EXHIBIT 1
_____________________________________________________________________________
_____________________________________________________________________________
STOCK FOR CASH
PURCHASE AGREEMENT
ACQUISITION OF THE STOCK OF
HANYON TECH CO., LTD.
BY
▇▇▇▇▇▇ AUTOMATION, INC.
DATED: March 31, 1999
_____________________________________________________________________________
_____________________________________________________________________________
STOCK FOR CASH PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
RECITALS .................................................................. 1
ARTICLE 1. PURCHASE AND SALE OF STOCK .................................... 1
1.1 Purchase of Company Shares ........................................... 1
1.2 Adjustment to Purchase Price ......................................... 2
1.3 Time and Place of Closing ............................................ 4
1.4 Delivery of Company Shares ........................................... 4
1.5 Further Assurances ................................................... 4
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS...... 5
2.1 Organization and Qualification of Company ............................ 5
2.2 Capitalization of Company; Title to Stock ............................ 5
2.3 Subsidiaries ......................................................... 6
2.4 Authorization of Transaction ......................................... 6
2.5 Present Compliance with Obligations and Laws ......................... 6
2.6 No Conflict of Transaction With Obligations and Laws. ................ 7
2.7 Financial Statements ................................................. 7
2.8 Absence of Undisclosed Liabilities ................................... 8
2.9 Conduct of Business; Absence of Certain Changes ...................... 8
2.10 Payment of Taxes .................................................... 10
2.11 Title to Properties; Liens; Condition of Properties. ................ 11
2.12 Collectibility of Receivables ...................................... 13
2.13 Inventories. ........................................................ 13
2.14 Intellectual Property Rights. ....................................... 14
2.15 Contracts and Commitments. .......................................... 17
2.16 Labor and Employee Relations. ....................................... 18
2.17 Employee Benefits ................................................... 20
2.18 Environmental Matters. .............................................. 21
2.19 Government Authorizations ........................................... 23
2.20 Warranty or Other Claims ............................................ 24
2.21 Litigation .......................................................... 24
2.22 Borrowings and Guarantees ........................................... 24
2.23 Financial Service Relations and Powers of Attorney .................. 24
2.24 Insurance. .......................................................... 25
2.25 Minute Books ........................................................ 25
2.26 Finder's Fee ........................................................ 26
2.27 Transactions with Interested Persons ................................ 26
2.28 Absence of Sensitive Payments ....................................... 26
2.29 Year 2000. .......................................................... 26
2.30 Disclosure of Material Information .................................. 27
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER. ...................... 27
3.1 Organization of Buyer ................................................ 27
3.2 Authorization of Transaction ......................................... 27
3.3 No Conflict of Transaction With Obligations and Laws ................. 27
3.4 Finder's Fee ......................................................... 28
ARTICLE 4. COVENANTS OF THE COMPANY AND THE SELLER ....................... 28
4.1 Conduct of Business .................................................. 28
4.2 Disposition of Certain Assets ........................................ 30
4.3 Access to Information ................................................ 30
(i)
4.4 Governmental Permits and Approvals; Contract Consents ................ 31
4.5 Maintenance of Government Authorizations ............................. 31
4.6 Collection of Receivables ............................................ 31
4.7 Risk of Loss ......................................................... 31
4.8 Employee/Employee Compensation ....................................... 32
4.9 Breach of Representations and Warranties ............................ 32
4.10 Consummation of Agreement ........................................... 32
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF BUYER ............................ 32
5.1 Due Diligence Review ................................................. 32
5.2 Divestiture of Certain Assets ........................................ 33
5.3 Representations; Warrantees; Covenants ............................... 33
5.4 Resignations of Officers and Directors .............................. 33
5.5 Releases ............................................................. 33
5.6 Opinion of Sellers' Counsel. ......................................... 33
5.7 Employment Agreements ................................................ 33
5.8 Noncompetition Agreements ............................................ 34
5.9 Escrow Agreement .................................................... 34
5.10 Stockholders Agreement ............................................. 34
5.11 Amendment of Charter ................................................ 34
5.12 Absence of Certain Litigation ....................................... 34
5.13 No Bankruptcy ....................................................... 34
5.14 Governmental Approvals, Third Party Consents ........................ 35
5.15 Modification of Synergy Memorandum of Understanding ................. 35
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE SELLERS. ..................... 35
6.1 Representations; Warrantees; Covenants ............................... 35
6.2 Employment Agreements ................................................ 35
6.3 Absence of Certain Litigation ........................................ 35
ARTICLE 7. INDEMNIFICATION. .............................................. 35
7.1 Definitions .......................................................... 35
7.2 Indemnification by Sellers. .......................................... 36
7.3 Defense of Third Party Actions. ...................................... 38
7.4 Miscellaneous. ....................................................... 39
7.5 Payment of Indemnification .......................................... 39
ARTICLE 8. TERMINATION OF AGREEMENT ...................................... 39
8.1 Termination .......................................................... 39
8.2 Effect of Termination ................................................ 40
8.3 Right to Proceed ..................................................... 40
ARTICLE 9. MISCELLANEOUS. ................................................ 40
9.1 Survival of Warranties ............................................... 40
9.2 Fees and Expenses .................................................... 40
9.3 Notices .............................................................. 40
9.4 Publicity and Disclosures ............................................ 42
9.5 Confidentiality ...................................................... 42
9.6 Time Period .......................................................... 42
9.7 Entire Agreement ..................................................... 42
9.8 Severability ......................................................... 42
9.9 Assignability ........................................................ 42
9.10 Amendment ........................................................... 42
9.11 Dispute Resolution. ................................................. 43
9.12 Governing Law; ...................................................... 43
9.13 Remedies ............................................................ 43
9.14 Counterparts ........................................................ 44
9.15 Effect of Table of Contents and Headings ........................... 44
SIGNATURE PAGE ............................................................ 45
LIST OF EXHIBITS AND SCHEDULES ............................................ 47
(ii)
STOCK FOR CASH PURCHASE AGREEMENT
AGREEMENT entered into as of March __, 1999 of among ▇▇▇▇▇▇ Automation,
Inc., a Delaware corporation ("Buyer"), Hanyon Tech Co., Ltd., a company
organized under the laws of the Republic of Korea (the "Company"), and each of
the persons listed on Exhibit A hereto, being the holders of 90.5% of the issued
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and outstanding capital stock of the Company (the "Sellers").
RECITALS
WHEREAS, Sellers collectively own 90.5% of the outstanding shares of Common
Stock of the Company (the "Company Shares"), and are willing to sell the Company
Shares to Buyer; and
WHEREAS, ▇▇▇▇▇ wishes to acquire the remaining capital stock of the Company;
NOW, THEREFORE, in consideration for the mutual agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
ARTICLE 1. PURCHASE AND SALE OF STOCK
1.1 Purchase of Company Shares.
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(a) Subject to the provisions of this Agreement, each of the Sellers agrees to
sell, and ▇▇▇▇▇ agrees to purchase, at the Closing (as defined in Section
1.3 hereof), the number of Company Shares set forth next to such Seller's
name on Exhibit A hereto and all rights attached to such Company Shares
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(including, but not limited to, the rights to dividends accrued thereon
until the Closing) at a price per share of US$183.625, for an aggregate
purchase price of US$6,647,225, subject to adjustment as provided in
Section 1.2 hereof (the "Purchase Price"), which shares constitute, and
will constitute at the Closing, ninety and one half percent (90.5%) of the
issued and outstanding capital stock of the Company. The Purchase Price,
shall be paid by Buyer in cash by certified or bank check or by wire
transfer of funds, as follows:
(i) at the Closing, the aggregate sum of US$1,612,000 (the "Escrow Fund") shall
be paid to State Street Bank and Trust Company, or another mutually
acceptable institution, as escrow agent ("Escrow Agent") under and subject
to the terms of the Escrow Agreement to be entered into pursuant to Section
5.10 hereof (the "Escrow Agreement"); and
(ii) at the Closing the aggregate sum of US$3,035,225, shall be paid pro rata
to the Sellers. To the extent payment is to be made by wire transfer of
funds, Sellers shall designate the account(s) into which such funds are to
be wired in writing to Buyer at least three (3) business days prior to the
Closing.
(iii) within ten (10) days after the delivery of the Closing Balance Sheet
pursuant to Section 1.2 hereof, the balance of the Purchase Price
(adjusted in accordance with
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Section 1.2 hereof) allocable to the Company Shares owned by each of the
Sellers shall be paid pro rata to the Sellers.
(b) Buyer shall withhold from any amounts payable to Sellers under this
Agreement and remit to appropriate taxing authorities any amounts required
to be so withheld by the relevant taxing authorities, including but not
limited to any amount of securities transaction tax payable as a result of
the transaction.
1.2 Adjustment to Purchase Price.
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(a) Promptly following the Closing, but in no event later than 60 days after
the Closing, PricewaterhouseCoopers, LLP ("PWC"), independent public
accountants shall prepare and deliver to the Buyer and the Sellers an
audited balance sheet (the "Closing Balance Sheet") prepared in accordance
with paragraph (b) below. In the event the book value of the Company as
shown on the Closing Balance Sheet (the "Closing Book Value") based upon a
currency exchange rate of US $1:1,200 Won is less than or more than
US$5,800,000 (the "Target Book Value"), the Purchase Price shall be
adjusted dollar for dollar for such difference (if and only to the extent
such difference exceeds US$150,000) in accordance with paragraph (c)
paragraph (d), or paragraph (e) below. The fees and expenses of such
independent public accountants shall be borne by Buyer.
(b) For purposes of this Section 1.2 the term "book value" shall mean the book
value of all assets appearing on the balance sheet less the book value of
all liabilities appearing thereon. The Closing Balance Sheet shall fairly
present the assets, liabilities and Closing Book Value of the Company as of
the close of business on the Closing Date determined in accordance with
generally accepted accounting principals, practices and methods of the
United States ("U.S. GAAP") and, to the extent the Base Balance Sheet is as
hereinafter defined in accordance with U.S. GAAP, on a basis consistent
with the preparation of the Base Balance Sheet (as hereinafter defined),
and as follows:
(i) Consistency. The same accounting principles, practices, procedures and
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policies that were used in preparing the Base Balance Sheet shall be used
in preparing the Closing Balance Sheet, and the computational methods and
assumptions used in preparing the Base Balance Sheet shall be used in the
preparation of the Closing Balance Sheet and the calculation of Closing
Book Value. The Base Balance Sheet and the Closing Book Value shall be
prepared in accordance with U.S. GAAP.
(ii) Notwithstanding the foregoing and anything else to the contrary herein:
(A) Accruals and Reserves. Accruals and reserves will be made for (1) all
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amounts to be paid by the Company to Sellers and all other employees of the
Company in excess of their normal salaries on account of the Company's
performance during 1998, together with any related taxes to be distributed
to the Sellers on account
Page 2
thereof, and (2) all matters for which an accrual or reserve would be
appropriate under U.S. GAAP.
(B) Inventory. Inventory shall be valued as provided in Section 2.13 hereof by
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Buyer as of the close of business on the Closing Date based on a physical
count undertaken on a mutually agreed upon date that is on or near the
Closing Date at which all parties or their representatives may be present
to observe. An appropriate reserve shall be established (or write-off
taken) in accordance with U.S. GAAP for excess, damaged and defective
inventory (including but not limited to packaging) and for inventory which
is not a salable or usable within one (1) year, or which is obsolete.
(c) Subject to subsection (f) hereof, in the event that the Closing Book Value
is less than Target Book Value and such difference is more than US$150,000
but less than or equal to US$2,150,000, then within ten (10) days following
the later of (i) the date of delivery of the Closing Balance Sheet to the
Buyer and the Sellers, or (ii) the determination of any dispute with
respect to the Closing Balance Sheet as provided in paragraph (g) of this
Section 1.2, the Buyer shall pay pro rata to the Sellers, by certified or
bank check or wire transfer of funds, an amount equal to (i) US$2,150,000
minus (ii) such difference.
(d) In the event that the Closing Book Value is less than the Target Book Value
and such difference is greater than US$2,150,000, then, within ten (10)
days following the later of (i) the date of delivery of the Closing Balance
Sheet to the Buyer and the Sellers, or (ii) the determination of any
dispute with respect to the Closing Balance Sheet as provided in paragraph
(g) of this Section 1.2, each Seller shall pay to Buyer, by certified bank
check or wire transfer of funds, such Seller's pro rata share of the amount
equal to (i) the Target Book Value minus (ii) the Closing Book Value minus
(iii) US$2,150,000.
(e) Subject to subsection (f) hereof, in the event that the Closing Book Value
is greater than the Target Book Value and such difference is more than
US$150,000, then within ten (10) days following the later of (x) the date
of delivery of the Closing Balance Sheet to the Buyer and the Sellers or
(y) the determination of any dispute with respect to the Closing Balance
Sheet as provided in paragraph (g) of this Section 1.2, the Buyer shall pay
pro rata to the Sellers by certified or bank check or wire transfer of
funds an amount equal to the sum of (i) US$2,000,000 plus (ii) such
difference, minus US$150,000.
(f) Notwithstanding the foregoing, no adjustment to the Purchase Price shall be
made and Buyer shall pay pro rata to the Sellers by certified or bank check
or wire transfer of funds an amount equal to US$2,000,000 if the difference
between the Closing Book Value and the Target Book Value is less than or
equal to US$150,000.
(g) If after the final Closing Balance Sheet has been prepared and delivered to
Buyer and Seller by PWC, any dispute shall arise as to the manner of
preparation or the accuracy of the Closing Balance Sheet, the Buyer or the
Sellers may elect, by notice given at any time prior to their receipt of
the Closing Balance Sheet or within ten (10) days following such receipt,
Page 3
to submit the dispute to Deloitte & Touche, an independent certified public
accounting firm of international standing (the "Independent CPA"). The
determination of such dispute by the Independent CPA shall be final and
binding on the parties. All fees and expenses of the Independent CPA
charged or incurred in connection with the determination of such dispute
shall be borne equally between the Buyer and Seller.
