or forward-looking statements provided to Purchaser or any of its
Affiliates by Seller or the Company.
5.29 Financial Advisors. No Person has acted, directly or indirectly,
as a broker, finder or financial advisor for the Company or the Acquired
Subsidiaries in connection with the transactions contemplated by this Agreement
and no Person is or will be entitled to any fee or commission or like payment by
the Company or the Acquired Subsidiaries in respect thereof.
38
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that:
6.1 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate properties and carry on its business.
6.2 Authorization of Agreement. Purchaser has full corporate power and
authority to execute and deliver this Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement or to be
executed by Purchaser in connection with the consummation of the transactions
contemplated by this Agreement (the "Purchaser Documents"), and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance by Purchaser of this Agreement and each Purchaser Document, and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized and approved by all necessary corporate action on behalf of
Purchaser. This Agreement has been, and each Purchaser Document will be at or
prior to the Closing, duly and validly executed and delivered by Purchaser and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each Purchaser Document when
so executed and delivered will constitute, the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
6.3 Conflicts; Consents of Third Parties.
(a) Neither the execution and delivery by Purchaser of this Agreement
and of the Purchaser Documents, nor the compliance by Purchaser with any of the
provisions hereof or thereof will (i) conflict with, or result in the breach of,
any provision of the certificate of incorporation or by-laws of Purchaser, (ii)
conflict with, violate, result in the breach of, or constitute a default under
any note, bond, mortgage, indenture, license, agreement or other obligation to
which Purchaser is a party or by which Purchaser or its properties or assets are
bound or (iii) violate any statute, rule, regulation or Order of any
Governmental Body by which Purchaser is bound, except, in the case of clauses
(ii) and (iii), for such violations, breaches or defaults as would not,
individually or in the aggregate, have a material adverse effect on the ability
of Purchaser to consummate the transactions contemplated by this Agreement.
39
(b) No consent, waiver, approval, Order, Permit or authorization of,
or declaration or filing with, or notification to, any Person or Governmental
Body is required on the part of Purchaser in connection with the execution and
delivery of this Agreement or the Purchaser Documents, the compliance by
Purchaser with any of the provisions hereof or thereof, or the consummation of
the transactions contemplated hereby or thereby.
6.4 Litigation. There are no Legal Proceedings pending or, to the
Knowledge of Purchaser, threatened that are reasonably likely to prohibit or
restrain the ability of Purchaser to perform its obligations under this
Agreement or consummate the transactions contemplated hereby.
6.5 Capitalization. The authorized share capital of Purchaser consists
of 120,000,000 shares of Purchaser Common Stock and 2,500,000 shares of
Purchaser Preferred Stock. As of the close of business in New York on September
2, 2005, there were 31,894,226 shares of Purchaser Common Stock issued and
outstanding, no shares of Purchaser Preferred Stock issued and outstanding and
no shares of Purchaser Common Stock or Purchaser Preferred Stock held by
Purchaser as treasury stock. All of the issued and outstanding shares of
Purchaser Common Stock were duly authorized for issuance and are validly issued,
fully paid and non-assessable and were not issued in violation of any preemptive
or similar rights. The outstanding shares of Purchaser Common Stock are issued
in accordance with the registration provisions of the Securities Act and any
relevant state securities laws, or pursuant to a valid exemption therefrom. The
offer, issuance and exchange of Purchaser Common Stock as contemplated herein
are made pursuant to a valid exemption from the registration requirements of the
Securities Act.
6.6 SEC Reports; Financial Statements. Purchaser has filed all
required forms, reports and documents with the SEC since January 1, 2002 (the
"Purchaser SEC Reports"), each of which has complied in all material respects
with all applicable requirements of the Securities Act and the Securities
Exchange Act of 1934, as amended, each as in effect on the dates such forms,
reports and documents were filed. None of the Purchaser SEC Reports, including
any financial statements or schedules included or incorporated by reference
therein, contained, when filed, any untrue statements of a material fact or
omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
consolidated financial statements of Purchaser included in the Purchaser SEC
Reports complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto as in effect on the dates such Purchaser SEC Reports were filed, and
fairly present, in all material respects and in conformity with GAAP applied on
a consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of Purchaser and its consolidated subsidiaries
as of the dates thereof and their consolidated results of operations and changes
in financial position for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments)
6.7 Financial Advisors. No Person has acted, directly or indirectly,
as a broker, finder or financial advisor for Purchaser in connection with the
transactions contemplated by this Agreement and no Person is entitled to any fee
or commission or like payment in respect thereof.
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ARTICLE VII
COVENANTS
7.1 Pre-Closing Access to Information; Confidentiality. Seller and the
Company shall, and the Company shall cause the Acquired Subsidiaries to, afford
to Purchaser and its accountants, counsel, financial advisors and other
representatives reasonable access, during normal business hours upon reasonable
notice throughout the period prior to the Closing, to their respective
properties and facilities (including all real property owned or leased by the
Company or any of the Acquired Subsidiaries and the buildings, structures,
fixtures, appurtenances and improvements erected, attached or located thereon),
books, financial information (including working papers and data in the
possession of Seller's or the Company's independent public accountants, internal
audit reports, and "management letters" from such accountants with respect to
Seller's or Company's systems of internal control), Contracts, commitments and
records and, during such period, shall furnish promptly such information
concerning its businesses, properties and personnel as Purchaser shall
reasonably request; provided, however, such investigation shall not unreasonably
disrupt the Company's operations. Prior to the Closing, Seller shall use
reasonable efforts to generally keep Purchaser reasonably informed as to all
material matters involving the operations and businesses of the Company and the
Acquired Subsidiaries taken as a whole. The Company shall authorize and direct
the appropriate directors, managers and employees of each of the Acquired
Subsidiaries to discuss matters involving the operations and business of such
Acquired Subsidiary with Purchaser and its representatives. All nonpublic
information provided to, or obtained by, Purchaser in connection with the
transactions contemplated hereby shall be "Confidential Information" for
purposes of the Non Disclosure Agreement, dated as of January 12, 2005, among
Purchaser, the Company and Seller (as amended by the Memorandum of
Understanding, dated as of May 17, 2005, by and among Purchaser, the Company and
Seller), the terms of which shall continue in force until the Closing; provided
that Purchaser and the Company may disclose such information as may be necessary
in connection with seeking necessary consents and approvals as contemplated
hereby. Notwithstanding the foregoing, the Company shall not be required to
provide any information which it reasonably believes (which belief must be
supported by written opinion of independent counsel) it may not provide to
Purchaser by reason of applicable Law. No information provided to or obtained by
Purchaser pursuant to this Section 7.1(a) shall limit or otherwise affect the
remedies available hereunder to Purchaser (including, but not limited to,
Purchaser's right to seek indemnification pursuant to Article IX), or the
representations or warranties of, or the conditions to the obligations of, the
parties hereto. For the avoidance of doubt, nothing in this Section 7.1 shall in
any way obligate Seller to provide Purchaser with Supplemental Disclosure
Schedules pursuant to Section 9.6, and no information provided to Purchaser
pursuant to this Section 7.1 shall be a Supplemental Disclosure unless it is
contained in a Supplemental Disclosure Schedule provided by Seller pursuant to
Section 9.6.
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7.2 Conduct of the Business Pending the Closing.
(a) Except as otherwise expressly provided in this Agreement or with
the prior written consent of Purchaser, from the date hereof until the Closing,
Seller shall, and shall cause the Company to, and the Company shall, and shall
cause the Acquired Subsidiaries to:
(i) conduct the respective businesses of the Company and the
Acquired Subsidiaries only in the Ordinary Course of Business;
(ii) use their commercially reasonable efforts to (A) preserve
its present business operations, organization (including officers and
employees) and goodwill of the Company and the Acquired Subsidiaries,
(B) preserve its present relationship with Persons having material
business dealings with the Company and the Acquired Subsidiaries
(including material customers and suppliers) and (C) maintain the
listing of Seller's ordinary shares, par value HK$ 0.07, on the SGX;
(iii) maintain (A) all of the material assets and properties of
the Company and the Acquired Subsidiaries in working condition,
ordinary wear and tear excepted, and (B) insurance upon all of the
material properties and assets of the Company and the Acquired
Subsidiaries in such amounts and of such kinds comparable to that in
effect on the date of this Agreement;
(iv) (A) maintain the books, accounts and records of the Company
and the Acquired Subsidiaries in the Ordinary Course of Business, (B)
continue to collect accounts receivable and pay accounts payable
utilizing normal procedures and without discounting or accelerating
payment of such accounts, and (C) comply with all material contractual
and other material obligations of the Company and the Acquired
Subsidiaries;
(v) make on a timely basis and not delay the making of material
planned capital expenditures; and
(vi) comply in all material respects with all applicable Laws.
