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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 11, 1996
---------------
CONSILIUM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-17754 94-2523965
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
485 CLYDE AVENUE, MOUNTAIN VIEW, CA 94043
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 961-6100
(Former name, former address and former fiscal year, if changed since
last report)
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This report consists of 40 pages.
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ITEM 2. ACQUISITION OR DEPOSITION OF ASSETS
(a) Pursuant to the Asset Acquisition Agreement dated July 2, 1996 (the
"Acquisition Agreement"), by and between the registrant, Consilium, Inc., a
Delaware corporation ("Consilium"), Consilium Taiwan, Inc., a Delaware
corporation and a wholly-owned subsidiary of Consilium ("Sub"), Systematic
Designs International, Inc., a Washington corporation ("SDI"), and Jen-Shih
Jessi Niou, who is the principal shareholder of SDI, the registrant acquired
certain assets (the "Purchased Assets"), consisting primarily of one existing
semiconductor factory automation contract and certain related tangible and
intangible assets, and assumed certain liabilities of SDI effective July 11,
1996. The price of the Purchased Assets consists of an initial payment of
$1,305,000 to be paid in installments (Four Hundred Thirty-Five Thousand Dollars
($435,000) paid on July 12, 1996; Four Hundred Thirty-Five Thousand Dollars
($435,000) to be paid on August 1, 1996; Four Hundred Thirty-Five Thousand
Dollars ($435,000) to be paid on November 1, 1996) and future performance-based
payments equal to specified percentages of revenues recognized by Consilium or
Sub from licenses within certain countries in Asia of software provided by SDI
and from certain service-related revenue of Sub (the "Includable Revenue") as
set forth below for each of the two twelve-month periods ending on July 8, 1997
and July 8, 1998:
<TABLE>
<CAPTION>
Percentage of Includable
Amounts of Includable Revenue Revenues for Such Period
--------------------------------- ------------------------
<S> <C>
$0 - $2.0 million 17.5%
Revenues over $2.0 - $4.5 million 50.0%
Revenues over $4.5 million 35.0%
</TABLE>
The purchase price has been and will continue to be paid in cash from the
Company's working capital. The principle used to determine the amount of
consideration was arms-length negotiation. Before the acquisition, there was no
material relationship between SDI and the registrant or any of its affiliates,
any director or officer of the registrant, or any associate of any such director
or officer.
SDI is a privately-held company specializing in the development of factory
automation products and systems integration services for the semiconductor
industry. SDI has continued as a business subsequent to the sale of the
Purchased Assets to the registrant.
The registrant considers the acquisition of the Purchased Assets as a
purchase of assets, as defined in Rule 11-01(d) of Regulation S-X.
(b) Consilium acquired an immaterial amount of tangible property from SDI,
which was used in support of SDI's provision of consulting services. Consilium
intends to continue such use of these tangible assets.
2
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<TABLE>
<CAPTION>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
<C> <S>
(a) Since the acquisition of the Purchased Assets constitutes a
purchase of assets as defined in Rule 11-01(d) of Regulation S-X,
no financial statements of SDI are required to be filed pursuant
to Article 3 of Regulation S-X.
(b) Since the acquisition of the Purchased Assets constitutes a
purchase of assets as defined in Rule 11-01(d) of Regulation S-X,
no pro forma financial information is required to be filed
pursuant to Article 11 of Regulation S-X.
(c) The following exhibit is attached hereto and filed herewith:
2.1/(1)/ The Acquisition Agreement between the registrant and SDI.
</TABLE>
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(1) Exhibits to the Acquisition Agreement not filed herewith are identified in
the Acquisition Agreement. The registrant will furnish supplementally any
omitted Exhibit to the Commission upon request.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 26, 1996 CONSILIUM, INC.
By: /s/ Laurence R. Hootnick
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Laurence R. Hootnick, President and
Chief Executive Officer
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CONSILIUM, INC.