(h) Notwithstanding the foregoing, the Purchase Price will not be adjusted to
the extent the Closing Book Value differs from the Target Book Value due to
a change in the "trade accounts and notes receivable" line item in the
Closing Balance Sheet from US$2,086,438, provided such change does not
relate to a contract termination or a material delay in the performance by
the Company of a contract.
1.3 Time and Place of Closing. The closing of the purchase and sale provided
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for in this Agreement (herein called the "Closing") shall be held at the
offices of ▇▇▇ & Ko within three (3) business days of the receipt of all
government approvals required pursuant to Section 5.14 hereof or at such
other place, date or time as may be fixed by mutual agreement of the
parties (the "Closing Date"); provided, however, that in no event shall the
Closing Date be extended beyond May 31, 1999.
1.4 Delivery of Company Shares. At the Closing, the Sellers shall deliver
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or cause to be delivered to Buyer, among other things:
(a) certificates for all the Company Shares owned by each Seller, duly endorsed
in blank for transfer, or with stock powers attached duly executed in
blank, with all signatures notarized or, at the election of ▇▇▇▇▇,
guaranteed;
(b) such other documents as may be required to effect a valid transfer of the
Company Shares by the Sellers, free and clear of any and all Encumbrances
(as defined in Section 2.6 hereof);
(c) general releases by all officers, directors and stockholders of the Company
except ▇▇▇▇▇-Gon ▇▇▇ ("▇.▇. ▇▇▇") and ▇▇▇▇▇-▇▇▇ Park ("▇.▇. ▇▇▇▇")
releasing any liability of the Company to them, or any claim that they may
have against the Company, except for accrued but unpaid compensation and
benefits as specified in the attached Schedule 1.4;
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(d) such other documents as may be required elsewhere in this Agreement or may
be reasonably requested by counsel to Buyer.
1.5 Further Assurances. Sellers from time to time after the Closing, at the
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request of Buyer and without further consideration, shall execute and
deliver further instruments of transfer and assignment (in addition to
those delivered under Section 1.4) and take such other action as Buyer may
reasonably require to more effectively transfer the Company Shares to the
Buyer.
Page 4
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS.
The Company and each of the Sellers hereby jointly and severally represent
and warrant to Buyer as follows:
2.1 Organization and Qualification of Company. The Company is a corporation
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duly organized, validly existing and in good standing under the laws of the
Republic of Korea, with full power and authority to own, operate or lease
its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is conducted by
it. The copies of the Company's Articles of Incorporation as amended to
date, and of the Company's bylaws as amended to date, certified by the
Company's President, copies of which are attached as Schedule 2.1 hereto,
are complete and correct. The Company is duly qualified to do business and
in good standing as a foreign corporation in each of the jurisdictions
identified on Schedule 2.1 and it is not required to be licensed or
qualified to conduct its business or own its property in any other
jurisdiction.
2.2 Capitalization of Company; Title to Stock.
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(a) The authorized capital stock of the Company consists of 200,000 shares of
Common Stock, 5,000 Won par value, of which 40,000 shares are validly
issued and outstanding. The issuance of all of such issued and outstanding
shares was duly authorized and all such shares are fully paid and
nonassessable, were issued in compliance with applicable securities laws,
and were not issued in violation of any person's preemptive rights. There
are no shares of capital stock reserved for any purpose. Except as set
forth on Schedule 2.2, there are no (i) outstanding or authorized
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subscriptions, warrants, options or other rights granted by the Company or
any Seller to purchase or acquire, or preemptive rights with respect to the
issuance or sale of, the capital stock of the Company, or which obligate or
may obligate the Company to issue any additional shares of its capital
stock or any securities convertible into or evidencing the right to
subscribe for any shares of its capital stock, (ii) other securities of the
Company directly or indirectly convertible into or exchangeable for shares
of capital stock of the Company, (iii) agreements relating to the voting of
the Company's capital stock, (iv) restrictions on the transferability of
the Company's capital stock (by agreement, charter, statute or otherwise),
or (v) other agreements among the Sellers or any other person relating to
the Company Shares. No "phantom" stock, stock appreciation rights or
agreements or similar rights or agreements exist which are intended to
confer on any person rights similar to any rights accruing to owners of
Company Shares.
(b) Each Seller is the record and beneficial owner of the number and type of
Company Shares set forth next to his name on Exhibit A hereto and is in
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possession of the certificates evidencing such ownership. Except as set
forth on said Exhibit A, no Seller owns of record or beneficially any other
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shares of capital stock of the Company, or any rights, options, or warrants
with respect thereto. The Company Shares to be delivered by Sellers to
Buyer pursuant to this Agreement will be, when delivered, duly authorized,
validly issued, fully paid and nonassessable, and will be free and clear of
all Encumbrances.
Page 5
2.3 Subsidiaries.
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(a) The Company does not have any Subsidiaries. The Company does not,
directly or indirectly, have the power to vote or direct the voting of a
sufficient amount of the ownership interest to elect all of the directors
or other persons who manage any corporation, limited liability company or
other business enterprise.
(b) Except as set forth on Schedule 2.3, the Company does not control directly
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or indirectly or have any direct or indirect equity or similar
participation in any corporation, joint venture, partnership, trust or
other business enterprise.
2.4 Authorization of Transaction. The Company has the full power and
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authority to execute, deliver and perform this Agreement and the other
agreements to be executed and delivered pursuant to this Agreement (the
"Ancillary Agreements"); to perform its obligations hereunder and
thereunder, and to carry out the transactions contemplated hereby and
thereby. Each of the Sellers has the unrestricted and absolute power,
authority and capacity to execute and deliver this Agreement and the
Ancillary Agreements and to perform his obligations hereunder and
thereunder, and to carry out the transactions contemplated hereby and
thereby. All necessary action, corporate or otherwise, has been taken by
each Seller and the Company to authorize the execution, delivery and
performance of this Agreement and each of the Ancillary Agreements and the
transactions contemplated hereby and thereby. The Agreement has been, and
each Ancillary Agreement will be at the Closing, duly executed and
delivered by the Company and each Seller and the Agreement is, or upon the
Closing will be, the legal, valid and binding obligation of the Company and
each Seller, enforceable against the Company and each Seller in accordance
with its terms.
2.5 Present Compliance with Obligations and Laws. The Company is not: (a) in
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violation of its Charter or bylaws; (b) in default in the performance of
any obligation, agreement or condition of any debt instrument which (with
or without the passage of time or the giving of notice) affords to any
person the right to accelerate any indebtedness or terminate any right; (c)
in default of or in breach of (with or without the passage of time or the
giving of notice) any other contract to which it is a party or by which it
or its assets are bound; or (d) in violation of any foreign or domestic
court order, judgment, administrative or judicial order, writ, decree,
stipulation, arbitration award or injunction (collectively, "Court Orders")
applicable to the Company or its business or assets; or in violation of any
foreign or domestic license, permit, order, franchise agreement,
concession, grant, authorization, consent or approval (collectively,
"Government Authorizations") that is held by the Company applicable to
Company or its business or assets. The Company has conducted and is now
conducting its business and the ownership and operation of its assets in
compliance with all applicable foreign and domestic statutes, laws,
ordinances, rules and regulations (collectively, "Laws"). All notices and
complaints of violations or alleged violations of Law received by the
Company within the last three (3) years are attached to Schedule 2.5,
together with a description of the status and disposition of such matters.
Page 6
2.6 No Conflict of Transaction With Obligations and Laws.
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(a) Except as set forth on Schedule 2.6, neither the execution, delivery and
------------
performance of this Agreement or any Ancillary Agreement, nor the
performance of the transactions contemplated hereby, will: (i) contravene,
conflict, with or constitute a breach or violation of any provision of the
Charter or bylaws of the Company or any resolutions of its Board of
Directors or other governing bodies; (ii) require any consent, approval or
authorization of or declaration, filing or registration with any person
other than a governmental agency as described in paragraph (b) below,
including consents of parties to loans, contracts, leases, licenses and
other agreements; (iii) conflict with or constitute (with or without the
passage of time or the giving of notice) a breach of, or default under, any
debt instrument to which the Company is a party, or give any person the
right to accelerate any indebtedness or terminate, modify or cancel any
right; (iv) constitute (with or without the passage of time or giving of
notice) a default under or breach of any other agreement, instrument or
obligation to which the Company is a party or by which the Company or any
of its assets are bound; (v) result in the creation of any lien, option
(including right of first refusal or first offer), encumbrance, charge,
restriction, mortgage, pledge, security interest, title exception,
restriction, claim or charge of any kind or character (each an
"Encumbrance") upon any Company Shares or any of the assets of the Company;
(vi) contravene, conflict with, or result in a violation of any Court Order
or Law, or give any governmental authority, whether national, regional,
state, local or other political subdivision or agency the Republic of
Korea, the United States of America, or any other nation (each a
"Government Authority"), or any other person, the right to exercise any
remedy or obtain any relief under any Court Order or Law, to which the
Company or Sellers are subject or by which the properties or assets of the
Company are bound; or (vii) contravene, conflict with or result in a
violation of any of the terms or requirements of, or give any Governmental
Authority the right to revoke, withdraw, suspend, cancel, terminate or
modify, any Government Authorization.
(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby by the Company and Sellers do not require
the consent, waiver, approval, authorization, exemption of or giving of
notice to any Governmental Authority.
2.7 Financial Statements.
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(a) Attached as Schedule 2.7(a) hereto are the following financial statements
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of the Company (audited, or unaudited as indicated), together with all
related compilations, reviews and other reports issued by the Company's
independent certified public accountants with respect thereto, all of which
statements (including the footnotes thereto) are complete and correct and
present fairly the assets, liabilities, financial position of the Company
on the date of such statements, and the results of operations and changes
in the financial condition of the Company for the periods covered thereby,
and such financial statements have been prepared in accordance with
generally accepted accounting principles, practices and methods of the
Republic of Korea ("Korean GAAP") consistently applied throughout the
periods involved and prior periods:
Page 7
Audited balance sheets, statements of profit and loss, statements of
changes in stockholders equity and statements of cash flow for the twelve
(12) months ended as of December 31, 1997.
. Unaudited balance sheets, statements of profit and loss, statements of
changes in stockholders equity and statements of cash flow for the twelve
(12) months ended as of December 31, 1998.
. Internally generated balance sheets, statements of profit and loss,
statements of changes in stockholders equity and statements of cash flow
for the two months ended as of February 28, 1999.
(b) The balance sheet dated December 31, 1998 (the "Base Balance Sheet Date")
included in the above financial statements was prepared in accordance with
U.S. GAAP and is sometimes referred to hereinafter as the "Base Balance
Sheet".
(c) The books of account of the Company for the past two (2) years are complete
and correct in all material respects and have been maintained on a
consistent basis. All external auditor's letters to management of the
Company for the past two (2) years and other significant correspondence
from or to such auditors during such period, if any, are attached as
Schedule 2.7(b) hereto.
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2.8 Absence of Undisclosed Liabilities. The Company does not have liabilities
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of any nature, whether accrued, absolute, contingent or otherwise
(including without limitation liabilities as guarantor or otherwise with
respect to obligations of others, or liabilities for taxes due or then
accrued or to become due), except: (a) liabilities stated or adequately
reserved against on the Base Balance Sheet, (b) liabilities incurred since
the Base Balance Sheet Date in the ordinary course of business consistent
with past practices (none of which is a claim for breach of contract,
breach of duty, breach of warranty, tort, or infringement of an
intellectual property right), which liabilities, to the extent outstanding
on the Closing Date will be reflected on the Closing Balance Sheet, and (c)
liabilities disclosed on Schedule 2.8 hereto. There is no fact which
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which presently materially adversely affects, or in the future (so far as
can now be reasonably foreseen) may materially adversely affect, the
business, properties, operations or conditions, financial or otherwise, of
the Company which has not been specifically disclosed herein or in a
schedule hereto.
2.9 Conduct of Business; Absence of Certain Changes. Since the Base Balance
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Sheet Date, Sellers and the Company have conducted the business of the
Company only in the ordinary course of business, consistent with prior
practices. Whether or not in the ordinary course of business, since the
Base Balance Sheet Date there has not been any change in the financial
condition, including working capital, earnings, reserves, properties,
assets, liabilities, business or operations, of the Company which change,
by itself or in conjunction with all other such changes has been materially
adverse with respect to the Company. Without limiting the generality of the
foregoing, except as disclosed on Schedule 2.9 hereto, since the Base
Balance Sheet Date there has not been:
Page 8
(a) any amendment to the Charter or bylaws of the Company;
(b) any contingent liability incurred by the Company as guarantor or otherwise
with respect to the obligations of others;
(c) any Encumbrance placed on any of the properties of the Company which
remains in existence on the date hereof;
(d) any obligation or liability incurred by the Company other than obligations
and liabilities incurred in the ordinary course of business consistent with
past practice (none of which is a claim for breach of contract, breach of
duty, breach of warranty, tort or infringement of an intellectual property
right);
(e) any sale or other disposition, or any agreement or other arrangement for
the sale or other disposition, of any of the properties or assets of the
Company other than in the ordinary course of business and as provided in
Section 4.2;
(f) any capital expenditure or commitment in excess of US$10,000 with respect
to any individual item or in excess of US$50,000 with respect to all such
items, or any lease or agreement to lease any assets with an annual rental
in excess of US$10,000 with respect to any individual item or in excess of
US$50,000 with respect to all such items;
(g) any damage, destruction or loss, whether or not covered by insurance, of
any of the assets or business of the Company;
(h) any declaration, setting aside or payment of any dividend on, or the making
of any other distribution in respect of, the capital stock of the Company,
any direct or indirect redemption, purchase or other acquisition by the
Company of its capital stock or any issuance of any securities of the
Company;
(i) any labor trouble or claim of unfair labor practices involving the Company;
(j) any change in the compensation or other amounts payable or to become
payable by the Company to any of its officers, employees or agents; or any
change in any bonus, pension or profit sharing payment, entitlement or
arrangement made to or with any of such officers, employees or agents; or
any grant of any loans or severance or termination pay or any entrance into
or variation of the terms of any employment agreement or adoption of or
increase in, the benefits under any Benefit Plan (as defined in Section
2.17 hereof);
(k) any change with respect to the management or supervisory personnel of the
Company;
(l) any payment or discharge of a material lien, claim, obligation or liability
of the Company which was not shown on the Base Balance Sheet or incurred in
the ordinary course of business thereafter;
Page 9
(m) any obligation or liability incurred by the Company to any of its officers,
directors or shareholders or any loans or advances made by the Company to
any of its officers, directors or shareholders, except normal compensation
and expense allowances payable to officers;
(n) any write-downs of the value of any inventory (including write-downs by
reason of shrinkage or mark-down) or write-offs as uncollectible of any
notes or accounts receivable, except for write-downs or write-offs that are
in the aggregate less than US$10,000 incurred in the ordinary course of
business;
(o) any disposal, sale, assignment, license or lapse of any rights to the use
of any trademark, tradename, patent, copyright, license or disposal, sale,
assignment, or license of or disclosure to any person other than Buyer of
any trade secret, technology, formula, process, know-how or other
confidential information not theretofore a matter of public knowledge other
than pursuant to confidentiality agreements;
(p) any change in any method of accounting or accounting practice, whether or
not such change was permitted by GAAP; or
(q) any agreement, whether in writing or otherwise, to take any action
described in this Section 2.9.