(b) Without limiting the generality of the foregoing, except as
otherwise expressly provided in this Agreement or with the prior written consent
of Purchaser, from the date hereof until the Closing, Seller shall not, and
shall cause the Company not to, and the Company shall not, and shall cause the
Acquired Subsidiaries not to:
(i) declare, set aside, make or pay any dividend or other
distribution in respect of the share capital of, or other ownership
interests in, the Company or any of the Acquired Subsidiaries or
repurchase, redeem or otherwise acquire any outstanding capital shares
or other securities of, or other ownership interests in, the Company
or any of the Acquired Subsidiaries;
42
(ii) transfer, issue, sell, pledge, encumber or dispose of any
capital shares or other securities of, or interests in, the Company or
any of the Acquired Subsidiaries or grant options, warrants, calls or
other rights to purchase or otherwise acquire capital shares or other
securities of, or interests in, the Company or any of the Acquired
Subsidiaries;
(iii) effect any recapitalization, reclassification, capital
share split, combination or like change in the capitalization of the
Company or any of the Acquired Subsidiaries, or amend the terms of any
outstanding securities of the Company or any Acquired Subsidiary;
(iv) amend the organizational documents of the Company or any of
the Acquired Subsidiaries;
(v) (A) materially increase the salary or other compensation of
any senior officer or senior employee of the Company or any of the
Acquired Subsidiaries, except for normal year-end increases in the
Ordinary Course of Business (B) grant any unusual or extraordinary
bonus, benefit or other direct or indirect compensation to any
employee, director or consultant, (C) increase the coverage or
benefits available under any (or create any new) severance pay,
termination pay, vacation pay, company awards, salary continuation for
disability, sick leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other employee benefit
plan or arrangement made to, for, or with any of the directors,
officers, employees, agents or representatives of the Company or any
of the Acquired Subsidiaries or otherwise modify or amend or terminate
any such plan or arrangement or (D) enter into any employment,
deferred compensation, severance, special pay, consulting,
non-competition or similar agreement or arrangement with any directors
or officers of the Company or any Acquired Subsidiary (or amend any
such agreement to which the Company or any of the Acquired
Subsidiaries is a party);
(vi) (A) create, incur, assume, guarantee, endorse or otherwise
become liable or responsible with respect to (whether directly,
contingently, or otherwise) any Indebtedness; (B) except in the
Ordinary Course of Business, pay, repay, discharge, purchase,
repurchase or satisfy any Indebtedness issued or guaranteed by the
Company or any of the Acquired Subsidiaries; (C) modify the terms of
any Indebtedness or other material Liability; or (D) make any loans,
advances of capital contributions to, or investments in, any other
Person (other than to wholly-owned Acquired Subsidiaries in the
Ordinary Course of Business);
(vii) subject to any Lien or otherwise encumber or, except for
Permitted Exceptions, permit, allow or suffer to be encumbered, any of
the properties or assets (whether tangible or intangible) of the
Company or any of the Acquired Subsidiaries;
(viii) acquire any material properties or assets or sell, assign,
license, transfer, convey, lease or otherwise dispose of any of the
material properties or assets of the Company and the Acquired
Subsidiaries, other than in the Ordinary Course of Business;
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(ix) enter into or agree to enter into any merger or
consolidation with, any corporation or other entity, and not engage in
any new business or invest in, make a loan, advance or capital
contribution to, or otherwise acquire the securities of any other
Person;
(x) cancel or compromise any debt or claim or waive or release
any material right of the Company or any of the Acquired Subsidiaries
except in the Ordinary Course of Business;
(xi) enter into any commitment for capital expenditures of the
Company and the Acquired Subsidiaries in excess of $50,000 for any
individual commitment and $250,000 for all commitments in the
aggregate;
(xii) enter into, modify or terminate any labor or collective
bargaining agreement of the Company or any of the Acquired
Subsidiaries or, through negotiation or otherwise, make any commitment
or incur any liability to any labor organization with respect to the
Company or any of the Acquired Subsidiaries;
(xiii) introduce any material change with respect to the
operation of the Company or any of the Acquired Subsidiaries,
including any material change in the types, nature, composition or
quality of its products or services, or, other than in the Ordinary
Course of Business, make any material change in product specifications
or prices or terms of distributions of such products;
(xiv) permit the Company or any of the Acquired Subsidiaries to
enter into any transaction or to enter into, modify or renew any
Contract which by reason of its size, nature or otherwise is not in
the Ordinary Course of Business;
(xv) except for transfers of cash pursuant to normal cash
management practices in the Ordinary Course of Business, permit the
Company or any of the Acquired Subsidiaries to make any investments in
or loans to, or pay any material fees or expenses to, or enter into or
modify any Contract with any Affiliate of the Company or any of the
Acquired Subsidiaries, or any director, officer or employee of the
Company or any of the Acquired Subsidiaries other than existing
contractual obligations previously disclosed to Purchaser;
(xvi) except as required by applicable Law, make a material
change in its accounting or Tax reporting principles, methods or
policies;
(xvii) (A) make or revoke any material Tax election, or settle or
compromise any material Tax liability or enter into a settlement or
compromise, or change (or make a request to any taxing authority to
change) any material aspect of its method of accounting for Tax
purposes, or (B) prepare or file any Tax Return (or any amendment
thereof) unless such Tax Return shall have been prepared in a manner
consistent with past practice and the Company shall have provided
Purchaser a copy thereof (together with supporting papers) at least
three (3) Business Days prior to the due date thereof for Purchaser to
review and approve (such approval not to be unreasonably withheld or
delayed);
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(xviii) enter into any Contract, understanding or commitment that
restrains, restricts, limits or impedes the ability of the Company or
any Acquired Subsidiary to compete with or conduct any business or
line of business in any geographic area or solicit the employment of
any persons;
(xix) terminate, amend, restate, supplement or waive any rights
under (A) any Material Contract, Company Lease, Personal Property
Lease or Intellectual Property License, other than in the Ordinary
Course of Business or as otherwise would not prejudice the interests
of the Company or the Acquired Subsidiaries or (B) any Permit;
(xx) settle or compromise any pending or threatened Legal
Proceeding or any claim or claims for, or that would result in a loss
of revenue of, an amount that could, individually or in the aggregate,
reasonably be expected to be greater than $25,000;
(xxi) change or modify in any material respect its credit,
collection or payment policies, procedures or practices, including
acceleration of collections or receivables (whether or not past due)
or fail to pay or delay payment of payables or other liabilities;
(xxii) take any action which would adversely affect the ability
of Seller or the Company to consummate the transactions contemplated
by this Agreement; and
(xxiii) agree to do anything (A) prohibited by this Section 7.2,
(B) which would make any of the representations and warranties of
Seller in this Agreement or the Seller Documents untrue or incorrect
in any material respect or (C) that would be reasonably likely to have
a Material Adverse Effect.
7.3 Further Assurances. Subject to, and not in limitation of, Section
7.4, each of Seller, the Company and Purchaser shall use its commercially
reasonable efforts to cause the Company and the Acquired Subsidiaries to (i)
take all actions necessary or appropriate to consummate the transactions
contemplated by this Agreement and (ii) cause the fulfillment at the earliest
practicable date of all of the conditions to their respective obligations to
consummate the transactions contemplated by this Agreement. Seller and the
Company shall use, and the Company shall cause the Acquired Subsidiaries to use,
their commercially reasonable efforts to obtain at the earliest practicable date
all consents and approvals required to consummate the transactions contemplated
by this Agreement, including the consents and approvals, if any, referred to in
Section 5.3(c) hereof.
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7.4 Regulatory Approvals. Purchaser, Seller and the Company shall make
all filings required of each of them or any of their respective subsidiaries or
Affiliates under any Antitrust Laws with respect to the transactions
contemplated hereby as promptly as practicable and, in any event, within four
(4) weeks.
7.5 No Shop. From the date of this Agreement until the earlier of the
Closing or the termination of this Agreement pursuant to Section 4.2:
(a) Seller and the Company will not, and will not permit the
Subsidiaries or any of the Affiliates, directors, officers, employees,
representatives or agents of Seller, the Company or any of the Subsidiaries
(collectively, the "Representatives") to, directly or indirectly, (i) discuss,
negotiate, undertake, authorize, recommend, propose or enter into, either as the
proposed surviving, merged, acquiring or acquired corporation, any transaction
involving a merger, consolidation, business combination, purchase or disposition
of any material amount of the assets of Seller, the Company or any of the
Acquired Subsidiaries or any share capital of Seller, the Company or any of the
Acquired Subsidiaries other than the transactions contemplated by this Agreement
(an "Acquisition Transaction"), (ii) facilitate, encourage, solicit or initiate
discussions, negotiations or submissions of proposals or offers in respect of an
Acquisition Transaction.
(b) Seller shall notify Purchaser orally and in writing promptly (but
in no event later than 24 hours) after receipt of any proposal or offer from any
Person other than Purchaser to effect an Acquisition Transaction or any request
for non-public information relating to the Company or any of the Acquired
Subsidiaries or for access to the properties, books or records of the Company or
any Acquired Subsidiary by any Person other than Purchaser. Such notice shall
indicate the identity of the Person making the proposal or offer, or intending
to make a proposal or offer or requesting non-public information or access to
the books and records of the Company, the material terms of any such proposal or
offer, or modification or amendment to such proposal or offer and copies of any
written proposals or offers or amendments or supplements thereto. Seller shall
keep Purchaser informed, on a current basis, of any material changes in the
status and any material changes or modifications in the material terms of any
such proposal, offer, indication or request.
(c) Seller and the Company shall (and Seller and the Company shall
cause their Representatives to, and the Company shall cause the Subsidiaries to)
immediately cease and cause to be terminated any existing discussions or
negotiations with any Persons (other than Purchaser) conducted heretofore with
respect to any of the foregoing. Seller and the Company agree not to (and the
Company agrees to cause the Subsidiaries not to) release any third party from
the confidentiality and standstill provisions of any agreement to which the
Company or any of the Acquired Subsidiaries is a party.