EXHIBIT INDEX
TO FORM 8-K
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ---------------------------------------- -------------
<C> <S> <C>
2.1 Asset Acquisition Agreement by and 6
between the registrant, Sub, SDI and
Jen-Shih Jessi Niou, dated July 2, 1996.
</TABLE>
<PAGE>
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
among
CONSILIUM,
CONSILIUM TAIWAN, INC.
SYSTEMATIC DESIGNS INTERNATIONAL, INC.,
and JEN-SHIH JESSI NIOU
July 2, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
RECITALS................................................................. 1
1. Definitions......................................................... 1
1.1 "Assumed Liabilities"......................................... 1
1.2 "Consulting Contracts"........................................ 1
1.3 "Derivative Product" or "Derivative Work"..................... 1
1.4 "Excluded Liabilities"........................................ 1
1.5 "Leases"...................................................... 2
1.6 "Purchased Assets"............................................ 2
1.7 "Seller Software Products".................................... 2
1.8 "Taiwan Business"............................................. 2
1.9 "Taiwan Subcontractors"....................................... 2
2. The Purchased Assets................................................ 2
2.1 Transfer and Delivery of Assets............................... 2
2.2 Consideration for Sale........................................ 3
2.3 Assumption of Liabilities..................................... 6
2.4 Allocation of Purchase Price.................................. 7
2.5 Sales and Use Taxes........................................... 7
3. Representations and Warranties of Seller and the Shareholder........ 7
3.1 Organization.................................................. 7
3.2 Authorization................................................. 8
3.3 Capital Structure............................................. 8
3.4 No Conflict; Consents......................................... 8
3.5 Financial Information......................................... 9
3.6 Compliance With Other Instruments............................. 9
3.7 No Material Adverse Changes................................... 9
3.8 Taxes......................................................... 9
3.9 Title; Transfer Free of Liens................................. 10
3.10 Intellectual Property Rights.................................. 10
3.11 Agreements, Contracts and Commitments......................... 12
3.12 Restrictions on Business Activities........................... 12
3.13 Litigation.................................................... 12
3.14 Government Approvals; Consents................................ 13
3.15 Employees..................................................... 13
3.16 Employee Benefits............................................. 13
3.17 Environmental Matters......................................... 13
3.18 Labor Matters................................................. 14
3.19 Compliance with Laws.......................................... 14
3.20 Governmental Authorizations and Licenses...................... 14
3.21 Complete Copies of Materials.................................. 14
3.22 Representations Complete...................................... 14
3.23 Securities Act................................................ 15
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4. Representations and Warranties of Consilium and Buyer............... 15
4.1 Organization.................................................. 15
4.2 Authorization................................................. 15
4.3 No Conflict................................................... 15
4.4 Securities and Exchange Commission Documents.................. 16
4.5 Government Approvals; Consents................................ 16
4.6 Issuance of Stock Consideration............................... 16
5. Covenants of Seller and Shareholder................................. 16
5.1 Operation in Ordinary Course.................................. 16
5.2 Cooperation with Buyer and Consilium.......................... 17
5.3 Obligation to Register Copyrights............................. 17
5.4 Exclusivity................................................... 17
5.5 No Public Announcement........................................ 17
5.6 Covenant Not to Compete....................................... 17
5.7 Due Diligence Assistance...................................... 19
5.8 Financial Statements and Other Reports........................ 19
6. Covenants of Consilium and Buyer.................................... 20
6.1 Employment of Taiwan Business Employees....................... 20
7. Mutual Covenants.................................................... 20
7.1 No Action to Make Representations and Warranties Untrue; Best
Efforts Regarding Consents and Conditions..................... 20
7.2 Due Diligence; Investigation and Audits....................... 20
7.3 Cooperation................................................... 20
7.4 Adjustment for Customer Payments, Taxes, Etc.................. 21
8. Conditions to Close................................................. 21
8.1 Conditions to Each Party's Obligations to Close
the Acquisition............................................... 21
8.2 Conditions to Consilium's and Buyer's Obligations
to Close...................................................... 22
8.3 Seller's and Shareholder's Conditions to Close................ 23