2.10 Payment of Taxes.
---- -----------------
(a) The Company has duly and timely filed all applicable income, excise, gross
receipts and franchise tax returns, value added, real estate and personal
property tax returns, sales and use tax returns, employee tax and
contribution returns and all other tax returns, reports and declarations,
including valid extensions therefor, or estimated taxes required to be
filed by it, with respect to all applicable taxes (the "Tax Returns")
including, without limitation, income, profit, franchise, sales, use, value
added, real property, personal property, ad valorem, excise, employment,
social security and wage withholding taxes, severance, stamp, occupation,
and windfall taxes, of every kind, character or description imposed by any
governmental or quasi-governmental authority in Korea, the United States,
or any other nation and any interest or fines, and any and all penalties or
additions relating to such taxes, charges, fees, levies or assessments
("Taxes"). All of the Tax Returns are complete and correct in all
respects. The Tax Returns filed by the Company for the most recent five
(5) fiscal years are attached to Schedule 2.10. All Taxes shown to be due
-------------
on such Tax Returns have been paid, or are being contested in good faith by
the Company and such contest is being diligently pursued. With respect to
all other Taxes for which no return is required or which have not yet
accrued or otherwise become due, to the Company's and Sellers' knowledge,
adequate provision has been made in the pertinent financial statements
referred to in Section 2.7 above (as of the date thereof). The provisions
for Taxes reflected in the above-mentioned financial statements are
adequate to cover any tax liabilities of the Company in respect of its
business, properties and operations during the periods covered by said
financial statements and all prior periods. All Taxes and other
assessments and levies which the Company is required to withhold or collect
have been withheld or collected and paid over or will be paid over to
proper governmental authorities as required.
Page 10
All transfer, excise and other taxes payable to any jurisdiction by reason
of the transfer of the Company Shares pursuant to this Agreement shall be
borne by Sellers and Buyer shall withhold the appropriate amount under
Section 1 after the Closing out of the consideration payable by Buyer
hereunder.
(b) Except as set forth on Schedule 2.10, the Tax Returns have never been
-------------
examined by any Governmental Authority. The Company is not aware of any
intention on the part of any Governmental Authority to examine any of the
Tax Returns. No claims, assessments or other obligations to pay more taxes
have been asserted or against the Company, nor is any other taxing
authority now asserting or, to the knowledge of the Company or any Seller,
threatening to assert against the Company any such claim for additional
Taxes, or interest thereon or penalties in connection therewith. The
Company has not extended the time for the filing of any Tax Return or
assertion of any such claim or waived any statute of limitations for any
year, which is still in effect.
2.11 Title to Properties; Liens; Condition of Properties.
---- ---------------------------------------------------
(a) Set forth on Schedule 2.11 hereto is a listing of all real property and
-------------
leases under which the Company leases real property, together with a
description of such property, the name of the landlord and a description
of the significant terms of each lease ("Real Property"). Also set forth
on Schedule 2.11 is a complete description of the machinery, equipment and
-------------
other tangible personal property with an original cost in excess of
US$5,000 used or owned by the Company and a listing of all leases under
which the Company leases any personal property as of the Closing Date
requiring annual rental payments in excess of US$10,000, together with a
description of such property (collectively, the "M aterial Personal
Property"). Schedule 2.11 lists all locations where Material Personal
-------------
Property or the Company's inventory (other than goods in transit in the
ordinary course of business) are located. The Real Property and Material
Personal Property include all properties and assets (whether real,
personal or mixed, tangible or intangible) reflected on the Base Balance
Sheet or purchased by the Company since the Base Balance Sheet (except for
such properties or assets sold since the Base Balance Sheet Date in the
ordinary course of business), and is sufficient to conduct the Company's
business as currently conducted.
(b) True, correct and complete copies of all leases, subleases, rental
agreements, contracts of sale, or other contracts redated to property,
together with all amendments, modifications and renewals thereof, related
to any of the Real Property or the Material Personal Property are attached
to Schedule 2.11. All of the foregoing agreements are valid, subsisting
-------------
and enforceable in accordance with their terms against the parties thereto.
The Company is in full compliance with all terms and conditions of such
agreements and no event has occurred nor does any circumstance exist that
(with or without notice or the passage of time or both) would constitute a
violation or default under any such agreements, and the Company has
neither given nor received notice of any alleged violation or of any
default under any such agreement. Company has fully paid any and all key
money for all leases, each such lease has first priority on the property,
and all key money is properly collateralized. No landlord to any property
leased by the Company is bankrupt. No such landlord is known to have
defaulted on
Page 11
any promissory note or payment obligation. Neither the Company nor any
Seller have any knowledge or indication that such landlord will be in such
position in the future.
(c) Except as specifically disclosed on Schedule 2.11 or on the Base Balance
-------------
Sheet, the Company has good and marketable title in fee simple to all of
their Real Property and Material Personal Property, including, but not
limited to, property described on Schedule 2.11. None of such property
-------------
owned or used by the Company is subject to any Encumbrance (other than for
taxes not yet due and payable), except as specifically disclosed on
Schedule 2.11 or on the Base Balance Sheet.
-------------
(d) Except as set forth on Schedule 2.11: (i) all buildings, machinery and
-------------
equipment used or owned by the Company are in satisfactory condition,
working order and repair, normal wear and tear excepted, are adequate for
the uses to which they are being put, and have been adequately maintained,
and (ii) substantially conform with all applicable Laws regulating the use
of real property or safety, and neither the Company nor any Seller knows of
any pending or threatened change of any such Laws regulating the use of
real property or safety, and there is no pending or threatened taking of
any such property by any Governmental Authority.
(e) All water, waste disposal, sewer, gas, electric, telephone, drainage and
other utilities are connected pursuant to valid permits, and the Company
has not received any notice that such utilities are inadequate to service
the Real Property.
(f) The Company has obtained all licenses and permits, required from all
Government Authorities having jurisdiction over the Real Property or from
private parties to assure vehicular and pedestrian access to and from the
Real Property at all material access points.
(g) The Real Property is in compliance with all applicable Laws, there are no
physical, structural, or mechanical defects in the Real Property or the
structures located thereon, including without limitation in the plumbing,
heating, sprinkler systems, air conditioning, roof, ventilation systems and
electrical systems. All such items are in good operating condition and
repair, and no single repair in excess of US$5,000 has been required to be
made to the Real Property or to any of said systems since the Base Balance
Sheet Date.
(h) To the best of the Company's and Sellers' knowledge, there are no
environmental, land use regulation or similar proceedings, commenced or
planned to be commenced, that would materially adversely affect the value
of the Real Property or the use and operation of the Real Property for its
intended purpose.
(i) There are no outstanding contracts made by Sellers or the Company for the
construction or repair of any improvements to the Real Property that have
not been fully paid for. Sellers shall cause to be discharged all
Encumbrances arising from any labor or material furnished to the Real
Property prior to the Closing.
(j) Neither the Company nor any Seller has received any written notice from any
insurance carrier of any defects in the Real Property, or in any portion
thereof, that would
Page 12
adversely affect the insurability thereof or the cost of such insurance, or
that requires corrective action. There are no pending insurance claims
related to the Real Property.
(k) There are no pending or, to the best of the Company and Sellers' knowledge,
threatened, legal proceedings or actions of any kind or character, or any
claims or demands relating thereto affecting the Real Property or the
Company's interest therein.
2.12 Collectibility of Receivables.
---- ------------------------------
(a) All of the accounts receivable, trade accounts, notes receivable, contract
receivables, unbilled invoices and other receivables ("Receivables") of the
Company less a reserve for bad debts in the amount shown on Schedule 2.12
-------------
and those existing on the Closing Date, will be, (a) valid and enforceable
claims, (b) which arose out of transactions with unaffiliated parties, (c)
fully collectible within ninety (90) days of invoice date through normal
means of collection, and (d) subject to no set-off, defense or
counterclaim. None of the Receivables has at any time been placed for
collection with any attorney, collection agency or similar individual or
entity. A complete and accurate list of each Receivable accrued on the
Company's books on December 31, 1998, which lists the name, age and amount
thereof, has been delivered to Buyer. An accurate summary of the aging of
the Company's Receivables on December 31, 1998 is attached as Schedule
--------
2.12. Since, December 31, 19989 there has not been a material change in
----
the Company's receivables' aging practice.
(b) Neither the Company, any subsidiary nor any Seller has knowledge that any
of the Company's debtors are bankrupt, have defaulted on a promissory note
or payment obligation, or had a check returned because of insufficient
funds or that such condition is eminent.
2.13 Inventories.
---- -----------
(a) All inventories of finished goods and raw materials of the Company
reflected on the Base Balance Sheet or to be reflected on the Closing
Balance Sheet and existing on the date of Closing are, and will be of a
quantity and quality normally salable in the ordinary course of business at
commercially reasonable prices consistent with the Company's prior
experience, except to the extent of the obsolete inventory reserve in the
amount shown on the Base Balance Sheet or to be shown on the Closing
Balance Sheet. All such inventories are valued on a lower of cost or
market basis and in accordance with the Company's normal valuation methods
and policies, consistently applied. Purchase commitments for raw materials
and parts are not in excess of normal requirements and none are at prices
in excess of current market prices. Except as shown on Schedule 2.13,
-------------
since the date of the Base Balance Sheet, no inventory items have been sold
or disposed of except through sales in the ordinary course of business at
prices no less than prevailing market prices.
(b) The value of the finished goods inventory on December 31, 1998, and on the
Closing Date, when added to the cost of the variable expenses of freight,
commissions and discounts, shall not exceed the market price. The
inventories of finished goods value in connection with the Closing Balance
Sheet shall thereafter be salable at prices equal to or in
Page 13
excess of the amount necessary, after variable expenses, to sell such
inventory at a price equal to no less than cost. Except for the items
listed on Schedule 2.13, all inventories of finished goods existing on
-------------
December 31,1998, and on the Closing Date will be salable on or before
December 31, 1998, through the Company's normal and ordinary course of
business and consistent with the past practices of the Company.
2.14 Intellectual Property Rights.
---- ----------------------------
(a) The Company owns, or licenses or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks,
copyrights, trade secrets and any applications therefor, maskworks,
formulae, net lists, designs, schematics, technology, know-how, computer
software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material that
are used or proposed by the Company to be used in the business of the
Company as currently conducted (excluding any of the foregoing validly
licensed or purchased from third parties as set forth on Schedule
--------
2.14(b)(ii)) (the "Company Intellectual Property Rights"). Schedule
----------- --------
2.14(a) sets forth a list of all trademarks, service marks, trade names,
-------
registered copyrights (and any applications for the registration thereof),
patents, and patent applications owned or licensed (and specifically
identified in the license agreement) and used or held for use by the
Company that relate to or are part of the Company's products or products
proposed by the Company or are used in the business of the Company,
specifying as to each, as applicable: (i) the nature of such rights; (ii)
the owner of such rights; and (iii) with respect to all trademarks, service
marks, trade names and registered copyrights (and any applications for the
registration thereof) owned by the Company, the jurisdictions by or in
which such right has been issued or registered or in which an application
for such issuance or registration has been filed, including the respective
registration or application numbers. Schedule 2.14(a) further includes
titles of any invention disclosures submitted by employees, independent
contractors or others having an obligation to assign the same to the
Company. Where required, the Company has received executed assignments
for Company Intellectual Property Rights and have recorded such assignments
with the appropriate domestic or foreign filing offices.
(b) Schedule 2.14(b)(i) sets forth a complete list of all licenses, sublicenses
--- -------------------
and other agreements to which the Company is a party and pursuant to which
any person is authorized to use any Company Intellectual Property Right or
any trade secret of the Company including the identity of all parties
thereof; and in Schedule 2.14(b)(ii) sets forth a complete list of all
--------------------
licenses, sublicenses and other agreements to which the Company is a party
and pursuant to which the Company is authorized to use (1) any third party
patents, trademarks, trade secrets, maskworks, or copyrights (including
software) (the "Company Third Party Intellectual Property Rights") which
are incorporated in, are, or are used to form a part of, any Company
product, or (2) any trade secret of a third party in or as to any product
of the Company including the identity of all parties thereto. To the
knowledge of the Company, the Company Third Party Intellectual Property
Rights have been assigned to or licensed by the licensor of such right.
(c) Other than as set forth on Schedule 2.14(c), the Company is not, nor will
----------------
it be as a result of the execution and delivery of this Agreement or the
performance of its
Page 14
obligations hereunder, in breach or violation of any license, sublicense or
agreement described on Schedule 2.14(b)(i) or (ii). No claims with respect
---------------------------
to the Company Intellectual Property Rights, any trade secret, or the
Company Third Party Intellectual Property Rights (to the extent arising out
of any use, reproduction or distribution of such Company Third Party
Intellectual Rights by or through the Company), have been asserted or to
the knowledge of the Company, are threatened by any person. The Company
knows of no valid grounds for any bona fide claims: (i) against the Company
to the effect that the manufacture, sale, licensing or use of any product
as now used, sold, offered for sale or licensed or proposed for use, sale,
offer for sale or license by the Company infringes on any copyright,
patent, trademark, service mark or trade secret; (ii) against the use of
any trademarks, tradenames, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in the
Company's business as currently conducted or as proposed to be conducted by
the Company; (iii) challenging the ownership, validity, enforceability or
effectiveness of any of the Company Intellectual Property Rights or other
trade secret of the Company; or (iv) challenging the Company's license or
legally enforceable right to use, or the validity, enforceability or
effectiveness of, the Company Third Party Intellectual Property Rights.