(d) For the avoidance of doubt, nothing in this Agreement shall
prohibit Seller or the Company from receiving any unsolicited or uninitiated
submissions, proposals or offers in respect of an Acquisition Transaction. In
the event that Seller or the Company receives any such unsolicited or
uninitiated submission, proposal or offer (an "Unsolicited Offer") in respect of
an Acquisition Transaction, Seller shall be entitled to:
46
(i) announce such Unsolicited Offer so far as such announcement
is required under the listing rules or requirements of the SGX or any
other Law;
(ii) do or refrain from doing anything required by the SGX; and
(iii) make, or refrain from making, any recommendation to its
shareholders as Seller's directors (other than directors who have
executed Voting Agreements) may deem necessary in order to comply with
their fiduciary duties in respect of such Unsolicited Offer;
provided, however, that the receipt of any Unsolicited Offer shall in no way
derogate Seller's obligations under any other section of this Agreement.
(e) In the event that this Agreement is terminated pursuant to Section
4.2, and within six (6) months following such termination Seller enters into an
agreement to consummate an Acquisition Transaction on terms and conditions which
are more favorable to Seller, as reasonably determined in good faith by
Purchaser, than the terms and conditions set forth in this Agreement, Seller
shall, on the date of the execution of such Acquisition Transaction agreement,
reimburse Purchaser for all actual costs and expenses incurred by Purchaser in
connection with its effort to acquire the Shares or otherwise relating to the
negotiation, preparation or execution of this Agreement or any documents or
agreements contemplated hereby or the performance or consummation of the
transactions contemplated hereby; provided, however, that such expense
reimbursement shall not exceed one million U.S. dollars ($1,000,000).
7.6 Publicity.
(a) None of Purchaser, Seller or the Company shall issue any press
release, public announcement, circular or notice concerning this Agreement or
the transactions contemplated hereby without obtaining the prior written
approval of the other parties hereto (which approval will not be unreasonably
withheld or delayed), unless in the reasonable judgment of the party intending
to make such issuance, disclosure is otherwise required by applicable Law or by
the applicable rules of any stock exchange on which such party or its Affiliates
lists securities, provided that, to the extent required by applicable Law, the
party intending to make such release or announcement shall use its commercially
reasonable efforts consistent with such applicable Law to consult with the other
party with respect to the text thereof.
(b) Each of Purchaser, Seller and the Company agrees that the terms of
this Agreement shall not be disclosed or otherwise made available to the public
and that copies of this Agreement shall not be publicly filed or otherwise made
available to the public, except where such disclosure, availability or filing is
required by applicable Law and only to the extent required by such Law. In the
47
event that such disclosure, availability or filing is required by applicable
Law, each of Purchaser, the Company and Seller (as applicable) agrees to use its
commercially reasonable efforts to obtain confidential treatment of this
Agreement with any Governmental Body and to redact such terms of this Agreement
the other party shall request.
7.7 Preservation of Records; Post-Closing Access; Cooperation with SEC
Filings.
(a) Seller and Purchaser agree that each of them shall (and shall
cause the Company and the Acquired Subsidiaries to) preserve and keep the
records held by them relating to the respective businesses of the Company and
the Acquired Subsidiaries for a period of seven (7) years from the Closing Date
and shall make such records and personnel available to the other as may be
reasonably required by such party in connection with, among other things, any
insurance claims by, legal proceedings against or governmental investigations of
Seller, the Company, the Acquired Subsidiaries or Purchaser or any of their
Affiliates or in order to enable Seller or Purchaser to comply with their
respective obligations under this Agreement and each other agreement, document
or instrument contemplated hereby or thereby. In the event Seller or Purchaser
wishes to destroy (or permit to be destroyed) such records after that time, such
party shall first give ninety (90) days prior written notice to the other and
such other party shall have the right at its option and expense, upon prior
written notice given to such party within such ninety (90) day period, to take
possession of the records within one hundred and eighty (180) days after the
date of such notice.
(b) In the event of any claim by a party for a breach of the
representations and warranties under this Agreement, the party making such claim
(the "Claiming Party") shall allow, and shall cause its Affiliates to allow, the
party alleged of such breach (the "Defending Party") and its accountants and
professional advisers to investigate the matter or circumstance alleged to give
rise to such claim and whether and to what extent any amount is payable in
respect of such claim. In furtherance of the foregoing, the Claiming Party shall
provide, and shall cause its Affiliates to provide, to the Defending Party and
its accountants and professional advisors reasonable information and assistance,
including reasonable access to the premises and personnel of the Claiming Party
and its Affiliates and to any relevant property, documents and records within
the possession or control of the Claiming Party and its Affiliates, as well as
the right to examine any property, accounts, documents and records of the
Claiming Party and its Affiliates as reasonably requested by the Defending Party
or its accountants or professional advisers; provided that the Defending Party
shall reimburse the Claiming Party for all costs and expenses reasonably
incurred by the Claiming Party and its Affiliates in connection with the
foregoing. The Defending Party and its accountants and professional advisors
shall keep all such information confidential and shall only use such information
for the purpose of the claim in question.
(c) From and after the date hereof, Seller shall, and prior to the
Closing shall cause the Company and the Acquired Subsidiaries to, cooperate with
Purchaser and promptly provide any information reasonably requested by Purchaser
in connection with any document that Purchaser may file with the SEC (including
the Shelf Registration Statement), including by providing any financial
48
statement working papers, auditor communications or other financial statement
documents of the Company and the Acquired Subsidiaries. All information provided
pursuant to this Section 7.7(c) by Seller, and, prior to the Closing, by the
Company and the Acquired Subsidiaries shall, to the Knowledge of Seller or the
Company, be true and correct in all material respects.
(d) For a period twelve (12) months from and after the Closing Date,
Seller shall provide Purchaser with reasonable access to its executive officers
which are employed by Seller as of the date hereof, including its chief
financial officer, and cause such persons to be reasonably available and
cooperate with Purchaser, at no cost to Purchaser, as Purchaser deems necessary
in connection with the preparation of financial statements of the Company and
the Acquired Subsidiaries. In furtherance of the foregoing, Seller's chief
financial officer shall: (i) ensure that all appropriate steps are taken to
provide for a clean accounting "cutoff" as of the Closing Date for both book and
tax purposes, and assist Purchaser in preparing the Closing Statement; (ii) file
the March 31, 2005 Tax Return on behalf of the Company and the Acquired
Subsidiaries prior to the latest date prescribed by Law that such return can be
filed (including any extensions and grace periods) without late fee, penalty or
interest; and (iii) prepare such audited financial statements for Seller, the
Company and/or any of the Subsidiaries relating to periods occurring prior to
the Closing that are reasonably determined by Purchaser to be necessary in
connection with the forms, reports and documents that Purchaser will file with
the SEC after the Closing with respect to the consummation of the transactions
contemplated by this Agreement.
7.8 Use of Name. Seller hereby agrees that upon the consummation of
the transactions contemplated hereby, the Company and the Acquired Subsidiaries
shall own and have the sole and exclusive right in relation to Seller and its
Affiliates to the use of the name "MultiVision" or similar names, any service
marks, trademarks, trade names, identifying symbols, logos, emblems, signs or
insignia related thereto or containing or comprising the foregoing, including
any name or mark confusingly similar thereto and the Marks listed on Schedule
5.14(a) (collectively, the "Company Marks"). Notwithstanding the foregoing,
Purchaser hereby grants to Seller upon the Closing a twelve (12) month
non-exclusive, non-transferable, royalty-free license (the "License") to use the
Company Marks solely and exclusively in connection with transitioning to Marks
other than the Company Marks upon the expiration of the License, provided that
Seller may not use the Company Marks in a Restricted Business (as defined in the
Non-Competition Agreement). After the expiration of the License, Seller shall
not, and shall not permit its Affiliates to, use such name or any variation or
simulation thereof or any of the Company Marks. Seller shall, and shall cause
its Affiliates to, immediately after the Closing, cease to hold itself out as
having any affiliation with the Company or any of its Affiliates other than the
use of the License. In furtherance thereof, upon the expiration of the License,
Seller shall have removed, struck over or otherwise obliterated all Company
Marks from all materials, including any vehicles, business cards, schedules,
stationery, packaging materials, displays, signs, promotional materials,
manuals, forms, computer software and other materials.
49
7.9 Affiliate Transactions. On or prior to the Closing Date, the
Company shall, and shall cause the Acquired Subsidiaries to, terminate all
Contracts with its Affiliates or Seller or its Affiliates (other than (i) those
Contracts set forth on Schedule 7.9, (ii) Contracts between the Company and the
Acquired Subsidiaries, (iii) Contracts between the Company and the Acquired
Subsidiaries and their respective officers and employees and (iv) Contracts
whose continuance Purchaser has approved in writing), and deliver releases
executed by such Affiliates or Seller or its Affiliates with whom the Company
has terminated such Contracts pursuant to this Section 7.9 providing that no
further payments are due, or may become due, under or in respect of any such
terminated Contacts; provided that in no event shall the Company or any of the
Acquired Subsidiaries pay any consideration with respect to any such termination
or release.
7.10 Monthly Financial Statements. As soon as reasonably practicable,
but in no event later than thirty (30) days after the end of each calendar month
during the period from the date hereof to the Closing, the Company shall provide
Purchaser with unaudited monthly reports for the Company and each of the
Acquired Subsidiaries showing for such preceding month (i) revenues and (ii)
bookings for new orders.
7.11 Notification of Certain Matters. Each of Seller and Purchaser
shall give notice to the other party, as promptly as reasonably practicable upon
becoming aware of (a) any occurrence, or failure to occur, of any event, which
occurrence or failure to occur has caused or is reasonably likely to cause any
representation or warranty in this Agreement made by it to be untrue or
inaccurate in any respect at any time after the date hereof and prior to the
Closing, except where such occurrences of failures to occur could not,
individually or in the aggregate, reasonably be expected to result in a failure
of the conditions set forth in Section 8.2(a) or 8.3(a), as applicable, to be
satisfied and (b) any material failure on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided that the delivery of any notice pursuant to this Section
7.11 shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice, or the representations or warranties of, or the
conditions to the obligations of, the parties hereto.