9. The Closing......................................................... 23
9.1 Closing....................................................... 23
9.2 Seller's and Shareholder's Actions at the Closing............. 23
9.3 Consilium and Buyer Actions at the Closing.................... 24
10. Termination......................................................... 25
10.1 Termination................................................... 25
10.2 Remedies...................................................... 25
11. Survival of Representations, Warranties and Covenants;
Indemnification..................................................... 26
11.1 Survival of Representations, Warranties and Covenants......... 26
11.2 Indemnification by Seller and the Shareholder................. 26
12. Miscellaneous Provisions............................................ 28
12.1 Notices...................................................... 28
12.2 Attorney Fees................................................ 29
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12.3 Expenses; Finder's Fees...................................... 29
12.4 Entire Agreement............................................. 29
12.5 Amendment.................................................... 30
12.6 Further Assurances........................................... 30
12.7 Binding Effect............................................... 30
12.8 Headings..................................................... 30
12.9 Applicable Law............................................... 30
12.10 Invalid Provisions........................................... 30
12.11 Counterparts................................................. 30
12.12 Confidentiality of Information............................... 31
12.13 Advice of Legal Counsel...................................... 31
12.14 Alternative Dispute Resolution............................... 31
12.15 Arbitration.................................................. 31
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), is entered into as of the
2nd day of July, 1996 by and between Consilium, Inc., a Delaware corporation
("Consilium"), Consilium Taiwan, Inc., a Delaware corporation and a wholly owned
subsidiary of Consilium ("Buyer"), Systematic Designs International, Inc., a
Washington corporation (the "Seller"), and Jen-Shih Jessi Niou who is the
principal shareholder of Seller (the "Shareholder").
RECITALS
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A. Seller and Shareholder desire to sell and Buyer desires to purchase as
a going concern the customer and personnel relationships, customers contracts,
and operations of Seller in Taiwan and certain related assets of Seller on the
terms and subject to the conditions set forth herein.
B. Concurrent with the closing of the asset purchase contemplated by this
Agreement, the Shareholder and other key personnel with respect to the
operations of Seller in Taiwan will become employees of Consilium or Buyer
(directly or indirectly through subcontractors in Taiwan), and Seller will
license certain computer software products of Seller to Consilium and Buyer
pursuant to that certain Software Licensing Agreement of even date herewith (the
"Software Licensing Agreement").
NOW, THEREFORE, based on these premises and in consideration of the mutual
covenants and agreements contained herein, the parties agree as follows:
1. Definitions. Unless otherwise defined herein, when used in this Agreement
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the following terms shall have the following meanings:
1.1 "Assumed Liabilities" means the liabilities to be assumed by Buyer
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that are listed on Exhibit 1.1 attached hereto. Such Assumed Liabilities shall
-----------
not include any other liabilities of Seller and all such other liabilities are
excluded as set forth below.
1.2 "Consulting Contracts" means the consulting contracts listed on
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Exhibit 1.2 attached hereto.
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1.3 "Derivative Product" or "Derivative Work" have the meaning provided to
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such terms in the Software Licensing Agreement.
1.4 "Excluded Liabilities" means any and all liabilities, obligations or
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commitments of any nature of Seller or the Taiwan Subcontractors, whether known
or unknown, contingent or fixed or otherwise, (including, without limitation,
employee compensation claims (related to the personnel of the Taiwan Business),
labor and national health insurance contributions (employer and employee arising
from the Taiwan Business) due or accrued through the Closing and all Taxes (as
defined in Section 3.8 below) which were or should have been paid, withheld or
accrued through the Closing, together with any penalties or interest associated
with such
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contributions or Taxes not paid, withheld or accrued through the Closing),
except the Assumed Liabilities.
1.5 "Leases" means the leases listed on Exhibit 1.5 attached hereto.
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1.6 "Purchased Assets" means the Material Contracts (as defined in Section
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3.11 below) and the other assets of Seller to be acquired by Buyer that are
listed on Exhibit 1.6 attached hereto.