(d) Other than as set forth on Schedule 2.14(d), all registered trademarks,
----------------
service marks, patents and copyrights held by the Company are valid and
subsisting and have been properly maintained and renewed in accordance with
all applicable laws and regulations in the U.S. and foreign countries
where applicable. To the knowledge of the Company, there has been and is
no unauthorized use, disclosure, infringement or misappropriation of any of
the Company Intellectual Property Rights or any trade secret material to
the Company, or any Company Third Party Intellectual Property Right to the
extent licensed by or through the Company, by any third party, including
any employee or former employee of the Company. Except as set forth on a
Schedule 2.14(d), the Company (i) has not been sued or charged in writing
----------------
as a defendant in any claim, suit, action or proceeding which involves a
claim of infringement of any patents, trademarks, service marks, copyrights
or violation of any trade secret or any proprietary right of any third
party; (ii) has been threatened or charged in writing, orally or otherwise
with infringement or violation of any patents, trademarks, service marks,
copyrights or trade secrets or other proprietary right of any third party;
and (iii) has knowledge of valid grounds for any such threat, or claim or
claim for indemnification as a result thereof.
(e) No Company Intellectual Property Right or trade secret of the Company is
subject to any outstanding order, judgment, decree, legal or governmental
proceeding (other than pending applications for patent, trademark
registration or copyright registration) or stipulation restricting in any
manner the licensing thereof by the Company. To the knowledge of the
Company, no Company Third Party Intellectual Property Right is subject to
any outstanding order, judgment, decree, legal or governmental proceeding
(other than pending applications for patent, trademark registration or
copyright registration) or stipulation restricting in any manner the
licensing thereof by the Company. Except for contracts licensing the
Company's products executed in the ordinary course of business and in
accordance with the Company's past practices in the form attached to
Schedule 2.14(e), the Company has not entered into any agreement to
----------------
indemnify any other person against any charge of infringement of any
Company Third Party Intellectual Property Right.
Page 15
(f) The Company has taken reasonable measures to protect and preserve (i) the
validity and enforceability of trademarks included in the Company
Intellectual Property Rights, (ii) the validity and enforceability of
copyrights included in the Company Intellectual Property Rights, and (iii)
the confidentiality and validity and enforceability of its trade secrets
and other confidential information it wishes to remain as confidential.
The Company has taken reasonable measures to protect and preserve the
novelty and potential patentability of any inventions disclosed in
invention disclosures submitted by employees, independent contractors or
others having an obligation to assign the same to the Company. Except as
set forth on Schedule 2.14(f), all employees, contractors, agents and
----------------
consultants of the Company have executed a nondisclosure agreement in the
form attached as Schedule 2.14(f) to protect the confidentiality and to
----------------
vest in the Company exclusive ownership of such intellectual property
rights. All patents or patent applications have been duly assigned to the
Company and such assignments have been recorded in the appropriate
government offices. To the knowledge of the Company , no trade secret or
confidential information of the Company has been used, divulged,
appropriated or misappropriated for the benefit of any person other than
the Company or otherwise to the detriment of the Company. To the
knowledge of the Company , no employee, contractor, agent or consultant of
the Company has used any trade secrets or other confidential information of
any other person in the course of their work for the Company. Except as
set forth on Schedule 2.14(f), the Company has no written or oral
----------------
agreements with employees, contractors, agents or consultants with respect
to the ownership of inventions, trade secrets or other works created by
them as a result of which any such employee, contractor, agent or
consultant may have nonexclusive rights to the portions of the Company's
Intellectual Property Rights so created by such individual.
(g) To the knowledge of the Company, no officer, employee, contractor, agent or
consultant of the Company is, or is now expected to be, in violation of any
term of any employment contract, patent disclosure agreement, proprietary
information agreement, noncompetition agreement, nonsolicitation agreement,
confidentiality agreement, or any other similar contract or agreement or
any restrictive covenant relating to the right of any such officer,
employee, contractor, agent or consultant to be employed or engaged by the
Company because of the nature of the business conducted or to be conducted
by the Company or relating to the use of trade secrets or proprietary
information of others, and to the Company's knowledge and belief, the
continued employment or retention of its officers, employees, contractors,
agents or consultants does not subject the Company to any liability with
respect to any of the foregoing matters. No director, officer or employee
of the Company owns, directly or indirectly, in whole or in part, any
Company Intellectual Property Right which the Company has used, is
presently using, or the use of which is reasonably necessary to its
business as now conducted or presently contemplated to be conducted.
(h) Except as set forth on Schedule 2.14(h), the Company has not deposited, or
----------------
is not obligated to deposit, any source code or object code regarding its
products into any source code or object code escrows or similar
arrangements and the Company is under no contractual or other obligation
to disclose the source code or object code or any other material
proprietary information included in or relating to its products.
Page 16
(i) All copyrightable works of authorship, were developed and authored as
original works of authorship either by full-time employees of the Company
within the normal scope of their duties as works for hire, or by third
persons as works for hire under an express written agreement so stating or
under a written agreement expressly transferring and assigning all rights
to the Company.
2.15 Contracts and Commitments.
---- -------------------------
(a) Except for contracts, commitments, plans, agreements and licenses described
in Schedule 2.15(a) hereto, the Company is not a party to or subject to
-------------
any contract, agreement or commitment (written or oral):
(i) for the purchase of any commodity, material, equipment or asset, except
contracts or agreements (except for purchase orders in the ordinary course
of business involving payments of less than US$5,000 each);
(ii) creating any obligations of the Company after the Base Balance Sheet Date
with a value of more than US$5,000 during any month for agreements without
a fixed term or more than US$20,000 over the term of the agreement for
agreements with a fixed term;
(iii) providing for the purchase of all or substantially all of its
requirements of a particular product from a supplier;
(iv) which by its terms does not terminate or is not terminable without premium
or penalty by the Company (or its successor or assign) upon ninety (90)
days notice;
(v) for the sale or lease of its products not made in the ordinary course of
business;
(vi) with any sales agent or distributor of products of the Company;
(vii) containing covenants limiting the freedom of the Company to compete in
any line of business or with any person or entity;
(viii) for a license or franchise (as licensor or licensee or franchisor or
franchisee);
(ix) involving any arrangement or obligation with respect to the return of
inventory or merchandise other than on account of a defect in condition,
or failure to conform to the applicable contract;
(x) with any national government including without limitation the Republic of
Korea or United States of America; or
(xi) which is material to the assets or business of the Company.
Page 17
(b) Each of the contracts, commitments, plans, agreements and licenses to which
the Company is a party, including those listed on Schedule 2.15(b) (each a
----------------
"Contract") is valid, binding and enforceable against the Company and, to
the knowledge of the Company, against the other parties thereto; the
Company is in full compliance with all terms and conditions of each
Contract; and, except as set forth on Schedule 2.15(b), no event has
----------------
occurred or circumstance exists that (with or without notice or the passage
of time or both) would constitute a violation of or default under such
Contract by the Company or by the other party or parties thereto, and the
Company has not given or received notice of any alleged violation of or
default under any such Contract.
(c) Except as set forth on Schedule 2.15(c), to the knowledge of the Company
----------------
and the Sellers, the Company is not a party to any Contract or order for
the sale of goods or the performance of services which, if performed by the
Company in accordance with its terms, could only be performed by the
Company with a negative gross profit margin or which has no reasonable
likelihood of being performed within the time limits therein provided.
(d) Since December 31, 1998, the Company has not experienced any termination,
cancellation, limitation or modification or change in any business
relationship with any material supplier or customer, nor has the Company
received notice or otherwise have knowledge that any customer or supplier
intends to cease, or materially reduce or change the terms of, doing
business with the Company or to terminate any agreement with the Company
where such action has had or would have a material adverse effect on the
business of the Company. Schedule 2.15(d) lists every material customer or
----------------
supplier of the Company and the amount of business with that customer.
For purposes hereof, a supplier is material if during any of fiscal 1996,
1997 and 1998 it accounted for more than five percent (5%) by value of the
orders of the Company considered as one enterprise for purchase of all its
raw materials and other products essential to its manufacturing processes
for such year. A customer is material if during any of fiscal 1996, 1997
or 1998 it accounted for more than three percent (3%) by value of the
orders of the Company .
(e) The total backlog of the Company (including all accepted and unfulfilled
sales orders) is not materially less than the backlog amount set forth on
Schedule 2.15(e), and the aggregate of all outstanding purchase orders
----------------
issued by the Company (including all contracts or commitments for the
purchase by the Company of materials or other supplies) is not materially
more than the purchase order amount set forth on such Schedule 2.15(e).
----------------
All such sales and purchase commitments were made in the ordinary course of
business.
2.16 Labor and Employee Relations.
---- ----------------------------
(a) Except for employment agreements entered into by all employees in the form
attached as Schedule 2.16(a) hereto, there are no currently effective
----------------
consulting or employment agreements or other agreements with individual
consultants or employees to which the Company is a party or of which the
Company is a beneficiary
Page 18
(including noncompetition covenants). Complete and accurate copies of all
such written agreements are attached to Schedule 2.16(a). Also shown on
----------------
Schedule 2.16(a) are the name and rate of compensation (including all bonus
----------------
compensation and other remunerative payments of any kind) of each officer,
employee or agent of the Company.
(b) None of the employees of the Company is covered by any collective
bargaining agreement with any trade or labor union, employees' association
or similar association. No labor organization or group of employees has
made a pending demand for recognition; there are no labor representation
questions involving the Company; and, to the knowledge of the Company and
Sellers, there is no organizing activity involving the Company pending by
any labor organization or group of employees. There are no labor strikes,
slowdowns or work stoppages, lockouts, or other labor troubles pending, or,
to the knowledge of the Company and Sellers, threatened, with respect to
the employees of the Company, nor has the Company experienced any material
labor difficulty during the five (5) years immediately preceding the date
of this Agreement.
(c) Except as shown on Schedule 2.16(c) hereto, there are no currently
----------------
effective work rules with individual consultants or employees to which the
Company is a party or of which the Company is a beneficiary. Complete and
accurate copies of all such work rules are attached to Schedule 2.16(c).
----------------
(d) The Company has complied in all respects with all applicable Laws relating
to the employment of labor, including without limitation those relating to
wages, hours, unfair labor practices, discrimination, civil rights, plant
closings, immigration and the collection and payment of social security and
similar taxes.
(e) There are no complaints, proceedings, investigations or charges against the
Company pending or, to the knowledge of Sellers, threatened before any
Government Authority in the Republic of Korea, the United States of
America, or elsewhere by or on behalf of any employee or former employee of
the Company.
(f) The Company has paid in full (or made provisions for payment in full) to
its employees, agents and contractors all wages, salaries, commissions,
bonuses and other direct compensation for all services performed by them.
The Company does not have and will not have on the Closing Date any
contingent liability for sick leave, vacation time, holiday pay, severance
pay or similar items not set forth on the Base Balance Sheet or on the
Closing Balance Sheet. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will
not trigger any severance pay obligation under any contract or at law.
(g) Except as set forth on Schedule 2.16(g), there has not been any fine or
----------------
penalty imposed or asserted against the Company by any Governmental
Authority under any Law relating to employment, immigration or occupational
safety matters.
Page 19
2.17 Employee Benefits
---- -----------------
(a) Schedule 2.17 sets forth a brief description of every plan, arrangement or
--- -------------
policy whether written or oral relating to benefits for current or former
employees of the Company, including:
(i) any non-governmental employee benefit plan subject to the laws of the
Republic of Korea (including but not limited to, the National Pension Act,
the Medical Insurance Act, the Workers Industrial Injury Compensation
Insurance Act, the Unemployment Insurance Act, and the Labor Standards
Act);
(ii) any governmentally mandated or administered employee benefit plan under
the laws of the Republic of Korea (including but not limited to, the
National Pension Fund, Medical Insurance Program, Workers Industrial
Injury Compensation Insurance Program, Employment Insurance Program); or
(iii) a compensation, stock purchase, stock option, stock bonus, housing loan,
severance, health, welfare, life, disability or other benefit plan, fund,
program, arrangement or practice which is not covered by clauses (i)
through (iii) above (including policies related to vacation pay, holiday
time, moving expense reimbursement programs, sick leave and salary
reduction agreements, charge-in-control agreements, and severance
agreements). (Hereinafter, "Benefit Plan")
(b) There are no agreements or commitments of the Company or any Affiliate,
whether or not legally binding, to create any additional Benefit Plan not
listed on Schedule 2.17. Except as set forth on Schedule 2.17, there are
------------- -------------
no Benefit Plans for which the Company has any liability, either for
funding, benefit payments, withdrawal or termination liability, or
otherwise. For any Benefit Plan for which a liability exists, the
liability is identified on Schedule 2.17.
-------------
(c) With respect to each Benefit Plan, the Company has furnished to Buyer
complete and accurate copies of each Benefit Plan described in Schedule
--------
2.17, including all amendments thereto. The Company has also furnished the
----
most recent annual or more frequent report of that Benefit Plan required to
be filed with any Governmental Authority (such as a Form 5500) and the most
recent plan description or annual report to employees or beneficiaries and
any material employee communications. The Company has also furnished Buyer
copies of any insurance contracts or other agreements through which any
Benefit Plan is funded, any custodial or investment contracts relating to
assets or benefits under the Benefit Plan, any contracts relating to record
keeping or administration for the Benefit Plan, and notice of any material
adverse change occurring with respect to any Benefit Plan since the date of
the most recently completed and filed annual report.