7.12 Seller Shareholder Approval. Seller, acting through its Board of
Directors, shall, in accordance with its organizational documents and applicable
Law (a) duly call, give notice of, convene and hold an extraordinary meeting of
its shareholders (the "Seller Shareholder Meeting") as soon as reasonably
practicable after the date hereof for the purposes of considering and taking
action upon the approval and adoption of this Agreement and the Seller Documents
and the transactions and obligations of Seller and the Company contemplated
hereby and thereby (such approval, the "Seller Shareholder Approval"), (b)
prepare and file with the SGX information required to be disclosed by the SGX in
connection with the Seller Shareholder Meeting and (c) use its commercially
reasonable efforts to take such reasonable steps in the circumstances (taking
into account the fiduciary duties of the directors of Seller and the
requirements of the SGX) to obtain the necessary approvals by its shareholders
of this Agreement and the Seller Documents and the transactions and obligations
of Seller and the Company contemplated hereby and thereby.
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7.13 Excluded Assets. Prior to the Closing, Seller shall cause the
Company and the Subsidiaries to transfer the Excluded Subsidiaries and all of
the assets and liabilities which are set forth on Schedule 7.13 hereto
(collectively, the "Excluded Assets") to Seller or any other Person designated
by Seller who will not be an Affiliate of Purchaser after the Closing.
7.14 Dividend and Affiliate Transaction Restrictions. For a period two
(2) years from and after the Closing Date, Seller shall not (i) declare, set
aside, make or pay dividends or other distributions in respect of its share
capital or repurchase, redeem or otherwise acquire outstanding capital shares or
other securities, if after taking any such action, the book value (determined in
accordance with IFRS) of Seller's net assets would in the aggregate be less than
(A) thirty million U.S. dollars ($30,000,000) if such action is taken on or
prior to the first (1st) anniversary of the Closing Date or (B) twenty-four
million U.S. dollars ($24,000,000) if such action is taken after the first (1st)
anniversary of the Closing Date, (ii) declare, set aside or make distributions
to its shareholders of any shares of Purchaser Common Stock issued by Purchaser
in connection with this Agreement or the transactions contemplated hereby or
(iii) enter into any agreement or arrangement, including an agreement for the
sale or purchase of assets, with an Affiliate, employee, officer, director or
shareholder of Seller or any of their respective immediate family members or
Affiliates which is not on fair and commercially reasonable terms with respect
to Seller. For the avoidance of doubt, this Section 7.14 shall not prevent
Seller from purchasing assets from a bona fide third party seller on
commercially reasonable terms.
7.15 Shutdown of Certain Excluded Subsidiaries.
(a) Prior to the Closing, Seller and Purchaser shall negotiate in good
faith a Shutdown Support Agreement (the "Shutdown Support Agreement"), whereby
Purchaser shall agree to provide certain reasonable support services in
connection with the termination of operations and shutdown of the Excluded
Subsidiaries listed on Schedule 7.15 by Seller after the Closing.
(b) Prior to the Closing, Seller and Purchaser shall negotiate in good
faith an additional adjustment (the "Shutdown Adjustment") to the purchase price
equal to the severance, lease termination and other costs reasonably incurred by
Seller in connection with the termination of operations and shutdown of the
Excluded Subsidiaries listed on Schedule 7.15 by Seller after the Closing;
provided that the Shutdown Adjustment shall be no less than seventy thousand
U.S. dollars ($70,000) and no greater than two hundred and fifty thousand U.S.
dollars ($250,000). The Base Purchase Price shall be increased for all purposes
of this Agreement by the amount of the Shutdown Adjustment.
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ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions Precedent to Obligations of Each Party. The respective
obligations of each of Seller and Purchaser to consummate the transactions
contemplated by this Agreement is subject to the fulfillment, on or prior to the
Closing Date, of each of the following conditions precedent:
(a) no Legal Proceedings shall have been instituted or threatened or
claim or demand made against Purchaser, Seller, the Company or any of the
Subsidiaries seeking to restrain or prohibit or to obtain substantial damages
with respect to the consummation of the transactions contemplated hereby, and
there shall not be in effect any Order by a Governmental Body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated hereby; and
(b) the Seller Shareholder Approval shall have been obtained or
Purchaser and Seller shall have each determined that the Seller Shareholder
Approval is not necessary.
8.2 Conditions Precedent to Obligations of Purchaser. The obligation
of Purchaser to consummate the transactions contemplated by this Agreement is
subject to the fulfillment, on or prior to the Closing Date, of each of the
following conditions precedent (any or all of which may be waived by Purchaser
in whole or in part to the extent permitted by applicable Law):
(a) the representations and warranties of Seller qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, in each case, as of the date of this
Agreement and as of the Closing as though made at and as of the Closing, except
to the extent such representations and warranties expressly speak as of an
earlier date (in which case such representations and warranties qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, on and as of such earlier date);
(b) Seller and the Company shall have performed and complied in all
material respects with all obligations and agreements required in this Agreement
to be performed or complied with by them prior to the Closing Date;
(c) there shall not have been or occurred any Material Adverse Effect
since the Balance Sheet Date;
(d) Purchaser shall have received certificates, each in form and
substance reasonably satisfactory to Purchaser, signed by Seller and the chief
executive officer and chief financial officer of Seller, dated as the Closing
Date, to the effect that each of the conditions specified above in Sections
8.2(a)-(c) have been satisfied in all respects;
52
(e) Seller shall have obtained (i) any consent, approval, Order or
authorization of, or registration, declaration or filing with, any Governmental
Body necessary to be obtained or made in connection with the execution and
delivery of this Agreement or the performance of the transactions contemplated
herein (and where any conditions are attached to such consent or approval, such
conditions are reasonably acceptable to Purchaser) or any applicable mandatory
waiting periods shall have expired or been granted early termination and (ii)
those consents, waivers and approvals, if any, referred to in Section 5.3(c)
hereof in a form reasonably satisfactory to Purchaser;
(f) Seller shall have obtained those consents and releases listed on
Schedule 8.2(f) in a form reasonably satisfactory to Purchaser;
(g) each of the Persons listed on Schedule 8.2(g) shall have entered
into an employment agreement on terms satisfactory to Purchaser, and such
employment agreements shall be in full force and effect and all of such persons
shall be willing and able to perform in accordance with such employment
agreements;
(h) Purchaser shall have received the written resignations of each of
the directors of the Company;
(i) Seller and the Escrow Agent shall have entered into, executed and
delivered to Purchaser the Escrow Agreement substantially in the form of Exhibit
A hereto;
(j) Seller shall have entered into, executed and delivered to
Purchaser the Non-Competition Agreement substantially in the form of Exhibit B
hereto;
(k) Seller shall have entered into, executed and delivered to
Purchaser the Shutdown Support Agreement;
(l) Seller shall have agreed with Purchaser as to the amount of the
Shutdown Adjustment at least ten (10) days prior to the Closing; provided that
if any time prior to the Closing, Seller irrevocably offers (conditional on the
Closing) to make the amount of the Shutdown Adjustment seventy thousand U.S.
dollars ($70,000), then this condition shall be deemed to have been waived by
Purchaser;
(m) Huge Hill Limited and, as appropriate, the Company and/or one or
more of the Acquired Subsidiaries shall have each entered into, executed and
delivered to Purchaser an exclusive supply agreement (the "Huge Hill Exclusive
Supply Agreement"), substantially in the form of Exhibit C hereto;
(n) Sino Gear Force Limited and, as appropriate, the Company and/or
one or more of the Acquired Subsidiaries shall have each entered into, executed
and delivered to Purchaser an exclusive supply agreement (the "Sino Gear
Exclusive Supply Agreement" and, together with the Huge Hill Exclusive Supply
Agreement, the "Exclusive Supply Agreements"), substantially in the form of
Exhibit C hereto;
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(o) Seller shall have amended each of the Contracts set forth on
Schedule 8.2(o) so that each such Contract will, to the reasonable satisfaction
of Seller, comply with the representations of Seller contained in the last
sentence of Section 5.15(b);
(p) Seller shall have amended each of the Contracts set forth on
Schedule 8.2(p) in a manner reasonably satisfactory to Purchaser to clarify that
the Intellectual Property covered by each such Contract is owned by the Company
and the Acquired Subsidiaries;
(q) Seller shall have delivered, or caused to be delivered, to
Purchaser share certificates representing the Shares, duly endorsed in blank or
accompanied by share transfer powers and forms and with all requisite share
transfer tax stamps, if applicable, attached, along with a certified copy of the
share registry of the Company which reflects the transfer of the Shares and the
change of directors; and
(r) the Company shall have delivered to Purchaser certificates of good
standing, if applicable, with respect to the Company and each of the Acquired
Subsidiaries as of a recent date issued by an authorized official from the
appropriate Governmental Body of such entity's jurisdiction of organization and
each jurisdiction in which such entity is qualified to do business as a foreign
corporation.