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1.7 "Seller Software Products" means the Seller software "Products," as
------------------------
that term is defined in the Software Licensing Agreement
1.8 "Taiwan Business" means Seller's business in Taiwan, including without
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limitation the licensing of Seller's software for semiconductor fabrications
facility automation and the provision or related design, consulting and
programming services (including that called for under the Consulting Contracts),
and including Seller's relationships with all current and prospective customers
within the Protected Territory and Sellers relationship with the personnel in
Taiwan who provide services on behalf of Seller provided by contract through the
Taiwan Subcontractors.
1.9 "Taiwan Subcontractors" means Systematic International, Inc. and Pau-
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Ho Electronic Industrial, Ltd., two corporations formed and existing under the
laws of Taiwan, with which Seller has had a contractual relationship to provide
employees, office space, and otherwise take action and provide resources to help
Seller fulfill the terms of the Consulting Contracts.
2. The Purchased Assets; Transfer of Certain Rights and Obligations.
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2.1 Transfer and Delivery of Assets. On the terms and subject to the
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conditions set forth below, Seller shall sell, convey, assign, transfer and
deliver and cause to be sold, conveyed, assigned, transferred and delivered to
Buyer, and Buyer shall purchase from Seller, on the Closing Date (as defined in
Section 9.1), all of Seller's right, title and interest in and to the Purchased
Assets (the "Acquisition"). Such right, title and interest in and to the
Purchased Assets shall be sold, conveyed, assigned, transferred and delivered by
Seller to Buyer by appropriate instruments of transfer, bills of sale,
endorsements, and/or assignments as of the Closing Date, and shall be free and
clear of any and all claims, liabilities, liens and encumbrances, except as
expressly provided herein. Subject to the terms and conditions set forth in
this Agreement, Seller shall transfer, assign and deliver to Buyer, and Buyer
shall acquire and purchase from Seller the Material Contracts listed in Exhibit
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3.11 hereto in consideration of Buyer's assumption of Seller's obligations
- ----
thereunder. Notwithstanding the foregoing, the Purchased Assets and the
Material Contracts will not include, and the Seller will retain, all outstanding
invoices and accounts receivable with respect to the Material Contracts (whether
or not attributable to the value of the work in process earned prior to
Closing).
2.2 Consideration for Sale. As consideration for the Purchased Assets,
----------------------
and for the performance by Seller of its covenants in accordance with this
Agreement, Buyer shall pay Seller the following consideration (the "Purchase
Price"):
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(a) Initial Payments. Buyer shall pay to Seller a cash sum of One
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Million Three Hundred Five Thousand U.S. Dollars (U.S. $1,305,000), to be paid
by check or wire transfer in installments as follows, subject to adjustment in
accordance with Section 2.2(c):
(i) Four Hundred Thirty-Five Thousand Dollars ($435,000) (the
"Initial Payment") shall be paid on the Closing Date as provided in Section 9.3
hereof, subject to adjustment in accordance with Section 2.2(c); and
(ii) Four Hundred Thirty-Five Thousand Dollars ($435,000) on
August 1, 1996, subject to adjustment in accordance with Section 2.2(c).
(iii) Four Hundred Thirty-Five Thousand Dollars ($435,000) on
November 1, 1996, subject to adjustment in accordance with Section 2.2(c).
(b) Performance-based Payments.
--------------------------
(i) An amount (the "Additional Consideration") equal to the
percentage of Includable Revenues (as defined below) as set forth below for each
of the two twelve month periods ending on July 8, 1997 and July 8, 1998 (each a
"Contract Year").
Percentage of Includable
Amounts of Includable Revenue Revenues for Such Period
- ----------------------------- ------------------------
$0 - $2.0 million 17.5%
Revenues over $2.0 - $4.5 million 50.0%
Revenues over $4.5 million 35.0%
(ii) Payments by Buyer to Seller of Additional Consideration
under this Section 2.2(b) shall be made in the manner provided in Section 2.2(a)
and on or before the 10th business day after compilation by Consilium of the
financial information (the "Financial Information") necessary to calculate the
amount of Additional Consideration for the Contract Year to which the payment
relates, but in any event not later than August 16, 1996 (the "Payment Date").