(d) With respect to each Benefit Plan:
Page 20
(i) each Benefit Plan complies currently and has complied in the past, with the
provisions of all applicable Laws governing Benefit Plans of the applicable
jurisdictions;
(ii) all required government filings, reports, and notices have been properly
and timely made, and all such filings and employee disclosures required to
be made within thirty (30) days after Closing that are based in whole or
in part upon the period prior to the Closing shall have been prepared and
delivered to Buyer on or before the Closing;
(iii) no such Benefit Plan is currently under audit or investigation by any
Governmental Authority;
(iv) there are no actions, suits or claims (other than routine claims for
benefits) pending or threatened against any of the Benefit Plans or
against the assets of any Benefit Plan;
(v) any premiums due in connection with the Benefit Plan, including without
limitation premiums for life and health insurance and annuity contracts,
have been paid in full when due and, except as specifically disclosed on
Schedule 2.17, there are no such premiums that are attributable to any
-------------
period of time before the Closing that will not have been paid or accrued
for on or before the Closing;
(vi) all reports and filings made to Governmental Authorities and any other
documents reasonably necessary to enable Buyer to perform its
responsibilities with respect to any Benefit Plan subsequent to the
Closing are and shall be available at the offices of the Company on and
immediately after the Closing;
(vii) except as required by Law, no Benefit Plan provides health or other
welfare benefits to retirees, former employees, or their dependents.
(e) Except as required by Law, neither the Company nor any Affiliate has made
any promises or incurred any obligation to provide any health or other
welfare benefits to any retirees, former employees, or their dependents.
(f) The execution and delivery of this Agreement by the Sellers and the
consummation of the transactions contemplated hereunder will not result in
any liability of the Buyer of the Company to any employee of the Company or
any Affiliate in respect of any Benefit Plan.
2.18 Environmental Matters.
---- ---------------------
(a) Except as disclosed in Schedule 2.18(a) hereto, any and all oil, petroleum
----------------
products, chemicals, waste oil, hazardous waste, hazardous substances,
toxic substances or hazardous materials (hereafter, "Hazardous Materials")
used or generated by the Company have always been and are being generated,
used, stored, treated and disposed on and at any of the
Page 21
properties or facilities owned or leased by the Company, the former parent
corporation of the Company, or, to the best knowledge of the Company and
Sellers, any predecessors-in-interest of the Company (for the purposes of
this Section, a "Site") in compliance with all applicable Laws, Court
Orders, Government Authorizations, including those related to the
protection of public health, worker safety, the environment or the
management of pollution or Hazardous Materials (collectively "Environmental
Laws") and the Company is in compliance with all Environmental Laws. For
purposes of this Agreement, "Environmental Laws" includes (i) in Korea, The
Framework Act on Environmental Policy, The Environmental Impact Assessment
Act, The Natural Environment Conservation Act, The Water Quality
Conservation Act, The Clean Air Conservation Act, The Environmental
Conservation Act, The Wastes Control Act, and The Act on the Promotion of
Saving and Recycling of Resources and (ii) in the United States, the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), the Clean
Air Act, the Clean Water Act, the Toxic Substances Control Act, the
Emergency Planning and Community Right-to-Know Act of 1986, the Hazardous
Materials Transportation Act, the Federal Water Pollution Control Act, the
corresponding state and local statutes, ordinances and amendments or
successor legislation to such acts, the common law and any similar laws,
rules, or regulations (foreign or domestic).
(b) The Company has not received or become subject to any claim, notice,
complaint, Court Order, administrative order or request for information
from any Government Authority or private party (i) alleging violation of,
or asserting any exceedence or noncompliance with any Environmental Law, by
it or its former parent corporation, (ii) asserting potential liability,
(iii) requesting information, or (iv) requesting investigation or clean-up
of any Site under any Environmental Law.
(c) No Hazardous Materials used or generated by the Company, its former parent
corporation or, to the best knowledge of the Company and Sellers, any
predecessors-in-interest to the Company, have ever been, are being, or are
intended to be or are threatened with being spilled, released, discharged,
disposed, placed, leaked, or otherwise caused to become located in the air,
soil or water in, under or upon a Site or any land adjacent thereto.
Seller has provided Buyer with copies of all notices filed pursuant to any
Environmental Law.
(d) No Hazardous Materials have ever been shipped by or for the Company, its
former parent corporations or, to the best knowledge of the Company and
Sellers, any predecessor-in-interest to the Company, to other sites or
facilities for treatment, storage or disposal, and the Company has not
received any notice that any sites or facilities to which any such wastes
have been shipped or sent to are subject to or threatened to become subject
to any governmental response action or clean up order. The Company has
provided Buyer with copies of all manifests, bills of lading and other
receipts or evidence documenting disposal or recycling of Hazardous
Materials and sales receipts of the process by-products relating to
operations of the Company.
(e) Neither the Company, its former parent corporation nor, to the best
knowledge of the Company and Sellers, any predecessor-in-interest to the
Company has treated, stored for more than ninety (90) days, disposed of or
recycled any Hazardous Materials on any
Page 22
Site nor has anyone else, treated, stored for more than ninety (90) days,
disposed of or recycled any of the foregoing on any Site.
(f) Hazardous Materials have been collected, managed, recycled, shipped and
disposed by the Company and its former parent corporation in accordance
with all Environmental Laws.
(g) To the best knowledge of the Company and Sellers, no other underground
tanks or other storage facilities for Hazardous Materials have been located
on a Site and copies of all notifications made to Federal, state or local
authorities pursuant to Environmental Laws relating to underground storage
tanks have been provided to Buyer. As of the date hereof, none of such
tanks and other underground storage facilities are in violation of any
Environmental Law, in any respect.
(h) All ▇▇▇▇▇, water discharges and other water diversions and all air emission
sources on any Site are properly registered and/or permitted under, and
copies of such permits have been provided to Buyer and do not violate any
applicable law.
(i) There are no asbestos-containing materials, capacitors, transformers or
other equipment or fixtures containing PCBs located at any Site.
The Company does not produce, purchase or use in its products, or
purchase or use any material, part, component or subassembly incorporated
into its products, containing any chemical or other material to which state
packaging and/or disclosure laws apply.
(k) There are no Encumbrances under Environmental Laws on any Site or any
assets of the Company and no government actions have been taken or are in
process which could subject any Site or any such assets to such
encumbrances, and neither the Company are required to place any notice or
restriction relating to Hazardous Materials at any Site in any deed to such
property.
(l) The Company has made available to Buyer all environmental audits,
assessments or studies within the possession of the Company or the Sellers
with respect to the Company's facilities or any Site and the results of
sampling and analysis of any asbestos, air, soil, or water, including
ground and surface water, undertaken with respect to its facilities or any
Site.
2.19 Government Authorizations. The Company holds all Government
---- --------------------------
Authorizations that are required to own its properties and assets and to
permit it to conduct its businesses as presently conducted. All such
Government Authorizations are listed on Schedule 2.19 hereto, together
-------------
with the applicable expiration date, and are now, and will be after the
Closing, valid and in full force and effect, and Buyer shall have full
benefit of the same, and no proceeding is pending, or to the knowledge of
the Company or Sellers, threatened seeking the revocation or limitations
of any Government Authorization.
Page 23
2.20 Warranty or Other Claims.
---- -------------------------
(a) Except as set forth on Schedule 2.20(a), neither the Company nor any Seller
----------------
knows of any existing or threatened claims, or any facts upon which a claim
probably will be asserted, against the Company for services or merchandise
which are defective or fail to meet any service or product warranties. No
claim has been asserted against the Company for material renegotiation or
price redetermination of any business transaction, and neither the Company
nor any Seller has knowledge of any facts upon which any such claim is
likely to be asserted.
(b) All products that were designed, manufactured or sold by the Company
complied with applicable contracts, agreed product specifications, Laws and
standards (whether Company, government or industry) and there are no
defects in such products. Schedule 2.20(b) sets forth the Company's
----------------
experience with returns of products sold by the Company for fiscal years
1996, 1997 and 1998 (including claims or notices that products may or will
be returned, whether by reason of alleged overshipments, defective
merchandise or otherwise).
2.21 Litigation. Except for matters described in Schedule 2.21 hereto, there
---- ---------- -------------
is no action, suit, claim, proceeding, investigation or arbitration
proceeding pending (or, to the knowledge of the Company or any Seller,
threatened) against or otherwise involving the Company or any of the
Company Shares or any of the officers, directors, former officers or
directors, employees, shareholders or agents of the Company (in their
capacities as such) and there are no outstanding Court Orders to which the
Company is a party or by which any of its assets are bound, any of which
(a) question this Agreement or any Ancillary Agreement or any action to be
taken hereby or thereby or affect the transactions contemplated hereby, or
(b) materially restrict the present business properties, operations,
prospects, assets or condition, financial or otherwise, of the Company or
(c) will result in any materially adverse change in the business,
properties, operations, prospects, assets or the condition, financial or
otherwise, of the Company. Neither the Company nor any Seller has any
reason to believe that any such action, suit, proceeding, investigation or
arbitration proceeding may be brought against the Company.
2.22 Borrowings and Guarantees. Except as shown on Schedule 2.22 hereto,
---- -------------------------- -------------
there are no agreements or undertakings pursuant to which the Company (a)
is borrowing or is entitled to borrow any money, (b) is lending or has
committed itself to lend any money, or (c) is a guarantor or surety with
respect to the obligations of any person. Complete and accurate copies of
all such written agreements have been delivered to Buyer and are attached
to Schedule 2.22.
-------------
2.23 Financial Service Relations and Powers of Attorney. All of the
---- ---------------------------------------------------
arrangements which the Company has with any bank, depository institution
or other financial services entity, whether or not in the Company's name,
are completely and accurately described on Schedule 2.23 hereto,
-------------
indicating with respect to each of such arrangements the type of
arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the current balance as of the date reported,
banking institution and person or persons authorized in respect thereof.
The Company does not have any outstanding power of attorney.
Page 24
2.24 Insurance.
---- ---------
(a) The Company maintains (i) insurance on all the property listed on Schedule
--------
2.24 that insures against loss or damage by fire or other casualty
-----
(including extended coverage) and (ii) insurance against liabilities,
claims and risks of a nature and in such amounts as are normal and
customary in its industry.
(b) Schedule 2.24 contains a complete and correct list of all policies of
--- -------------
insurance maintained by or on behalf of the Company (including insurance
providing benefits for employees) in effect on the date hereof, together
with complete and correct information with respect to the premiums,
coverages, insurers, expiration dates, and deductibles in respect of such
policies. The policies listed on Schedule 2.24 (i) are sufficient to
-------------
enable the Company to comply with all requirements of Law and all
agreements to which any of them is subject, (ii) will remain in full force
and effect through the respective expiration dates of such policies without
the payment of additional premiums, and (iii) will not be adversely
affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. Schedule 2.24 also sets forth all other
-------------
insurance policies in effect at any time during the five-year period ended
February 28, 1999, under which the Company may currently be entitled to
give notice or otherwise assert a claim.
(c) Except for amounts deductible under the policies of insurance described on
Schedule 2.24 or with respect to risks assumed as a self-insurer and
-------------
described on such Schedule, the Company is not, nor has the Company at any
time been, subject to any liability as a self-insurer of the business or
assets of the Company.
(d) Except as set forth on Schedule 2.24, there are no claims pending under any
-------------
of said policies, or disputes with insurers, and all premiums due and
payable thereunder have been paid, and all such policies are in full force
and effect in accordance with their respective terms. Schedule 2.24 also
-------------
sets forth the insurance claims expenses of the company for the last five
years. No notice of cancellation or termination has been received with
respect to any such policy and there is no basis upon which the insurance
company would have the right to terminate any such policy during the policy
term and no notice relating to non-renewal reduction of coverage or
increase in premium has been received by the company with respect to any
such policy. The Company has not been refused any insurance with respect
to assets or operations, nor has its coverage been limited by any insurance
carrier with which it has applied for any such insurance or with which it
has carried insurance. Neither the Company nor any Seller has knowledge of
any insurance carrier's insolvency or inability to perform its obligations
or pay any claims pursuant to any of the insurance policies maintained by
the Company.
(e) Except as set forth on Schedule 2.24, the Company has no current or prior
-------------
insurance policy which remains subject to a retrospective adjustment of the
premiums payable thereunder.
2.25 Minute Books. The minute books and stock records of the Company
---- ------------
accurately record all action taken by the shareholders, board of directors
and committees thereof of the Company and all issuances and transfers of
capital stock of the Company. Complete and
Page 25
accurate copies of all minute books and stock records of the Company have
been delivered to or made available for inspection by Buyer.
2.26 Finder's Fee. Neither the Company nor any Seller has incurred or become
---- -------------
liable for any broker's commission or finder's fee relating to or in
connection with the transactions contemplated by this Agreement.
2.27 Transactions with Interested Persons. Except as set forth on Schedule
---- ------------------------------------- --------
2.27, no officer, supervisory employee, director or stockholder of the
----
Company, or any Seller, or their respective spouses or children, (i) owns,
directly or indirectly, on an individual or joint basis, any interest in,
or serves as an officer or director of, any customer, competitor or
supplier of the Company or any organization which has a contract or
arrangement (written or oral) with the Company, or (ii) has any contract
or agreement (written or oral) with the Company, and all such agreements
are on arms-length terms.
2.28 Absence of Sensitive Payments. The Company has not, and to the
---- ------------------------------
knowledge of the Company and the Sellers, none of the Company's directors,
officers, agents, stockholders or employees or any other person associated
with or acting on behalf of the Company:
(a) made or agreed to make any solicitations, contributions, payments or gifts
of funds or property to any governmental official, employee or agent where
either the payment or the purpose of such solicitation, contribution,
payment or gift was or is illegal under the laws of the Republic of Korea
or the United States of America or any subdivision thereof or prohibited by
the policy of the Company or of any of its suppliers or customers;
(b) established or maintained any unrecorded fund or asset for any purpose, or
has made any false or artificial entries on any of its books or records for
any reason; or
(c) made or agreed to make any contribution or expenditure, or reimbursed any
political gift or contribution or expenditure made by any other person to
candidates for public office, whether federal, state or local (foreign or
domestic) where such contributions were or would be a violation of
applicable Law.
2.29 Year 2000.
---- ---------
The following versions of the Company's products support continued and
normal operation before, during and after the calendar transition to
January 1, 2000:
Products Version
------------------------ -------
DREAMS 8.0
LCDworks 2.2
SPEC Server 2.0
Etc.