8.3 Conditions Precedent to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement are subject
to the fulfillment, prior to or on the Closing Date, of each of the following
conditions precedent (any or all of which may be waived by Seller in whole or in
part to the extent permitted by applicable Law):
(a) the representations and warranties of Purchaser set forth in this
Agreement qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, in each case,
as of the date of this Agreement and as of the Closing as though made at and as
of the Closing, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, on and as of
such earlier date); provided, however, that if Purchaser does not make the Share
Election, the representations and warranties of Purchaser set forth in Sections
6.5, 6.6, and 6.7 shall be deemed true and correct in all respects at all times
for purposes of this Section 8.3;
(b) Purchaser shall have performed and complied in all respects with
all obligations and agreements required by this Agreement to be performed or
complied with by Purchaser on or prior to the Closing Date;
(c) Purchaser and the Escrow Agent shall have entered into, executed
and delivered to Seller the Escrow Agreement substantially in the form of
Exhibit A hereto;
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(d) Purchaser shall have entered into, executed and delivered to
Seller the Non-Competition Agreement substantially in the form of Exhibit B
hereto; and
(e) Purchaser shall have entered into, executed and delivered to
Seller the Shutdown Support Agreement;
(f) Purchaser shall have agreed with Seller as to the amount of the
Shutdown Adjustment at least ten (10) days prior to the Closing; provided that
if at any time prior to the Closing, Purchaser irrevocably offers (conditional
on the Closing) to make the amount of the Shutdown Adjustment two hundred and
fifty thousand U.S. dollars ($250,000), then this condition shall be deemed to
have been waived by Seller; and
(g) the Shelf Registration Statement shall have been declared
effective by the SEC; provided, however, that in the event that Seller does not
provide to Purchaser within fourteen (14) days after the written request by
Purchaser for any information reasonably determined by Purchaser to be necessary
to file the Shelf Registration Statement with, and have it declared effective
by, the SEC, this condition shall be deemed to have been waived by Seller.
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations and Warranties. The representations
and warranties of the parties contained in this Agreement (other than in Section
5.11 (taxes), which is governed by Section 9.7), any certificate delivered
pursuant hereto or any Seller Document or Purchaser Document shall survive the
Closing through and including the second (2nd) anniversary of the Closing Date;
provided, however, that (i) the representations and warranties of Seller set
forth in Sections 5.1 (organization), 5.2 (authorization), 5.4 (ownership), 5.5
(capitalization), 5.6 (subsidiaries) and 5.29 (financial advisors) shall survive
the Closing indefinitely and (ii) the representations and warranties of
Purchaser set forth in Sections 6.1 (organization), 6.2 (authorization) and 6.7
(financial advisors) shall survive the Closing indefinitely (in each case, the
"Survival Period"); provided, further, that any obligations to indemnify and
hold harmless shall not terminate with respect to any Losses as to which the
Person to be indemnified shall have given notice (stating in reasonable detail
the basis of the claim for indemnification) to the indemnifying party in
accordance with Section 9.3 before the termination of the applicable Survival
Period. Notwithstanding anything to the contrary contained herein, if Purchaser
does not make the Share Election, the representations and warranties of
Purchaser set forth in Sections 6.5, 6.6 and 6.7 shall expire with and terminate
upon the Closing.
9.2 Indemnification.
(a) Subject to Sections 9.1, 9.4, 9.6 and 9.7 hereof, Seller hereby
agrees to indemnify and hold the Purchaser Indemnified Parties harmless from and
against, and pay to the applicable Purchaser Indemnified Parties the amount of
any and all Losses based upon, attributable to or resulting from:
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(i) the failure of any of the representations or warranties made
by Seller in this Agreement (other than in Section 5.11), any
certificate delivered pursuant hereto or in any Seller Document to be
true and correct in all respects on the date hereof and, as this
Agreement may be modified by any Supplemental Disclosure Schedules, as
of the Closing Date;
(ii) the breach of any covenant or other agreement on the part of
Seller or the Company under this Agreement, any certificate delivered
pursuant hereto or any Seller Document; and
(iii) the Excluded Assets or the transfer of the Excluded Assets
pursuant to Section 7.13, including any Taxes imposed on or payable by
any Purchaser Indemnified Party at any time as a result of the
transfer of the Excluded Assets.
(b) Subject to Sections 9.1 and 9.4, Purchaser hereby agrees to
indemnify and hold the Seller Indemnified Parties harmless from and against, and
pay to the applicable Seller Indemnified Parties the amount of any and all
Losses:
(i) based upon, attributable to or resulting from the failure of
any of the representations or warranties made by Purchaser in this
Agreement or in any Purchaser Document to be true and correct in all
respects on the date hereof and as of the Closing Date; provided,
however, that if Purchaser does not make the Share Election, Purchaser
shall have no obligation to indemnify with respect to the
representations and warranties of Purchaser set forth in Sections 6.5,
6.6 and 6.7; and
(ii) based upon, attributable to or resulting from the breach of
any covenant or other agreement on the part of Purchaser under this
Agreement or any Purchaser Document.
(c) The right to indemnification or any other remedy based on
representations, warranties, covenants and agreements in this Agreement shall
not be affected by (and shall exist notwithstanding) any investigation conducted
with respect to, or any knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or agreement. The waiver of
any condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or agreements, will not affect
the right to indemnification or any other remedy based on such representations,
warranties, covenants and agreements.
9.3 Indemnification Procedures.
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(a) A claim for indemnification for any matter not involving a third
party claim may be asserted by notice to the party from whom indemnification is
sought.
(b) In the event that any Legal Proceedings shall be instituted or
that any claim or demand shall be asserted by any third party in respect of
which payment may be sought under Section 9.2 hereof or for any breach of
contract claim with respect to breach of the representations and warranties
(other than Section 5.11) contained herein (regardless of the limitations set
forth in Section 9.4) (an "Indemnification Claim"), the indemnified party shall
promptly cause written notice of the assertion of any Indemnification Claim of
which it has knowledge which is covered by this indemnity to be forwarded to the
indemnifying party. The failure of the indemnified party to give reasonably
prompt notice of any Indemnification Claim shall not release, waive or otherwise
affect the indemnifying party's obligations with respect thereto except to the
extent that the indemnifying party can demonstrate prejudice as a result of such
failure. The indemnifying party shall have the right, at its sole expense, (i)
to be represented by counsel of its choice, which must be reasonably
satisfactory to the indemnified party, and (ii) to defend against, negotiate,
settle or otherwise deal with any Indemnification Claim which relates to any
Losses indemnified against hereunder; provided that the indemnifying party shall
have acknowledged in writing to the indemnified party its unqualified obligation
to indemnify the indemnified party as provided hereunder. If the indemnifying
party elects to defend against, negotiate, settle or otherwise deal with any
Indemnification Claim which relates to any Losses indemnified by it hereunder,
it shall within five (5) Business Days (or sooner, if the nature of the
Indemnification Claim so requires) notify the indemnified party of its intent to
do so. If the indemnifying party elects not to defend against, negotiate, settle
or otherwise deal with any Indemnification Claim which relates to any Losses
indemnified against hereunder, fails to notify the indemnified party of its
election as herein provided or contests its obligation to indemnify the
indemnified party for such Losses under this Agreement, the indemnified party
may defend against, negotiate, settle or otherwise deal with such
Indemnification Claim. If the indemnified party defends any Indemnification
Claim, then the indemnifying party shall reimburse the indemnified party for the
expenses of defending such Indemnification Claim upon submission of periodic
bills. If the indemnifying party shall assume the defense of any Indemnification
Claim, the indemnified party may participate, at its own expense, in the defense
of such Indemnification Claim; provided, however, that such indemnified party
shall be entitled to participate in any such defense with separate counsel at
the expense of the indemnifying party if (i) so requested by the indemnifying
party to participate or (ii) in the reasonable opinion of counsel to the
indemnified party, a conflict or potential conflict exists between the
indemnified party and the indemnifying party that would make such separate
representation advisable; and provided, further, that the indemnifying party
shall not be required to pay for more than one such counsel for all indemnified
parties in connection with any Indemnification Claim. The parties hereto agree
to cooperate fully with each other in connection with the defense, negotiation
or settlement of any such Indemnification Claim. Notwithstanding anything in
this Section 9.3 to the contrary, neither the indemnifying party nor the
indemnified party shall, without the written consent of the other party, settle
or compromise any Indemnification Claim or permit a default or consent to entry
of any judgment unless the claimant and such party provide to such other party
an unqualified release from all liability in respect of the Indemnification
Claim. If the indemnifying party makes any payment on any Indemnification Claim,
the indemnifying party shall be subrogated, to the extent of such payment, to
all rights and remedies of the indemnified party to any insurance benefits or
other claims of the indemnified party with respect to such Indemnification
Claim.
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(c) After any final decision, judgment or award shall have been
rendered by a Governmental Body of competent jurisdiction (as permitted by
Section 10.3) and the expiration of the time in which to appeal therefrom, or a
settlement shall have been consummated, or the indemnified party and the
indemnifying party shall have arrived at a mutually binding agreement with
respect to an Indemnification Claim hereunder, the indemnified party shall
forward to the indemnifying party notice of any sums due and owing by the
indemnifying party pursuant to this Agreement with respect to such matter and
the indemnifying party shall be required to pay all of such remaining sums so
due and owing to the indemnified party in accordance with Section 9.5.