(iii) For purposes of this Agreement, the revenues used to
calculate the Additional Consideration (the "Includable Revenues") shall be
derived from the Financial Information as prepared by Consilium, which shall be
prepared in accordance with generally accepted accounting principles ("GAAP"),
applied on a basis consistent with Consilium's prior year's audited financial
statements using the methods set forth on Exhibit 2.2(b)(iii)-1. Includable
---------------------
Revenues shall include all revenues recognized by Consilium or Buyer from
licenses within the Protected Territory of software provided by Seller
(including any such software included in the Purchased Assets or separately
licensed to Consilium by Seller pursuant to the Software Licensing Agreement),
and certain services-related revenue of Buyer, as follows:
(A) Includable Revenues will be deemed to include actual
revenues recognized by Consilium or Buyer from itemized license fees received
for licenses of
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Seller Software Products or Derivative Products and software provided by Seller
that is included in the Purchased Assets or Derivative Works based upon such
software within the Protected Territory. Includable Revenues will include all
service and consulting revenue (i) recognized by Consilium or Buyer under the
Material Contracts and/or (ii) arising from services provided by the employees
of the Buyer (including the Taiwan Employees as defined in Section 6.1) or by
Third Party Taiwan Consultants, whether or not related to Seller Software
Products, Derivative Products or the Purchased Assets. For purposes of this
Agreement, "Third Party Taiwan Consultants" include all consultants or
subcontractors engaged by Buyer who render services or consulting in the
Protected Territory, but excluding all Consilium or its subsidiaries other than
Buyer (and all employees of Consilium or such subsidiaries) and excluding Seller
(and any subsidiaries, employees, consultants or subcontractors of Seller) where
Buyer or Consilium pays Seller directly for such services.
(B) Includable Revenues will exclude any revenues derived
from sales of hardware and any revenues derived from licenses of software
products not provided by Seller (that is, preexisting or later developed or
independently acquired Consilium software products or third party products
distributed by Consilium or Buyer), all maintenance revenues, and all consulting
revenues relating to such non-Seller originated software or products, except to
the extent of service and consulting revenues arising from the services of
employees of the Buyer and of Third Party Taiwan Consultants within the scope of
Section 2.2(b)(iii)(A).
(iv) At least 50% of each payment of Additional
Consideration shall be paid in cash. The balance of each payment of Additional
Consideration may be paid to Seller in (A) cash, (B) a number of shares of
Common Stock of Consilium with a fair market value (which shall be deemed to be
the simple average of the closing sales price of Consilium's Common Stock over
the ten trading days prior to the Payment Date) equal to the balance of
Additional Consideration due, or (C) any combination thereof, at Consilium's
sole option. All cash payments of Additional Consideration due hereunder shall
be paid in U.S. dollars.