To the Company's best knowledge, its development and test efforts have
been sufficient to identify and correct any Year 2000 transition issues
and there are no known outstanding bugs.
Page 26
The Company does not have any outstanding obligation to provide
services to upgrade its customers for Year 2000 compliance for systems
that contain the Company's products or custom software, except for the
projects listed on Schedule 2.15(e).
To the Company's best knowledge, the Company's internal systems and
operations have been sufficiently evaluated and upgraded to support
continued and normal business operations before, during and after the
calendar transition to January 1, 2000.
2.30 Disclosure of Material Information. Neither this Agreement nor any
---- ----------------------------------
Ancillary Agreement, the financial statements (including the footnotes
thereto), any Schedule, any exhibit, document or certificate delivered by
or on behalf of the Company or Seller pursuant hereto contains any untrue
statement of a material fact, or omits to state a material fact necessary
to make the statements herein or therein not misleading. There is no fact
which materially adversely affects the business or condition (financial or
otherwise), properties or operations of the Company which has not been set
forth herein.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
--------- ----------------------------------------
Buyer hereby represents and warrants to each of Sellers as follows:
3.1 Organization of Buyer. Buyer is a corporation duly organized, validly
--- ----------------------
existing and in good standing under the laws of Delaware with full power
and authority to own, operate or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is conducted by it.
3.2 Authorization of Transaction. All necessary action, corporate or
--- -----------------------------
otherwise, has been taken by Buyer to authorize the execution, delivery and
performance of this Agreement, and the Agreement is the valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms.
3.3 No Conflict of Transaction With Obligations and Laws.
--- -----------------------------------------------------
(a) Neither the execution, delivery and performance of this Agreement, nor the
performance of the transactions contemplated hereby, will: (i) constitute
a breach or violation of the Buyer's Charter or bylaws; (ii) require any
consent, approval or authorization of or declaration, filing or
registration with any person other than a Governmental Authority described
in paragraph (b) below; or (iii) conflict with or constitute (with or
without the passage of time or the giving of notice) a breach of, or
default under any debt instrument to which Buyer is a party, or give any
person the right to accelerate any indebtedness or terminate, modify or
cancel any material right; (iv) constitute (with or without the passage of
time or giving of notice) a default under or breach of any other material
agreements, instrument or obligation to which the Company is a party or by
which it or its assets are bound; or (v) result in a violation of any Law
or Court Order applicable Buyer or its business or assets.
Page 27
(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby by Buyer do not require the consent,
waiver, approval, authorization, exemption of or giving of notice by Buyer
to any Governmental Authority, except for the foreign investment report
required under the Foreign Investment Promotion Act, and the business
combination report required under the Monopoly Regulation and Fair Trade
Act.
3.4 Finder's Fee. Buyer has not incurred or become liable for any broker's
--- -------------
commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
ARTICLE 4. COVENANTS OF THE COMPANY AND THE SELLERS.
--------- ----------------------------------------
The Company and each of the Sellers hereby jointly and severally covenant
and agree with the Buyer as follows:
4.1 Conduct of Business. Between the date of this Agreement and the Closing,
--- -------------------
the Company will do the following unless Buyer shall otherwise consent in
writing:
(a) conduct its business only in the ordinary course of business consistent
with past practice and refrain from changing or introducing any method of
management or operations except in the ordinary course of business and
consistent with prior practices;
(b) except with respect to the sale of inventory in the ordinary course of
business and as specifically required by Section 4.2 hereof, refrain from
making any purchase, sale or disposition of any asset or property other
than in the ordinary course of business, from purchasing any capital asset
costing more than US$10,000 and from mortgaging, pledging, subjecting to a
lien or otherwise encumbering any of its properties or assets;
(c) refrain from incurring any contingent liability as a guarantor or otherwise
with respect to the obligations of others, and from incurring any other
contingent or fixed obligations or liabilities except those that are usual
and normal in the ordinary course of business;
(d) refrain from entering into any material agreement or amending or
terminating any material contract, agreement or license to which it is a
party or waiving or releasing any material right or claim;
(e) maintain its equipment and other assets in good working condition and
repair according to the standards that it maintained to the date of this
Agreement, subject only to ordinary wear and tear;
(f) refrain from making any change or incurring any obligation to make a change
in its Charter or bylaws or its authorized or issued capital stock or any
other of its securities, including warrants and options;
Page 28
(g) refrain from declaring, setting aside or paying any dividend or making any
other distribution in respect of capital stock, or making any direct or
indirect redemption, purchase or other acquisition of capital stock of the
Company;
(h) refrain from entering into any employment contract (other than as may be
contemplated by this Agreement) or making any change in the compensation
payable or to become payable to any of its officers, employees or agents;
(i) refrain from instituting, terminating, or changing any Benefit Plan, or
making any representations, either oral or written, that it will do any of
the foregoing;
(j) withhold or remit with respect to all employees all employment taxes;
(k) refrain from making any change in accounting methods or practices;
(l) refrain from prepaying any loans from its stockholders, officers or
directors (if any) or making any change in its borrowing arrangements;
(m) refrain from merging, consolidating or reorganizing with, or acquiring, any
entity;
(n) refrain from agreeing to any assessment by any taxing authority or filing
any Tax Return or amendment thereto, unless copies of such Tax Returns have
been delivered to the Buyer for its review and approval prior to filing or
from revoking any tax election or making any agreement or settlement with
any taxing authority;
(o) use its best efforts to prevent any change with respect to its banking
arrangements;
(p) use its best efforts to keep intact its business organization, to keep
available its present officers, agents and employees and to preserve the
goodwill of all suppliers, customers and others having business relations
with it;
(q) have in effect and maintain at all times all insurance of the kind, in the
amount and with the insurers set forth in Schedule 2.24 or equivalent
-------------
insurance with any substitute insurers approved by Buyer;
(r) perform all of its obligations under all contracts and other agreements
relating to the Company, including the discharge of all accounts payable of
the Company according to the terms and conditions of all invoices therefor
except when the amount thereof is being contested in good faith, by
appropriate proceedings and with adequate reserves therefor being set aside
on the books of the Company;
(s) maintain true, correct and complete books of accounts and records relating
to the business of the Company;
Page 29
(t) comply in all respects with all Laws applicable to the conduct of the
Company's business or its properties or assets;
(u) promptly upon its knowledge thereof, advise Buyer in writing of the
termination or resignation of any key employee and the circumstances
therefore;
(v) refrain from entering into any contract or commitment providing for
payments in excess of US$25,000 in any fiscal year, except in the ordinary
course of business after consultation with Buyer;
(w) pay all taxes, assessments, governmental charges or levies imposed upon it
or its income, profits or assets, or otherwise required to be paid by it,
nor fail to pay when due any liability or charge that if, unpaid, might
become an Encumbrance upon any of the Company's assets;
(x) promptly upon its knowledge thereof, advise Buyer in writing of (i) any
material adverse change in the financial condition or operations of the
business of the Company; (ii) any event, condition or circumstance
occurring from the date hereof until the Closing Date that would constitute
a violation or breach of any representation, warranty, covenant, agreement
or provision contained in this Agreement (provided, however, that such
disclosure shall not be deemed to cure any violation or breach of any such
representation, warranty, covenant, agreement or provision), or (iii) any
event, occurrence, transaction or other item that would have been or
required to have been disclosed on any Schedule, delivered hereunder, had
such event, occurrence, transaction or item existed on the date hereof; and
(y) not take or permit to be taken any action that is represented or warranted
in Section 2.9 not to have been taken since the Base Balance Sheet Date
unless inconsistent with the provisions of this Section 4.1.
4.2 Disposition of Certain Assets. Prior to the Closing Date
--- ------------------------------
(a) the Company shall assign its construction advance payment to Nasan
Construction Co., Ltd., in the principal amount of approximately 159
million Won for nominal consideration. Such amount is not included in the
Purchase Price.
(b) ▇.▇. ▇▇▇▇ and ▇.▇. ▇▇▇▇ shall have repaid key money loaned to them by the
Company in the amount of 60 million Won and 95 million Won, respectively;
and
(c) H.K. Park shall purchase from the Company, at a nominal fee, a sufficient
number of shares of the capital stock of Synergy Integration Technology,
Inc. ("Synergy") to reduce the Company's interest in Synergy to less than
20% of the outstanding equity securities of Synergy on a fully diluted
basis.
4.3 Access to Information. From and after the date hereof, at reasonable
--- ----------------------
times and upon reasonable notice to the Company, Buyer shall be entitled,
through its employees, advisors and representatives, to make such
investigation of the assets, properties, facilities, personnel,
Page 30
business and operations of the Company and the business of the Company and,
to make such examination of the books, records and financial condition of
the Company and the business of the Company, as Buyer reasonably requests.
No investigation by Buyer shall diminish, obviate or constitute a waiver
of, the enforcement of any of the representations, warranties, covenants or
agreements of the Company or Sellers under this Agreement or any of the
Ancillary Agreements. The Company and Sellers shall furnish the
representatives of Buyer with all information and copies of documents
concerning the affairs of the business of the Company as such
representatives may reasonably request and shall cause the appropriate
officers, employees, consultants, agents, accountants and attorneys of
Sellers to cooperate fully with such representatives in connection with
such review and examination and shall make full disclosure to Buyer of all
material facts affecting the financial condition and business operations of
the Company.
4.4 Governmental Permits and Approvals; Contract Consents. The Company and
--- ------------------------------------------------------
the Sellers shall use their best efforts (with the reasonable assistance of
Buyer to the extent required to obtain such approvals) to obtain promptly
(i) all permits and approvals from any Governmental Authority required to
be obtained by the Company for the lawful consummation of the Closing, (ii)
the consents set forth or required to be set forth on Schedule 2.6, (iii)
-------------
the consents necessary to assign any contract which under the terms of the
contract, the sale of the Company Shares constitutes an assignment which
requires the consent of another party and (iv) appropriate agreements, in
form and substance reasonably satisfactory to Buyer from the lessors of the
Real Property leased by the Company that it is not, and as a result of
consummation of the transaction, will not become, in breach of those
leases.
4.5 Maintenance of Government Authorizations. Seller shall at all times
--- -----------------------------------------
prior to the Closing Date cause the Company to preserve and maintain each
of the Government Authorizations free and clear of all Encumbrances. Seller
shall not take any action or permit the Company to take any action which
would cause any Governmental Authority to institute proceedings regarding
any of the Government Authorizations or take any other action which would
result in the Company being in noncompliance in any material respect with
the requirements of any Governmental Authority having jurisdiction thereof.
4.6 Collection of Receivables. Between the date hereof and the Closing Date,
--- --------------------------
the Company will use prudent practices in collection procedures in order to
collect the Receivables so as not to jeopardize Buyer's future customer
relations.
4.7 Risk of Loss. Legal title and risk of loss with respect to the assets of
--- -------------
the Company and the Company Shares shall not pass to Buyer until the
Company Shares are transferred at Closing. Prior to the Closing Date, if
any of the assets of the Company are destroyed or damaged by force majeure
or any other casualty, Buyer may, at its option and in its sole discretion,
if the amount of such destruction or damage is in excess of US$100,000, (i)
terminate this Agreement or (ii) reduce the Purchase Price by the amount of
such destruction or damage where such reduction amount must be agreed to by
the Sellers. If such reduction is unacceptable to the Sellers, Sellers may
terminate this Agreement. In the event that Buyer elects not to terminate
this Agreement, the amount of any insurance proceeds shall be collected by
the
Page 31
Company, and shall not be taken into account in connection with the
determination of any adjustment to the Purchase Price.
4.8 Employee/Employee Compensation. Sellers agree to cause the Company to
--- -------------------------------
discharge when due all compensation and benefits to any employee under all
pay and compensation practices applicable to the business of the Company
and under any employment agreements payable in the ordinary course of
business, except to the extent otherwise reflected on the Closing Balance
Sheet.
4.9 Breach of Representations and Warranties. Promptly upon the occurrence
--- -----------------------------------------
of, or promptly upon the Company or any Seller becoming aware of the
impending or threatened occurrence of, any event which would cause or
constitute a breach, or would have caused or constituted a breach had such
event occurred or been known to the Company or any Seller prior to the date
hereof, of any of the representations and warranties of the Company and
Sellers contained in or referred to in this Agreement, such person shall
give detailed written notice thereof to Buyer and the Company and Sellers
shall use their best efforts to prevent or promptly remedy the same.
4.10 Consummation of Agreement. Each Seller shall use his best efforts to
---- --------------------------
perform and fulfill, and to cause the Company to perform and fulfill, all
conditions and obligations on their part to be performed and fulfilled
under this Agreement, to the end that the transactions contemplated by
this Agreement shall be fully carried out. To this end, each of the
Company and each Seller will obtain all necessary authorizations or
approvals including the stockholders and Board of Directors of the
Company. From the date hereof until the termination of this Agreement,
neither the Company nor any Seller will discuss or negotiate with any
other party, or entertain or consider any inquiries or proposals received
from any other party, concerning the possible disposition of the Company's
business, assets or capital stock.
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF BUYER.
---------- -----------------------------------
The obligations of Buyer to consummate this Agreement and the transactions
contemplated hereby are subject to the condition that on or before the Closing
the actions required by this Article 5 will have been accomplished.
5.1 Due Diligence Review. Buyer shall have completed a review of the assets
--- ---------------------
and business of the Company which is satisfactory to the Buyer in its sole
discretion in all respects. Such review shall include a review of all of
the Schedules of the Company to this Agreement delivered to the Buyer on
the date hereof and a review of the financial files and records of the
Company, including, without limitation, review of the financial budget of
the Company for fiscal 1999 for the next two fiscal years of the Company,
the business and legal records and files of the Company, including customer
files, correspondence, invoices, licenses and permits (provided that Buyer
shall refrain from contacting any customers or suppliers of the Company
without the prior approval of Sellers), full access to the Company's
physical properties and appropriate personnel of the Company, and all
patents and written materials related to the Company's trade
Page 32
secrets and proprietary systems, all of which shall be made available
pursuant to Section 4.3 of this Agreement.
5.2 Divestiture of Certain Assets. The Company shall have divested the
--- ------------------------------
assets described in Section 4.2.