9.4 Limitations on Indemnification; Calculation of Losses. All of the
following are subject to Section 9.4(j):
(a) Notwithstanding the provisions of this Article IX, (i) neither
Seller nor Purchaser shall have any liability (x) under Section 9.2(a)(i),
9.2(b)(i) or 9.7(a)(i)(C)(1) as applicable, or (y) for any breach of contract
claim with respect to breaches of the representations and warranties contained
herein (A) for any individual item where the Loss relating thereto is less than
$5,000 (provided, that claims relating to a series of similar, connected or
related matters arising out of the same breach shall be aggregated for this
purpose to the extent that such claims relate to different Losses) and (B) with
respect to each individual item where the Loss relating thereto is equal to or
greater than $5,000, unless the aggregate amount of such Losses to the
indemnified or damaged parties finally determined to arise thereunder based
upon, attributable to or resulting from the failure of any of the
representations or warranties to be true and correct exceeds $300,000 (the
"Basket Amount") and, in such event, the indemnifying or liable party shall be
required to pay the entire amount of all such Losses, and (ii) in no event shall
the aggregate indemnification to be paid by Seller or Purchaser pursuant to
Section 9.2(a)(i) or 9.2(b)(i), as applicable, along with the aggregate amount
of damages for any other breach of contract claim with respect to a breach of
the representations and warranties contained herein, exceed the Indemnification
Cap. For purposes of this Agreement, the "Indemnification Cap" shall mean an
amount equal to the sum of the cash consideration received as part of the Final
Purchase Price plus ninety-five percent (95%) of the aggregate value (based upon
the Per Share Value per share of Purchaser Common Stock) of the Purchaser Common
Stock consideration to be received as part of the Final Purchase Price.
Notwithstanding the foregoing, the Basket Amount and the Indemnification Cap
limitations shall not apply to Losses related to the failure to be true and
correct of any of the representations and warranties set forth in Sections 5.1
(organization), 5.2 (authorization), 5.4 (ownership), 5.5 (capitalization), 5.29
(financial advisors), 6.1 (organization), 6.2 (authorization), 6.5
(capitalization) and 6.7 (financial advisors) and, with respect to claims from
Taxing Authorities or claims pursuant to Tax sharing or indemnity agreements,
Section 5.11 (taxes).
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(b) Notwithstanding anything in this Agreement to the contrary, after
the Closing, for purposes of this Article IX or for purposes of any breach of
contract claim with respect to breaches of the representations and warranties
contained herein, any breach of a representation or warranty of a party
contained herein that does not cause or result in a Loss shall not be deemed to
be a breach of this Agreement or a default hereunder.
(c) For purposes of calculating the amount of Losses hereunder, any
materiality or Material Adverse Effect qualifications in the representations,
warranties, covenants and agreements shall be disregarded.
(d) The amount of any Losses for which indemnification is provided
under this Article IX or for which damages for a breach of the representations
and warranties contained herein may be payable shall be net of any amounts
actually recovered by the indemnified party under insurance policies with
respect to such Losses, net of any increases in premiums due to such Losses.
(e) Seller shall have no right of contribution or other recourse
against the Company or the Acquired Subsidiaries or their respective directors,
officers, employees, Affiliates, agents, attorneys, representatives, assigns or
successors for any Indemnification Claims or other claims for breaches of this
Agreement asserted by Purchaser Indemnified Parties.
(f) Notwithstanding any other provision of this Agreement, no party
shall be:
(i) obligated to pay any claim in respect of any liability if and
to the extent that it is contingent unless and until such liability
becomes an actual liability that is due and payable and the amount
thereof is reasonably ascertainable;
(ii) liable in respect of any claim to the extent that such claim
is reserved for on the Closing Statement and taken into account in
determining the Final Purchase Price Adjustment;
(iii) liable with respect to any claim if and to the extent that
the facts giving rise to such claim would not have occurred but for
the intentional wrongful and improper act or omission of the other
party or its Affiliates after the Closing which (A) is taken or failed
to be taken other than in the ordinary and usual course of business,
with the knowledge that such intentional wrongful and improper act or
omission would be reasonably likely to lead to a claim under this
Agreement, (B) due to retroactive treatment, causes a breach of the
terms of this Agreement with respect to pre-Closing activities and (C)
is not an act or omission which Purchaser or its Affiliates has
reasonably determined is necessary to comply with any Law or
contractual obligation (provided, that this Section 9.4(f)(iii) shall
be solely used for purposes of determining whether liability exists,
and not for determining indemnifiable Loss with respect to such
liability); or
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(iv) liable with respect to (A) the passing of, or any change in,
any Law after the Closing or (B) any change in accounting policy,
bases or practice after the Closing, which, in the case of both
clauses (A) and (B), due to retroactive treatment, causes a breach of
the terms of this Agreement with respect to pre-Closing activities.
(g) The indemnified or damaged party shall take reasonable steps to
avoid, dispute, resist, appeal, compromise, defend or mitigate any Losses which
in the absence of mitigation might give rise to a liability in respect of any
claim for breach of a representation or warranty contained herein; provided,
however, that any costs incurred by or on behalf of the indemnified or damaged
party in such mitigation shall be added to the amount of the Loss of the
underlying claim.
(h) No party shall be entitled to indemnification or damages for
breach of the representations and warranties contained herein more than once in
respect of the same Loss arising from any one claim.
(i) If a party hereto pays an amount to discharge any claim for
indemnification or breach of the representations and warranties contained
herein, and the other party hereto or its Affiliates subsequently recovers and
is entitled to retain (whether by payment, discount, credit, relief or
otherwise) from a third party a sum which is referable to the subject matter of
the claim and which would not otherwise have been received by the indemnified or
damaged party without such claim, such indemnified or damaged party shall pay,
or shall cause its Affiliate to pay, to the other party an amount equal to (i)
the sum recovered from the third party less any costs and expenses incurred in
obtaining such recovery and less any Taxes attributable to the recovery after
taking account of any tax relief available in respect of any matter giving rise
to the claim, or, (ii) if less, the amount previously paid by the other party
less any Taxes attributable to it.
(j) Notwithstanding any other provision of this Agreement, (i) nothing
contained in this Section 9.4 shall have any effect with respect to the
satisfaction of the conditions set forth in Article VIII and, (ii) other than
Sections 9.4(a), 9.4(b), 9.4(e), 9.4(g) and 9.4(h), this Section 9.4 shall not
apply to or in any way limit indemnification or other right to recover damages
with respect to Taxes, which limitations shall solely be governed by Section 9.7
(and Sections 9.4(a), 9.4(b), 9.4(e), 9.4(g) and 9.4(h)).
9.5 Escrow. On the Closing Date, Purchaser shall, on behalf of Seller,
pay to the Escrow Agent, as agent to Purchaser and Seller, in immediately
available funds, to the account designated by the Escrow Agent (the "Escrow
Account"), an amount equal to five percent (5%) of the Estimated Purchase Price
(such amount, as it may be subsequently reduced pursuant to this Section 9.5,
the "Escrow Amount"), in accordance with the terms of this Agreement and the
Escrow Agreement. Any payment Seller is obligated to make to any Purchaser
Indemnified Parties pursuant to this Article IX shall be paid first, to the
extent there are sufficient funds in the Escrow Account, by release of funds to
the Purchaser Indemnified Parties from the Escrow Account by the Escrow Agent
within five (5) Business Days after the date notice of any sums due and owing is
given to Seller (with a copy to the Escrow Agent pursuant to the Escrow
Agreement) by the applicable Purchaser Indemnified Party and shall accordingly
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reduce the Escrow Amount and, second, to the extent the Escrow Amount is
insufficient to pay any remaining sums due, then Seller shall be required to pay
all of such additional sums due and owing to the Purchaser Indemnified Parties
by wire transfer of immediately available funds within five (5) Business Days
after the date of such notice. On the first anniversary of the Closing Date, the
Escrow Agent shall release the Escrow Amount (to the extent not utilized to pay
Purchaser for any indemnification claim) to Seller, except that the Escrow Agent
shall retain an amount equal to the amount of claims for indemnification under
this Article IX asserted prior to such anniversary but not yet resolved
("Unresolved Claims"). The Escrow Amount retained for Unresolved Claims shall be
released by the Escrow Agent (to the extent not utilized to pay Purchaser for
any such claims resolved in favor of Purchaser) upon their resolution in
accordance with this Article IX. For the avoidance of doubt, the release of the
Escrow Amount to Seller after the first anniversary of the Closing Date pursuant
to this Section 9.5 shall not prejudice any of the rights of the Purchaser
Indemnified Parties to seek indemnification from Seller under this Agreement.
9.6 Supplemental Disclosures.
(a) Solely for purposes of this Article IX, through the Closing Date,
Seller shall have the right to deliver to Purchaser one or more supplemental
disclosure schedules (collectively, the "Supplemental Disclosure Schedules")
setting forth any matter relating to a representation or warranty of Seller
contained in this Agreement (i) that occurred between the date of this Agreement
and the Closing Date, (ii) as to which Seller had no Knowledge as of the date of
this Agreement, (iii) that is not reflected on the disclosure schedules
delivered by Seller in connection with the execution of this Agreement and (iv)
that did not arise as a result of the breach of a covenant (i.e., not a
representation or warranty) of Seller contained in this Agreement (any item
meeting such requirements, a "Supplemental Disclosure"). Seller shall deliver
the Supplemental Disclosure Schedules to Purchaser no later than five (5)
Business Days prior to the Closing Date, and shall be entitled to deliver
additional Supplemental Disclosure Schedules until immediately prior to Closing
(which additional Supplemental Disclosure Schedules shall each include matters
that arise or are discovered since the delivery of the prior Supplemental
Disclosure Schedules). Seller shall use commercially reasonable efforts to
mitigate Losses relating to any Supplemental Disclosure. For the avoidance of
doubt, Supplemental Disclosures shall not modify or create exceptions to
Seller's representations and warranties or other obligations under this
Agreement for any purpose other than Section 4.2(h), this Article IX and any
claim with respect to breaches of the representations and warranties contained
herein.
(b) Notwithstanding anything to the contrary contained herein, Seller
shall not be liable under this Agreement with respect to any Supplemental
Disclosure and no Supplemental Disclosure shall be deemed a breach of a
representation or warranty of Seller under this Agreement for purposes of this
Article IX or with respect to any breach of contract claim for breaches of the
representations and warranties contained herein; provided, however, that if
Seller provides any Supplemental Disclosures to Purchaser, Purchaser shall have
the right to terminate this Agreement without any liability to Purchaser or its
Affiliates.