(v) Consilium will provide to Seller an interim
report within 45 days following each Consilium fiscal quarter setting forth
Consilium's calculation of Includable Revenue for such fiscal quarter. In
connection with the making of each payment of Additional Compensation by
Consilium or the Buyer under this Section 2.2(b), Consilium shall deliver to
Seller a schedule setting forth the computation of the Additional Consideration
and a copy of the Financial Information. Consilium's computation of any payment
under this Section 2.2(b) shall be conclusive and binding upon the parties
hereto unless, within thirty (30) days following Seller's receipt of the
schedule and Financial Information, Seller notifies Consilium in writing that it
disagrees with Consilium's computation of the Additional Consideration and/or
elects, at its sole option and expense, to have the Financial Information
verified by an independent accounting firm of its choice (a "Notice of
Objection"). Such Notice of Objection by Seller shall include either (i) a
schedule setting forth Seller's computation of the Additional Consideration,
together with a copy of any financial information, other than that previously
supplied by Consilium, used in making Seller's computation ("Seller's
Computation Schedule") or (ii) Seller's election to require verification of the
Financial Information. If Seller elects to require such verification, Seller
shall deliver Seller's Computation Schedule to Consilium, if at all, within
thirty (30) days of Seller's delivery of the Notice of Objection. Consilium and
the Seller shall consult with each other with respect to the objection(s). If
Consilium and the Seller are unable to reach agreement
4
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within thirty (30) days after Seller's Computation Schedule has been delivered,
unless such date is extended by mutual agreement, the objection(s) shall be
resolved by an independent accounting firm as mutually agreed by Consilium and
Seller or, if no such agreement shall be reached within seven (7) days of such
thirty (30) day period, the San Jose office of Ernst & Young LLP (the "Resolving
Accounting Firm"). Consilium, the Seller and their respective representatives
shall cooperate fully with the Resolving Accounting Firm and shall give, and
shall cause their respective representatives to give, the Resolving Accounting
Firm and its representatives such assistance and access to the assets and books
and records of Consilium, and any applicable work papers, schedules and other
documents, as the Resolving Accounting Firm shall reasonably request. The
resolution of the objection(s) by the Resolving Accounting Firm shall be final
and binding on Consilium and the Seller. The fees and expenses of the Resolving
Accounting Firm shall be borne equally by the Seller and Consilium.
(vi) In the event the amount of Additional Consideration
to be paid by Consilium or Buyer to Seller in accordance with Section 2.2(b) for
any Contract Year is recomputed in accordance with Section 2.2(b)(v) the
adjustment to the amount of Additional Consideration shall be paid by Consilium
or Buyer to Seller within ten (10) business days after the date of final
recomputation of such payment, provided that if Common Stock of Consilium
("Stock Consideration") is issued, the fair market value shall be determined as
set forth in subsection 2.2(b)(iv) above.
(c) Adjustment for Percentage Completion and Audit. The Purchase
----------------------------------------------
Price was established in part on the basis of the dollar value as of the Closing
of the Assumed Liabilities, and of the future work to be completed and revenue
to be received by Consilium and Buyer in connection with the Material Contracts.
In addition, the parties intend that the value of all work in process completed
under the Material Contracts prior to the Closing is to be for the account of
Seller, while Buyer and Consilium are to receive all revenue associated with
work performed under the Material Contracts from and after the Closing. The
Purchase Price payable under this Section 2.2 is therefore subject to adjustment
as follows.
(i) Prior to the Closing, or as soon thereafter as practicable,
the percentage completion of the work under each Material Contract will be
determined as of the Closing Date by the relevant project manager of Seller and
by the customer, subject to approval by Seller and Consilium. For each Material
Contract, the agreed upon percentage completion will be compared to the dollar
value of all payments made to Seller plus all outstanding invoices and accounts
receivable with respect to such Material Contract payable by the customer as a
percentage of the total amounts payable by the customer under the contract.
Where the percentage of the contract amounts paid and payable to Seller by the
customer exceeds the agreed percentage completion as of the Closing, the amount
of overage paid or payable to Seller will be calculated. Similarly, where the
percentage of the contract amounts paid and payable to Seller by the customer is
less than the percentage completion as of the Closing, the amount of
underpayment will be calculated. These amounts of over- and underpayment will be
totalled for all Material Contracts as a net amount payable to or due from
Seller (the "Percentage Completion Adjustment"). Following determination of the
Percentage Completion Adjustment, the amount thereof will be added to or
deducted from the amount of the next payment(s) to be made to Seller under
Section 2.2.
5
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(ii) Prior to the Closing, or as soon thereafter as practicable,
Coopers & Lybrand L.L.P. shall conduct an audit of the financial records
relating to the Taiwan Business for the three most recent fiscal years. Such
audit will be performed at Consilium's expense.
In the event of any disagreement concerning calculation of any adjustment
contemplated by this Section, the party owing money shall remit or permit offset
of all undisputed amounts as provided above. All amounts in dispute shall be
resolved in the manner provided for resolution of objections to the
determination of Additional Consideration payments as set forth in Section
2.2(b)(v).