5.3 Representations; Warrantees; Covenants. Each of the representations and
--- ---------------------------------------
warranties of the Company and Sellers contained in Article 2 shall be true
and correct as though made on and as of the Closing Date and the Company
and the Sellers shall, on or before the Closing, have performed all of
their obligations hereunder which by the terms hereof are to be performed
by them on or before the Closing Date. The Company and each of the Sellers
shall have delivered to Buyer a certificate of the Company and each of the
Sellers dated as of the Closing to the foregoing effect.
5.4 Resignations of Officers and Directors. The Company shall have
--- ---------------------------------------
delivered to Buyer at least five (5) business days prior to Closing, a
complete and correct list of all of the officers and directors of the
Company and Buyer shall have received the written resignations of such of
the officers, directors of the Company as Buyer shall have designated,
which resignations will be effective no later than the Closing Date.
5.5 Releases. Buyer shall have received from each of the officers, directors
--- ---------
and stockholders of the Company the waiver release of any claims
(including, but not limited to, claims arising out of the resignation of
such person as a director) against the Company contemplated by Section 1.4
hereof substantially in the form of Exhibit B hereto.
---------
5.6 Opinion of Sellers' Counsel.
--- ----------------------------
(a) At the Closing, Buyer shall have received from counsel for Sellers and the
Company an opinion dated as of the Closing and substantially in the form
set forth as Exhibit C hereto.
---------
(b) In rendering the foregoing opinion such counsel may state their opinions on
specific matters of fact to the best of their knowledge and, to the extent
they deem such reliance proper, may rely on (i) certificates of public
officials, (ii) certificates, in form and substance satisfactory to Buyer
and its counsel, of officers of the Company or its affiliates or any
Seller, and (iii) an opinion or opinions of other counsel satisfactory to
Buyer and its counsel, which opinions are in form and substance
satisfactory to Buyer and its counsel. In the event such counsel for
Sellers rely upon any such certificate or opinion, a counterpart of each
thereof shall be delivered to Buyer and its counsel.
5.7 Employment Agreements. ▇▇▇-▇▇▇▇ Park ("▇.▇. ▇▇▇▇"), ▇▇▇▇-▇▇▇ ▇▇▇▇ ("W.K.
--- ----------------------
▇▇▇▇"), ▇.▇. ▇▇▇ and ▇.▇. ▇▇▇▇ each shall have executed and delivered to
Buyer an Employment Agreement having substantially the terms and conditions
of Exhibit D and in the case of H.K. Park, Exhibit D-1 (the "Employment
-----------
Agreements").
Page 33
5.8 Noncompetition Agreements. ▇.▇. ▇▇▇▇, ▇.▇. ▇▇▇▇, ▇.▇. ▇▇▇, ▇.▇. ▇▇▇▇ and
--- --------------------------
the other Sellers each shall have executed and delivered to Buyer the
Noncompetition and Proprietary Information Agreement having substantially
the terms of Exhibits E (the "Noncompetition Agreements").
----------
5.9 Escrow Agreement. There shall have been executed and delivered to Buyer
--- -----------------
an Escrow Agreement in substantially the form attached hereto as Exhibit F
---------
(the "Escrow Agreement") pursuant to which US$1,612,000 of the Purchase
Price shall be deposited in escrow to secure payment of indemnification
payable to Buyer hereunder.
5.10 Stockholders Agreement. There shall have been executed and delivered
---- ----------------------
to Buyer by ▇.▇. ▇▇▇ and ▇.▇. ▇▇▇▇ a Stockholder Agreement in substantially
the form attached hereto as Exhibit G (the "Stockholders Agreement")
---------
creating a contingent purchase obligation.
5.11 Amendment of Charter. The Company shall have amended its Articles of
---- ---------------------
Incorporation to (a) require that any transfer of the Company's capital
stock shall require the approval of the Company's board of directors, (b)
remove the required distributions and dividends currently contained in
ARTICLE 35 "Disposition of Profits," and (c) reduce the term of office of
directors from three (3) years to one (1) year.
5.12 Absence of Certain Litigation. There shall not be any (a) injunction,
---- ------------------------------
restraining order or order of any nature issued by any court of competent
jurisdiction which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided, (b) suit,
action or other proceeding by any Government Authority pending before any
court or Governmental Authority, or threatened to be filed or initiated,
in which the Government Authority seeks to prevent or prohibit of
completion of any material transaction contemplated by this Agreement, or
asserts the illegality thereof or (c) suit, action or other proceeding by
a private party pending before any court or Governmental Authority, or
threatened to be filed or initiated, which in the reasonable opinion of
counsel for Buyer is likely to result in preventing or prohibiting
completion of the consummation of any material transaction contemplated
hereby or the obtaining of an amount in payment (or indemnification) of
material damages from or other material relief against any of the parties
or against any directors or officers of Buyer, in connection with the
consummation of any material transaction contemplated hereby.
5.13 No Bankruptcy. The Company shall not (i) have commenced proceeding
---- --------------
seeking liquidation, reorganization or other relief with respect to itself
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or substantially all
of its property, or have consented to any such relief or to the
appointment of or taking possession by any such official in a proceeding
commenced against it, or have made a general assignment for the benefit of
its creditors, or (ii) have a proceeding commenced against it seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
hereinafter in effect, or seeking the appointing of a trustee, receiver,
liquidator, custodian or similar official of it or substantially all of
its property or (iii) have an attachment placed on all or a significant
portion of its assets.
Page 34
5.14 Governmental Approvals, Third Party Consents. Each of the parties
---- ---------------------------------------------
hereto shall have received (i) all permits and approvals from each
applicable Governmental Authority, that Buyer, in its sole discretion,
determines are necessary including, but not limited to approval pursuant
to the Foreign Investment Promotion Act, and the business combination
report required pursuant to the Monopoly Regulation and Fair Trade Act,
and (ii) all third party consents that Buyer in its sole discretion
determine are necessary.
5.15 Modification of Synergy Memorandum of Understanding. There shall have
---- ----------------------------------------------------
been executed and delivered to Buyer a letter modifying the Memorandum of
Understanding between the Company and Synergy in substantially the form
attached hereto as Exhibit H.
---------
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE SELLERS.
---------- -----------------------------------------
The obligations of the Sellers to consummate this Agreement and the
transactions contemplated hereby are subject to the condition that on or before
the Closing the actions required by this Article 6 will have been accomplished.
6.1 Representations; Warrantees; Covenants. Each of the representations and
--- ---------------------------------------
warranties of Buyer contained in Article 2 shall be true and correct as
though made on and as of the Closing Date and Buyer shall, on or before the
Closing have performed all of its obligations hereunder which by the terms
hereof are to be performed by it on or before the Closing. Buyer shall have
delivered to Sellers a certificate of Buyer dated as of the Closing to the
foregoing effect.
6.2 Employment Agreements. The Buyer shall have executed and delivered to
--- ----------------------
each of H.K. Park, ▇.▇. ▇▇▇▇, ▇.▇. ▇▇▇ and ▇.▇. ▇▇▇▇, the Employment
Agreements.
6.3 Absence of Certain Litigation. There shall not be any (a) injunction,
--- ------------------------------
restraining order or order of any nature issued by any court of competent
jurisdiction which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided, (b) suit,
action or other proceeding by any Government Authority pending before any
court or Governmental Authority, or threatened to be filed or initiated, in
which the Government Authority seeks to prevent or prohibit of completion
of any material transaction contemplated by this Agreement, or asserts the
illegality thereof or (c) suit, action or other proceeding by a private
party pending before any court or Governmental Authority, or threatened to
be filed or initiated, which in the reasonable opinion of counsel for
Seller is likely to result in preventing or prohibiting completion of the
consummation of any material transaction contemplated hereby or the
obtaining of an amount in payment (or indemnification) of material damages
from or other material relief against any of the parties or against any
directors or officers of Seller, in connection with the consummation of any
material transaction contemplated hereby.
ARTICLE 7. INDEMNIFICATION.
--------- ----------------
7.1 Definitions For purposes of this Article 7:
--- -----------
Page 35
"Losses" means all losses, damages (including, without limitation,
consequential damages), fines, penalties, liabilities, payments and
obligations, and all expenses related thereto. Losses shall include any
reasonable legal fees and costs incurred by any of the Indemnified Persons
subsequent to the Closing in defense of or in connection with any alleged
or asserted liability, payment or obligation, whether or not any liability
or payment, obligation or judgment is ultimately imposed against the
Indemnified Persons and whether or not the Indemnified Persons are made or
become parties to any such action.
"Buyer's Indemnified Persons" means the Buyer, its parent, subsidiary
and affiliated corporations, their respective directors, officers,
employees, stockholders and agents, the Company after the Closing, and any
person serving as a director, officer, employee or agent of the Company at
Buyer's request after the Closing.
"Indemnified Person" means any person entitled to be indemnified under
this Article 7.
"Indemnifying Person" means any person obligated to indemnify another
person under this Article 7.
"Third Party Action" means any written assertion of a claim, or the
commencement of any action, suit, or proceeding, by a third party as to
which any person believes it may be an Indemnified Person hereunder.
7.2 Indemnification by Sellers.
--- --------------------------
(a) Subject to the limitations in paragraph (b) below, each of the Sellers,
jointly and severally agrees to defend, indemnify and hold harmless Buyer's
Indemnified Persons from and against all Losses directly or indirectly
incurred by or sought to be imposed upon any of them:
(i) resulting from or arising out of any breach of any of the representations
or warranties (other than those in Sections 2.1, 2.2, 2.8, 2.10 and, solely
to the extent relating to title, Section 2.11) made by the Company, Sellers
or either of them in or pursuant to this Agreement or in any agreement,
document or instrument executed and delivered pursuant hereto or in
connection with the Closing; provided that, for the purpose of this Section
7.2, any qualification of such representations and warranties by reference
to the materiality of matters stated therein, and any limitations of such
representations and warranties as being "to the knowledge of" or "known to"
or words of similar effect, shall be disregarded in determining any
inaccuracy, untruth, incompleteness or breach thereof;
(ii) resulting from or arising out of any breach of any of the representations
or warranties made by the Sellers pursuant to Sections 2.1, 2.2, 2.8, 2.10
and, solely to the extent related to title, Section 2.11;
(iii) resulting from or arising out of any breach of any covenant or agreement
made by Sellers or any of them in or pursuant to this Agreement;
Page 36
(iv) in respect of any liability or obligation of the Company which any Seller
has expressly assumed or for which any Seller has expressly agreed to be
responsible;
(v) resulting from or arising out of any liability, payment or obligation
arising out of any litigation or similar matter required to be described on
Schedule 2.21, except to the extent of reserves with respect thereto on the
-------------
Base Balance Sheet;
(vi) resulting from or arising out of the intentional misrepresentation or
breach of warranty of the Company or any Seller or any intentional failure
of the Company or any Seller to perform or comply with any covenant or
agreement of the Company or any Seller, respectively;
(vii) resulting from or arising out of any liability, payment or obligation in
respect of any taxes owing by the Company, Sellers or Buyer, as successor
to the Company, of any kind or description (including interest and
penalties with respect thereto) for all periods, or portions thereof, up
to an including the Closing Date, except to the extent of reserves with
respect thereto on the Base Balance Sheet;
(viii) resulting from or arising out of any third party action, whether by a
governmental authority or other third party for damages, including fines
or penalties, or clean-up costs or other compliance costs under any
Environmental Law or from the violation of any Environmental Law arising
out of the operations of the Company or its former parent corporation on
or before the Closing Date;
(ix) resulting from or arising out of any Benefit Plan (as defined in
Section 2.17); or
(x) resulting from or arising out of any Third Party Action (including a
binding arbitration or an audit by any taxing authority), that it is
instituted or threatened against any of Buyer's Indemnified Persons.
(b) The Sellers shall have no liability under paragraph (a) unless one or more
of the Buyer's Indemnified Persons gives written notice to the Sellers
asserting a claim for Losses, including reasonably detailed facts and
circumstances pertaining thereto, before the expiration of the period set
forth below:
(A) for claims under clauses (i), (v), (ix) and (x) (insofar as a claim under
clause (x) relates to any matter included under clause (i), (v) or (ix)) of
paragraph (a) above, a period of three (3) years from the Closing Date;
(B) for claims under clauses (iii), (vii), (viii) and (x) (insofar as a claim
under clause (x) relates to any matter included under clause (iii), (vii)
or (viii)) of paragraph (a) above, for so long as any claim
Page 37
may be made in respect of such matters under any applicable statute of
limitations, as it may be extended; and
(C) for claims under clauses (ii), (iv) and (vi) of paragraph (a) above,
without limitation as to time; except that, for any claim based upon a
covenant or undertaking which by its terms is to be performed after the
Closing, then the period above shall commence on the date when such
covenant or agreement should have been performed.
(ii) The gross amount with respect to a claim for indemnification for which the
Sellers may be liable to a Buyer's Indemnified Person pursuant to this
Article 7 shall be reduced by any insurance proceeds actually recovered by
or on behalf of the Indemnified Person on account of the indemnifiable
Loss.
7.3 Defense of Third Party Actions.
--- ------------------------------
(a) Promptly after receipt of notice of any Third Party Action, any person who
believes he, she or it may be an Indemnified Person will give notice to the
potential Indemnifying Person of such action. The omission to give such
notice to the Indemnifying Person will not relieve the Indemnifying Person
of any liability hereunder unless it was prejudiced thereby, nor will it
relieve it of any liability which it may have other than under this
Article 7.
(b) Upon receipt of a notice of a Third Party Action, the Indemnifying Person
shall have the right, at its option and at its own expense, to participate
in and be present at the defense of such Third Party Action, but not to
control the defense, negotiation or settlement thereof, which control shall
remain with the Indemnified Person, unless the Indemnifying Person makes
the election provided in paragraph (c) below.