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9.7 Tax Matters.
(a) Tax Indemnification.
(i) Seller hereby agrees to be liable for and to indemnify and
hold the Purchaser Indemnified Parties harmless from and against any
and all Losses in respect of:
(A) all Taxes of the Company and the Subsidiaries (or any
predecessor thereof) (1) for any taxable period ending on or
before the Closing Date, and (2) for the portion of any Straddle
Period ending at the close of business on the Closing Date
(determined as provided in Section 9.7(c));
(B) any and all Taxes imposed on any member of a
consolidated, combined or unitary group of which the Company or
any Subsidiary (or any predecessor thereof) is or was a member on
or prior to the Closing Date, by reason of the liability of the
Company or any Subsidiary (or any predecessor thereof); and
(C) the failure (1) of any of the representations and
warranties contained in Section 5.11 to be true and correct in
all respects (determined without regard to any qualification
related to materiality contained therein) on the date hereof and
as of the Closing Date or (2) to perform any covenant contained
in this Agreement with respect to Taxes.
(ii) Notwithstanding anything to the contrary contained in this
Section 9.7, Seller shall not be liable to the extent that:
(A) such Taxes are (1) not in excess of the amount, if any,
reserved for such Taxes (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) on the Closing Statement and (2) taken into account in
determining the Final Purchase Price Adjustment;
(B) Purchaser, the Company or the Acquired Subsidiaries have
recovered in respect of such Tax from a Person or Persons other
than Seller;
(C) such Tax is a penalty, charge or interest directly
caused by a delay or default after the Closing by Purchaser, the
Company or any of the Acquired Subsidiaries;
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(D) a Tax Claim is not yet due and payable, which date shall
be the last date the Tax Claim may be paid without incurring any
interest charge or penalty;
(E) the facts giving rise to any claim by a Purchaser
Indemnified Party would not have occurred but for the intentional
wrongful and improper act or omission of Purchaser or its
Affiliates after the Closing which (1) is taken or failed to be
taken other than in the ordinary and usual course of business,
with the knowledge that such intentional wrongful and improper
act or omission would be reasonably likely to lead to a claim
under this Agreement, (2) due to retroactive treatment, causes a
breach of the terms of this Agreement with respect to pre-Closing
activities and (3) is not an act or omission which Purchaser or
its Affiliates has reasonably determined is necessary to comply
with any Law or contractual obligation, (provided, that this
Section 9.7(a)(ii)(E) shall be solely used for purposes of
determining whether liability exists under Section 9.7, and not
for determining indemnifiable Loss with respect to such
liability); or
(F) due to retroactive treatment, (1) the passing of, or any
change in, any Tax Law after the Closing, including any increase
in the rates of Taxes or any imposition of Taxes or any
withdrawal of relief from Taxes not in effect at the date of this
Agreement, or (2) any change in Tax policy, bases or practice or
any change in the practice or procedure of any Taxing Authorities
introduced and having effect after Closing, causes a breach of
the terms of this Agreement with respect to pre-Closing
activities.
(b) Filing of Tax Returns; Payment of Taxes.
(i) Seller shall cause the Company and the Acquired Subsidiaries
to timely file all Tax Returns, if any, of or which include the
Company or any of the Acquired Subsidiaries required to be filed on or
prior to the Closing Date and shall pay or cause to be paid all Taxes
shown due thereon. All such Tax Returns shall be prepared in a manner
consistent with prior practice and shall be correct and complete in
all material respects. Seller shall provide Purchaser or its
designated advisors with copies of such completed Tax Returns at least
twenty (20) days prior to the due date for filing thereof, along with
supporting workpapers, for Purchaser's review.
(ii) Following the Closing, Purchaser shall cause to be timely
filed all Tax Returns required to be filed by the Company and the
Acquired Subsidiaries after the Closing Date and, subject to the right
to payment from Seller under Section 9.7(b)(iii), pay or cause to be
paid all Taxes shown due thereon. To the extent that such Tax Returns
include taxable periods ending prior to the Closing Date, Purchaser
and Seller shall work together to complete such portions of the Tax
Returns. Seller and Purchaser shall attempt in good faith to resolve
any disagreements regarding such Tax Returns prior to the due date for
filing. In the event that Seller and Purchaser are unable to resolve
any dispute with respect to such Tax Return at least ten (10) days
prior to the due date for filing, such dispute shall be resolved
pursuant to Section 9.7(f), which resolution shall be binding on the
parties.
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(iii) Not later than ten (10) days prior to the due date for the
payment of Taxes on any Tax Returns which Purchaser has the
responsibility to cause to be filed pursuant to Section 9.7(b)(ii),
Seller shall pay to Purchaser the amount of Taxes, as reasonably
determined by Seller and Purchaser, owed by Seller pursuant to the
provisions of Section 9.7(a). No payment pursuant to this Section
9.7(b)(iii) shall excuse Seller from its indemnification obligations
pursuant to Section 9.7(a) if the amount of Taxes as ultimately
determined (on audit or otherwise) for the periods covered by such Tax
Returns exceeds the amount of Seller's payment under this Section
9.7(b)(iii).
(c) Straddle Period Tax Allocation. Seller and Purchaser will, unless
prohibited by applicable Law, close the taxable period of the Company and the
Acquired Subsidiaries as of the close of business on the Closing Date. If
applicable Law does not permit the Company or any Acquired Subsidiary to close
its taxable year on the Closing Date or in any case in which a Tax is assessed
with respect to a taxable period which includes the Closing Date (but does not
begin or end on that day) (a "Straddle Period"), the Taxes, if any, attributable
to a Straddle Period shall be allocated (i) to Seller for the period up to and
including the close of business on the Closing Date, and (ii) to Purchaser for
the period subsequent to the Closing Date. Any allocation of income or
deductions required to determine any Taxes attributable to a Straddle Period
shall be made by means of a closing of the books and records of the Company and
the Acquired Subsidiaries as of the close of the Closing Date, provided that
exemptions, allowances or deductions that are calculated on an annual basis
(including, but not limited to, depreciation and amortization deductions) shall
be allocated between the period ending on the Closing Date and the period after
the Closing Date in proportion to the number of days in each such period.
(d) Tax Audits.
(i) If any party becomes aware of any fact or circumstance which
would be reasonably likely to give rise to a breach of representation
or warranty in relation to Taxes by Seller, or notice of any Legal
Proceeding with respect to Taxes of the Company or any of the Acquired
Subsidiaries (a "Tax Claim") shall be received by either party for
which the other party may reasonably be expected to be liable pursuant
to Section 9.7(a), the notified party (or the aware party, as the case
may be) shall notify such other party in writing of such Tax Claim (or
fact or circumstance); provided, however, that the failure of the
notified party to give the other party notice as provided herein shall
not relieve such failing party of its obligations under this Section
9.7 except to the extent that the other party is prejudiced thereby.
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(ii) Purchaser shall have the right, at the expense of Seller to
the extent such Tax Claim is subject to indemnification by Seller
pursuant to Section 9.7(a) hereof, to represent the interests of the
Company and the Acquired Subsidiaries in any Tax Claim (other than Tax
Claims arising out of Tax Returns referred to in Section 9.7(b)(i)),
provided that with respect to a Tax Claim relating exclusively to
taxable periods ending on or before the Closing Date, Purchaser shall
not settle such claim without the consent of Seller, which consent
shall not be unreasonably withheld.
(iii) Purchaser shall, or shall cause the Company to, take such
action as reasonably requested in writing by Seller to avoid, dispute,
resist, appeal, compromise or defend any claim or action relating to a
Tax Claim and any adjudication in respect thereof; provided that the
foregoing shall be at Seller's sole expense and Purchaser, the Company
and the Acquired Subsidiaries shall cooperate, but incur no
out-of-pocket expenses incurred in connection with any such request;
and provided further, that if the results of such Tax Claim involves
an issue that recurs in taxable periods of the Company or any Acquired
Subsidiary that recurs in taxable periods of the Company or any
Acquired Subsidiary ending after the Closing Date or otherwise could
adversely affect Purchaser, Company or any of their respective
Affiliates for any taxable period ending after the Closing Date, then
(A) Seller and Purchaser shall jointly control the defense and
settlement of any such Tax Claim at each party's own expense, and (B)
there shall be no settlement with respect thereto without the consent
of the other party, which consent will not be unreasonably withheld.
(e) Transfer Taxes. Seller and Purchaser shall equally share, be
liable for and pay (and shall indemnify and hold harmless the other party hereto
for any amount paid by such party in excess of amounts for which they are liable
hereunder) all sales, use, stamp, documentary, filing, recording, transfer or
similar fees or taxes or governmental charges as levied by any Governmental Body
including any interest and penalties) in connection with the transactions
contemplated by this Agreement, other than Taxes related to the Excluded Assets
which shall be borne by Seller.
(f) Disputes. Any dispute as to any matter covered by this Section 9.7
shall be resolved by a tax expert (the "Tax Expert"), who shall be a partner in
the Hong Kong office of the accounting firm of Ernst & Young (or if unable or
unwilling to accept such mandate, an independent accountant to be mutually
agreed upon by Seller and Purchaser), and who shall accept its appointment
within five (5) days after such referral, to make a final, non-appealable and
binding determination as to such disputed matter pursuant to the terms hereof.