2.3 Assumption of Liabilities.
-------------------------
(a) Subject to the terms and conditions herein, effective upon the
Closing, Buyer hereby assumes and agrees to perform, pay and discharge the
Assumed Liabilities.
(b) Notwithstanding the foregoing, Buyer does not hereby assume or
agree to perform, pay or discharge, and Seller shall remain unconditionally
liable for, from and after the date hereof, any and all Excluded Liabilities.
(c) Nothing herein shall be deemed to deprive Buyer of any defenses,
set-offs or counterclaims which Seller may have had or which Buyer shall have
with respect to any of the obligations, liabilities and commitments hereby
assumed (the "Defenses and Claims"). Effective at the Closing, Seller hereby
transfers, conveys and assigns to Buyer all Defenses and Claims and agrees to
cooperate with Buyer to maintain, secure, perfect and enforce such Defenses and
Claims, including the signing of any documents, the giving of any testimony or
the taking of any such other action as is reasonably requested by Buyer in
connection with such Defenses and Claims.
2.4 Allocation of Purchase Price. Seller and Buyer shall agree to an
----------------------------
allocation of Purchase Price among the Purchased Assets which is attached as
Exhibit 2.4 ("Allocation of Purchase Price"). Seller and Buyer agree to report
- -----------
this transaction for state and federal tax purposes in accordance with the
allocation as determined pursuant to this Section 2.4.
2.5 Sales and Use Taxes. Seller shall pay all sales and use taxes, if
-------------------
any, arising out of the Acquisition, whether such taxes are assessed initially
against Consilium, Buyer or Seller. Neither Consilium nor Buyer shall be
responsible for any income, sales, business, occupation, withholding or similar
tax or any taxes of any kind, or any penalties or interest associated with such
taxes, for the period prior to the Closing of the Acquisition.
3. Representations and Warranties of Seller and the Shareholder. Seller has
------------------------------------------------------------
disclosed to Consilium and Buyer that Seller has been conducting the Taiwan
Business in significant part through a contractual relationship with the Taiwan
Subcontractors. In light of this arrangement, Consilium and Buyer understand
that Seller and the Shareholder are not in a position to know and disclose with
certainty the status of various operational and legal compliance matters with
respect to the Taiwan Subcontractors, and that Seller and the Shareholder do not
control and are not responsible under the law for the actions or inactions of
the Taiwan Subcontractors. It is therefore understood and agreed among the
parties that to the extent representations in this
6
<PAGE>
Section 3 relate to the Taiwan Subcontractors, that the Disclosure Schedule will
contain only such exceptions or other responses as are pertinent to the best of
Seller's or the Shareholder's knowledge. Notwithstanding any lack of knowledge
by Seller or the Shareholder concerning the Taiwan Subcontractors or undisclosed
matters that relate to the Taiwan Subcontractors, the parties have agreed, and
Seller and the Shareholder specifically acknowledge, that Consilium is to be
indemnified and held harmless from any successor liability or other cost or
claim that arises for Consilium or Buyer after the Closing as a result of the
actions or inactions of the Taiwan Subcontractors that occur prior to Closing,
and that all such liability and cost will be borne solely by Seller and the
Shareholder in accordance with Section 11 based on any inaccuracy in the
representations set forth in this Section 3. Subject to the foregoing, Seller
and the Shareholder each hereby represent and warrant, individually and not
jointly, to Buyer as follows, except as specifically set forth in the
correspondingly numbered schedule in the Disclosure Schedule hereto:
3.1 Organization. Seller is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Washington, has the
requisite corporate right, power, authority and capacity to enter into this
Agreement to perform its obligations hereunder and to consummate the
transactions contemplated hereby and is duly qualified to do business as a
foreign corporation in each jurisdiction in which the failure to so qualify
would have a material adverse effect on the condition of the Taiwan Business.
Seller and the Shareholder have no direct or indirect interest in or loans to
any corporation, partnership, joint venture, business association, limited
liability company or other entity relating to the Taiwan Business.