(c) By written notice within forty-five (45) days after receipt of a notice of
a Third Party Action, an Indemnifying Person may elect to assume control of
the defense, negotiation and settlement thereof, with counsel reasonably
satisfactory to the Indemnified Person; provided, however, that the
Indemnifying Person agrees (i) to promptly indemnify the Indemnified Person
for its expenses to date, and (ii) to hold the Indemnified Person harmless
from and against any and all Losses caused by or arising out of any
settlement of the Third Party Action approved by the Indemnifying Person or
any judgment in connection with that Third Party Action. The Indemnifying
Persons shall not in the defense of the Third Party Action enter into any
settlement which does not include as a term thereof the giving by the third
party claimant of an unconditional release of the Indemnified Person, or
consent to entry of any judgment except with the consent of the Indemnified
Person.
(d) Upon assumption of control of the defense of a Third Party Action under
paragraph (c) above, the Indemnifying Person will not be liable to the
Indemnified Person
Page 38
hereunder for any legal or other expenses subsequently
incurred in connection with the defense of the Third Party Action, other
than reasonable expenses of investigation.
(e) If the Indemnifying Person does not elect to control the defense of a Third
Party Action under paragraph (c), the Indemnifying Person shall promptly
reimburse the Indemnified Person for expenses incurred by the Indemnified
Person in connection with defense of such Third Party Action, as and when
the same shall be incurred by the Indemnified Person.
(f) Any person who has not assumed control of the defense of any Third Party
Action shall have the duty to cooperate with the party which assumed such
defense.
7.4 Miscellaneous.
--- -------------
(a) Buyer's Indemnified Persons shall be entitled to indemnification under
Section 7.2(a) regardless of whether the matter giving rise to the
applicable liability, payment, obligation or expense may have been
previously disclosed to any such person unless expressly disclosed on each
particular Schedule requiring such disclosure.
(b) If any Loss is recoverable under more than one provision hereof, the
Indemnified Person shall be entitled to assert a claim for such Loss until
the expiration of the longest period of time within which to assert a claim
for Loss under any of the provisions which are applicable.
(c) Buyer may, at its options, recover any amount owing by the Sellers for
indemnification hereunder by setoff against any amounts that may otherwise
be due from the Buyer or the Company to the Sellers, or any of them,
whether hereunder or otherwise; provided that Buyer shall not be required
to recover such claims in such manner and may proceed against the
Indemnified Party at any time or times for recovery of indemnification
claims.
7.5 Payment of Indemnification. Claims for indemnification under this
--- ---------------------------
Article 7 shall be paid or otherwise satisfied by Indemnifying Persons
within thirty (30) days after notice thereof is given by the Indemnified
Person. Any amount which may become due and payable to any of the Buyer's
Indemnified Persons under Section 7.2(a) shall first be paid or otherwise
satisfied out of the Escrow Fund until the same has been exhausted. Any
claims in excess of the Escrow Fund may be satisfied by whatever remedy is
available at law or equity.
ARTICLE 8. TERMINATION OF AGREEMENT.
--------- ------------------------
8.1 Termination. At any time prior to the Closing, this Agreement may be
--- ------------
terminated (a) by mutual consent of the parties, (b) by either side if
there has been a material misrepresentation, breach of warranty or breach
of covenant by the other side in its representations, warranties and
covenants set forth herein, (c) by Buyer if the conditions stated in
Article 5 have not been satisfied at or prior to the Closing, (d) by the
Sellers if the conditions
Page 39
stated in Article 6 have not been satisfied at or prior to the Closing, or
(e) if the Closing shall not have occurred and the transactions
contemplated hereby consummated by May 31, 1999 provided that the right to
terminate under this clause (e) shall not be available to any parties whose
breach has been the cause of such failure to close.
8.2 Effect of Termination. If this Agreement shall be terminated as above
--- ----------------------
provided, all obligations of the parties hereunder shall terminate but any
breaching party shall remain liable to a nonbreaching party for its
damages. In the event that this Agreement is so terminated, each party will
return all papers, documents, financial statements and other data furnished
to it by or with respect to each other party to such other party (including
any copies thereof made by the first party). Notwithstanding such
termination, the provisions of Article 7 and Sections 9.4, 9.5, and 9.11
shall survive the termination of this Agreement.
8.3 Right to Proceed. Anything in this Agreement to the contrary
--- -----------------
notwithstanding, if any of the conditions specified in Article 5 hereof
have not been satisfied, Buyer shall have the right to proceed with the
transactions contemplated hereby without waiving its rights hereunder and
have all obligations, undertakings, agreements and other provisions of this
Agreement specifically performed by the Company and Sellers and Buyer shall
have the right to obtain and order such specific performance in any of the
Courts in the United States or any state or political subdivision thereof.
If any of the conditions specified in Article 6 hereof have not been
satisfied, Sellers shall have the right to proceed with the transactions
contemplated hereby without waiving its rights hereunder.
ARTICLE 9. MISCELLANEOUS.
-------------------------
9.1 Survival of Warranties. All representations, warranties, agreements,
--- -----------------------
covenants and obligations herein or in any schedule, certificate or
financial statement delivered by any party to another party incident to the
transactions contemplated hereby are material, shall be deemed to have been
relied upon by the other party and shall survive the Closing for the
applicable periods set forth in Article 7 and shall be further actionable
subject to the limitations set forth therein, regardless of any
investigation and shall not merge in the performance of any obligation by
either party hereto.
9.2 Fees and Expenses. Each of the parties will bear its own expenses in
--- ------------------
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, and no expenses of the Sellers or the
Company relating in any way to the purchase and sale of stock hereunder
shall be included in any account of the Company as of the Closing or shall
be charged to or paid by Buyer.
9.3 Notices. All notices, requests, demands and other communications
--- --------
required or permitted to be given hereunder by any party hereto shall be in
writing and shall be deemed to have been duly given (i) when received if
delivered personally, or (ii) on the business day following the business
day sent if sent by prepaid domestically recognized overnight receipted
courier if sent domestically, or (iii) on the third business day following
the day sent if sent by
Page 40
prepaid internationally recognized overnight receipted courier if sent
internationally, or (iv) upon receipt telephonically acknowledged if sent
by telecopier transmission on a business day or, if not a business day, on
the next following business day, or (v) when answered back if sent by
telex, if on a business day, or if not a business day, or the next
following business day, to the parties at the following addresses (or at
such other addresses as shall be specified by the parties by like notice):
If to the Sellers or, prior to the Closing, to the Company, to:
Hanyon Tech. Co., Ltd.
Shinbong bldg ▇▇▇-▇ ▇▇▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇
Tel: ▇▇ ▇ ▇▇▇ ▇▇▇▇
Fax: ▇▇ ▇ ▇▇▇ ▇▇▇▇
with a copy to:
▇▇ ▇▇▇▇ ▇▇▇▇▇/▇▇▇▇▇ ▇▇▇▇
▇▇▇ & Ko
18th Fl., Marine Center Main ▇▇▇▇.▇▇▇, ▇-▇▇,
▇▇▇▇▇▇▇▇▇-▇▇, ▇▇▇▇▇-▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇, ▇▇▇▇▇
Tel: ▇▇-▇ ▇▇▇ ▇▇▇▇
Fax: ▇▇ ▇ ▇▇▇ ▇▇▇▇
If to the Buyer, to:
▇▇▇▇▇▇ Automation, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: ▇▇▇ ▇▇▇ ▇▇▇▇
Fax: ▇▇▇ ▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esquire.
▇▇▇▇▇, ▇▇▇▇▇▇▇, Freed & Gesmer
One Financial Center
Boston, MA 02111
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and in any case at such other address as the addressee shall have specified
by written notice. All periods of notice shall be measured from the date of
delivery thereof.
Page 41
9.4 Publicity and Disclosures. Except as may be otherwise required for
--- --------------------------
compliance with applicable stock exchange rules or securities laws, the
Company shall not issue nor approve any news release or other public
announcement concerning this Agreement (or any schedules or exhibits
hereto) prior to the Closing without the prior written approval of the
Buyer. Subsequent to the Closing, Buyer and Sellers may issue any news
release, public announcement or published information or documents it deem
necessary or desirable.
9.5 Confidentiality. The parties agree that they will keep confidential and
--- ----------------
not disclose or divulge any confidential, proprietary or secret information
which they may obtain from the Company or Buyer in connection with the
transactions contemplated herein, or pursuant to inspection rights granted
hereunder, or reveal the financial or other terms and conditions of this
Agreement unless such information is or hereafter becomes public
information through means other than a default hereof by such party or is
required to be disclosed by applicable law, including applicable securities
laws or stock exchange rules or regulations. The obligations of this
Section 9.5 shall survive any termination of this Agreement.
9.6 Time Period. The parties acknowledge that time is of the essence with
--- ------------
respect to the fulfillment of the respective obligations of the parties
hereto and the Closing of the Transaction as contemplated by this
Agreement.
9.7 Entire Agreement. This Agreement (including all exhibits or schedules
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appended to this Agreement and all documents delivered pursuant to or
referred to in this Agreement, all of which are hereby incorporated herein
by reference) constitutes the entire agreement between the parties, and all
promises, representations, understandings, warranties and agreements with
reference to the subject matter hereof and inducements to the making of
this Agreement relied upon by any party hereto, have been expressed herein
or in the documents incorporated herein by reference.
9.8 Severability. The invalidity or unenforceability of any provision of
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this Agreement shall not affect the validity or enforceability of any other
provision hereof.
9.9 Assignability. This Agreement may not be assigned otherwise than by
--- --------------
operation of law (a) by Buyer without the prior written consent of Sellers
or (b) by Sellers without the prior written consent of Buyer. However, any
or all rights of Buyer to receive performance (but not the obligations of
Buyer to Sellers hereunder) and rights to assert claims against Sellers in
respect of breaches of representations, warranties or covenants of Sellers
hereunder, may be assigned by ▇▇▇▇▇ to (i) any direct or indirect
subsidiary, parent or other affiliate of Buyer, or (ii) any person or
entity extending credit to Buyer to finance the purchase price, but any
assignee of such rights under clause (i) or clause (ii) shall take such
rights subject to any defenses, counterclaims and rights of setoff to which
Sellers might be entitled under this Agreement. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns.
9.10 Amendment. This Agreement may be amended only by a written agreement
---- ----------
executed by ▇▇▇▇▇ and the Sellers, acting jointly, as attorney-in-fact for
the Sellers.
Page 42
9.11 Dispute Resolution. In the event of any dispute arising out of or
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relating to this Agreement, or the breach thereof, any party, by notice in
accordance with Section 9.3 (hereinafter referred to as an "Arbitration
Notice") given no later than 30 days, may demand that such dispute be
submitted to final and binding arbitration before a single arbitrator
selected by the parties in accordance with the then-existing rules of the
International Chamber of Commerce. All arbitration proceedings and records
shall be in English and shall be held in Massachusetts, United States of
America, in accordance with the laws of Massachusetts, United States of
America. Issuance of an Arbitration Notice shall suspend the effect of any
default under this Agreement, including, but not limited to, any judicial
or administrative proceedings instituted in connection therewith, for the
duration of the arbitration proceedings. If the parties cannot agree on
the identity of a single arbitrator within five (5) days of receipt of the
Arbitration Notice, each of them shall appoint one (1) arbitrator, and the
party-appointed arbitrators shall appoint within five (5) days of their
appointment a third arbitrator. The arbitrator or arbitrators shall
forthwith determine whether a default has occurred and shall deliver its
or their decision within ninety (90) days of the date of receipt of the
Arbitration Notice, specifying such remedy (including, individually or in
combination, money damages or specific performance) as shall fully
implement the intent and purposes of this Agreement and indemnify
nonbreaching parties for and hold them harmless from all losses, cost, and
expenses (including costs of arbitration and reasonable attorneys' fees)
resulting from any breach or from defending against any allegations of a
breach determined to be unfounded. Termination of any rights and licenses
shall not be awarded except in the event of a substantial breach not
remediable by money damages or in the event of a pattern of breaches (even
if timely cured or remediable by money damages) that have the effect of
materially undermining the intent of the parties. The right to demand
arbitration and to receive damages or specific performance as provided
hereunder shall be the exclusive remedy in the event of the giving of an
Arbitration Notice hereunder, and all other rights or remedies, in law or
in equity, are hereby forever waived.
9.12 Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of The Commonwealth of Massachusetts (other than
the choice of law principles thereof), except that any representations and
warranties with respect to real and tangible property shall be governed by
and construed in accordance with the laws of the jurisdiction where such
property is situated if other than in The Commonwealth of Massachusetts.
9.13 Remedies. The parties hereto acknowledge that the remedy at law for any
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breach of the obligations undertaken by the parties hereto is and will be
insufficient and inadequate and that the parties hereto shall be entitled
to equitable relief, in addition to remedies at law. In the event of any
action to enforce the provisions of this Agreement, Sellers shall waive
the defense that there is an adequate remedy at law. Sellers acknowledge
that the Company Shares are unique and cannot be obtained on the open
market. Without limiting any remedies Buyer may otherwise have hereunder
or under applicable law, in the event Sellers refuse to perform their
obligations under this Agreement, Buyer shall have, in addition to any
other rights at law or equity, the right to specific performance.
Page 43
9.14 Counterparts. This Agreement may be executed in multiple counterparts,
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each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
9.15 Effect of Table of Contents and Headings. Any table of contents,
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title of an article or section heading herein contained is for convenience
of reference only and shall not affect the meaning of construction of any
of the provisions hereof.
[REMAINDER OF PAGE INTENTIONAL BLANK. SIGNATURE PAGE FOLLOWS]
Page 44
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as an instrument under seal in multiple counterparts as of the date set
forth above by their duly authorized representatives.
COMPANY:
HANYON TECH CO., LTD.
By: /s/ ▇▇▇-▇▇▇▇ Park
-------------------------
▇▇▇-▇▇▇▇ Park
Title: President
SELLERS:
/s/ ▇▇▇-▇▇▇▇ Park
----------------------------
▇▇▇-▇▇▇▇ Park
/s/ Hae-Wook Park*
----------------------------
Hae-Wook Park
/s/ Whi-▇▇▇▇ ▇▇▇▇*
----------------------------
Whi-▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇-▇▇▇ ▇▇▇▇*
----------------------------
▇▇▇▇-▇▇▇ ▇▇▇▇
BUYER:
▇▇▇▇▇▇ AUTOMATION, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
* Executed by ▇▇▇-▇▇▇▇ ▇▇▇▇ as attorney-in-fact
Page 45