If Purchaser and Seller cannot agree on the selection of a partner at an
independent accounting firm to act as the Tax Expert, the parties shall request
the ICC to appoint such a partner (who must be an active or recently retired tax
expert with substantial experience with complex financial transactions of the
type set forth in this Agreement) and such appointment shall be conclusive and
binding on the parties. The fees and expenses of the Tax Expert shall be borne
equally by Seller and Purchaser. If any dispute with respect to a Tax Return is
not resolved prior to the due date of such Tax Return, such Tax Return shall be
filed in the manner which the party responsible for preparing such Tax Return
deems correct.
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(g) Time Limits. Any claim for indemnity under this Section 9.7 may be
made at any time prior to sixty (60) days after the expiration of the applicable
Tax statute of limitations with respect to the relevant taxable period
(including all periods of extension, whether automatic or permissive).
(h) Exclusivity. The indemnification provided for in this Section 9.7
shall be the sole remedy for any claim in respect of Taxes, including any claim
arising out of or relating to a breach of Section 5.11. In the event of a
conflict between the provisions of this Section 9.7, on the one hand, and the
provisions of Sections 9.1 through 9.4, on the other, the provisions of this
Section 9.7 shall control.
(i) Refunds and Tax Benefits. Any Tax refunds or reimbursements from a
third party for Taxes paid by Seller that are received by Purchaser, the Company
or the Acquired Subsidiaries and any amounts credited against Tax to which
Purchaser, the Company or the Acquired Subsidiaries become entitled, that relate
to any taxable periods or portions thereof ending on or before the Closing Date
shall be for the account of Seller, and Purchaser shall pay over to Seller any
such refund, reimbursement or the amount of any such credit within fifteen (15)
days after receipt thereof or entitlement thereto.
(j) Cooperation on Tax Matters. Purchaser, Seller, the Company and the
Subsidiaries shall cooperate fully, as and to the extent reasonably requested by
the other parties, in connection with the filing of Tax Returns and any audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Company and Seller shall (i) retain all books
and records with respect to Tax matters pertinent to the Company and each
Acquired Subsidiary relating to any whole or partial taxable period beginning
before the Closing Date until the expiration of the statute of limitations (and,
to the extent notified by the Company or Seller, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) give the other party reasonable
written notice prior to transferring, destroying or discarding any such books
and records and, if the other party so requests, Purchaser or Seller, as the
case may be, shall allow the other party to take possession of such books and
records. Purchaser and Seller further agree, upon request, to use commercially
reasonable efforts to obtain any certificate or other document from any
Governmental Authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed.
9.8 Tax Treatment of Indemnity Payments. Seller and Purchaser agree to
treat any indemnity payment made pursuant to this Article IX as an adjustment to
the purchase price for all income tax purposes.
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ARTICLE X
MISCELLANEOUS
10.1 Expenses. Except as otherwise provided in this Agreement, each of
Seller and Purchaser shall each bear its own expenses incurred in connection
with the negotiation and execution of this Agreement and each other agreement,
document and instrument contemplated by this Agreement and the consummation of
the transactions contemplated hereby and thereby. The Company and the Acquired
Subsidiaries shall not pay for any fees and expenses incurred by or on behalf of
Seller, the Company or any of the Acquired Subsidiaries in connection with the
process of selling the Company or otherwise relating to the negotiation,
preparation or execution of this Agreement or any documents or agreements
contemplated hereby or the performance or consummation of the transactions
contemplated hereby, including (i) any fees and expenses associated with
obtaining necessary or appropriate waivers, consents or approvals of any
Governmental Body or third parties on behalf of the Company or any of the
Acquired Subsidiaries, (ii) any fees or expenses associated with obtaining the
release and termination of any Liens, (iii) all brokers' or finders' fees, (iv)
fees and expenses of counsel, advisors, consultants, investment bankers,
accountants, and auditors and experts and (v) all sale, "stay-around,"
retention, or similar bonuses or payments to current or former directors,
officers, employees and consultants paid as a result of or in connection with
the consummation of the transactions contemplated hereby.
10.2 Specific Performance. Seller acknowledges and agrees that the
breach of this Agreement would cause irreparable damage to Purchaser and that
Purchaser will not have an adequate remedy at law. Therefore, the obligations of
Seller under this Agreement, including Seller's obligation to sell the Shares to
Purchaser, shall be enforceable by a decree of specific performance issued by
any court of competent jurisdiction after such a decision by the Arbitrators
pursuant to Section 10.3, and appropriate injunctive relief may be applied for
and granted in connection therewith. Such remedies shall, however, be cumulative
and not exclusive and shall be in addition to any other remedies which any party
may have under this Agreement or otherwise.
10.3 Dispute Resolution. Except for determinations by the Accounting
Referee pursuant to Section 3.3 and Tax disputes pursuant to Section 9.7(f), any
and all disputes, controversies or claims arising out of, relating to or in
connection with this Agreement (including any question regarding its existence,
validity, interpretation, scope, breach or termination) shall be resolved by a
final and binding arbitration, without any appeal, to be held in London, England
using the English language, under the then-prevailing Rules of Arbitration (the
"Rules") of the ICC by three (3) arbitrators (the "Arbitrators") mutually
selected by the parties, subject to the Rules. The decision of the Arbitrators
shall be in writing, and shall set forth in detail the reasons for such
decision. The Arbitrators shall be entitled to award damages, injunctive or
other equitable relief and any other remedy allowed by the Rules and applicable
Law. Judgment upon the award may be entered into any court of competent
jurisdiction. Each party shall bear its own expenses incurred in connection with
arbitration and the fees and expenses of the Arbitrators shall be shared equally
by the parties involved in the dispute and advanced by them from time to time as
required. It is the mutual intention and desire of the parties that the tribunal
of the Arbitrators be constituted as expeditiously as possible following the
submission of the dispute to arbitration.
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10.4 Entire Agreement; Amendments and Waivers. This Agreement
(including the schedules and exhibits hereto), the Seller Documents and the
Purchaser Documents represent the entire understanding and agreement between the
parties hereto with respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement, modification or
waiver is sought; provided that that the foregoing shall not exclude liability
for fraud or fraudulent misrepresentation. No action taken pursuant to this
Agreement, including any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representation, warranty, covenant or agreement contained herein. The waiver
by any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.
10.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of England and Wales.
10.6 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally by hand (with written confirmation of receipt), (ii) when sent by
facsimile (with written confirmation of transmission) or (iii) one (1) Business
Day following the day sent by overnight courier (with written confirmation of
receipt), in each case at the following addresses and facsimile numbers (or to
such other address or facsimile number as a party may have specified by notice
given to the other party pursuant to this provision):
If to Seller: If to Purchaser:
MultiVision Intelligent
Surveillance Limited Verint Systems Inc.
26/F Aitken Vanson Centre 330 South Service Road
61 Hoi Yuen Road Melville, New York 11747
Kwun Tong, Kowloon Facsimile: (631) 962-9300
Hong Kong Attn: Peter Fante, General Counsel
Facsimile: +852 2797 5679
Attn: Chief Financial Officer
68
If to Seller: If to Purchaser:
With a copy to: With a copy to:
Lee & Lee Weil, Gotshal & Manges LLP
Advocates & Solicitors 767 Fifth Avenue
5 Shenton Way New York, NY 10016
Level 19 UIC Building Facsimile: (212) 310-8007
Singapore 068808 Attn: Dennis Barsky, Esq.
Facsimile: +65 6 2250438
Attn: Adrian Chan Pengee
(if sent prior to October 1, 2005)
or:
Lee & Lee
Advocates & Solicitors
168 Robinson Road #25-01
Capital Tower
Singapore 068912
Facsimile: +65 6 2250438
Attn: Adrian Chan Pengee
(if sent on or after October 1, 2005)
10.7 Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any law or public policy,
all other terms or provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
10.8 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any Person not a party to this Agreement
except as provided below. Except as explicitly provided herein, the parties do
not intend that any Person who is not a signatory to this Agreement shall
acquire any right under this Agreement (whether or not pursuant to the U.K.
Contracts (Rights of Third Parties) Act 1999) nor that the consent of or any
notice to any Person who is not a signatory to this Agreement shall be required
for the variation, rescission or termination of this Agreement. No assignment of
this Agreement or of any rights hereunder may be made by either Seller or
Purchaser (by operation of law or otherwise) without the prior written consent
69
of the other parties hereto and any attempted assignment without the required
consents shall be null and void; provided, however, that Purchaser may assign
this Agreement and any or all of its rights or obligations hereunder (including
Purchaser's rights to purchase the Shares and Purchaser's rights to seek
indemnification hereunder) to any Affiliate of Purchaser or any Person to which
Purchaser or any of its Affiliates proposes to sell all or substantially all of
its assets. Upon any such permitted assignment, the references in this Agreement
to Purchaser shall also apply to any such assignee unless the context otherwise
requires.
10.9 Non-Recourse. No past, present or future director, officer,
employee, incorporator, member, partner, shareholder, Affiliate, agent, attorney
or representative of Purchaser shall have any liability for any obligations or
liabilities of Purchaser under this Agreement or for any claim based on, in
respect of, or by reason of, the transactions contemplated hereby.
10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first written above.
VERINT SYSTEMS INC.
By: /s/ Dan Bodner
--------------------------------
Name: Dan Bodner
Title: President and Chief
Executive Officer
MULTIVISION HOLDINGS LIMITED
By: /s/ Louis Mak Fuk Sang
-------------------------------
Name: Louis Mak Fuk Sang
Title: Director
MULTIVISION INTELLIGENT
SURVEILLANCE LIMITED
By: /s/ Dennis Li Kin Keung
--------------------------------
Name: Dennis Li Kin Keung
Title: Director