3.2 Authorization. Seller has the requisite corporate power and authority
-------------
to enter into this Agreement and all of the documents and agreements
contemplated hereby (the "Ancillary Agreements") and to perform its obligations
hereunder and thereunder, and at the time of Closing will have all requisite
power and authority to enable it to consummate the transactions contemplated
hereby. The Shareholder has full power, authority and capacity to enter into
this Agreement and the applicable Ancillary Agreements, to perform his
obligations hereunder, and at the time of Closing will have all requisite power
and authority to enable him to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Seller, the performance by
Seller of its obligations hereunder and the consummation by Seller of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Seller. No other corporate proceeding
on the part of Seller is necessary to authorize this Agreement or the
performance of Seller's obligations hereunder or the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Seller and the Shareholder and constitutes the valid and binding
obligation of each of Seller and the Shareholder, enforceable in accordance with
its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
3.3 Capital Structure. The authorized Common Stock of Seller consists of
-----------------
10,000,000 shares of Common Stock, no par value ("Seller Common Stock") and
5,000,000 shares of Preferred Stock, no par value. At the close of business on
the date hereof, there were 5,124,750 shares of Seller Common Stock and
1,300,000 shares of Preferred Stock outstanding.
7
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3.4 No Conflict; Consents. The execution and delivery by Seller and the
---------------------
Shareholder of this Agreement and the Ancillary Agreements, and the performance
by Seller and the Shareholder of Seller's and Shareholder's duties and
obligations hereunder and of all other acts necessary or appropriate for the
consummation of the transactions contemplated hereunder, will not conflict with,
result in a breach or constitute a violation of Seller's Articles of
Incorporation or Bylaws or any material contract, agreement, instrument,
understanding, arrangement, judgment, decree, lien, order, statute rule,
regulation, law or instrument to which Seller or the Shareholder is a party or
by which either of them is bound, nor will such actions give to any other person
or entity any interests or rights of any kind, including rights of termination,
acceleration or cancellation in or with respect to any of the Purchased Assets.
Other than consents that will be obtained prior to the Closing, no consent of
any person or entity is required to be obtained by Seller, the Taiwan
Subcontractors or the Shareholder for the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby,
including, but not limited to, consents from parties to licenses or other
agreements or commitments for the assignment of such contracts.
3.5 Financial Information. All financial information related to the
---------------------
Taiwan Business provided to Consilium or its representatives is accurate in all
material respects. Exhibit 3.5 sets forth a true and correct statement of
-----------
Seller's accounts receivables related to the Taiwan Business.
3.6 Compliance With Other Instruments. Neither Seller, the Taiwan
---------------------------------
Subcontractors nor the Shareholder is a party to, or bound by, any written or
oral contract, agreement, license, indenture, mortgage, debenture, note or other
instrument under the terms of which performance by Seller or the Shareholder
according to the terms of this Agreement and the Ancillary Agreements will be a
default or an event of acceleration, or whereby timely performance by Seller
according to the terms of this Agreement and the Ancillary Agreements may be
prohibited, prevented or delayed.
3.7 No Material Adverse Changes. There has been no material adverse
---------------------------
change in Seller's financial condition or in the operations of the Taiwan
Business since the latest date of the Financial Statements.
3.8 Taxes.
-----
(a) Definition of Taxes. For the purposes of this Agreement, "Taxes"
-------------------
or collectively, a "Tax," means any and all federal, state, local and foreign
taxes, assessments, and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) Tax Returns and Audits.
----------------------
(i) Seller and the Taiwan Subcontractors has accurately
prepared and timely filed all required federal, state, local and foreign
returns, estimates, information statements
8
<PAGE>
and reports ("Returns") relating to any and all Taxes concerning or attributable
to Seller, the Taiwan Subcontractors or their operations and such Returns are
true and correct and have been completed in accordance with applicable law.
(ii) Seller and the Taiwan Subcontractors have (A) paid all
Taxes they are required to pay prior to the Closing and (B) withheld with
respect to its employees all income taxes and other Taxes required to be
withheld.
(iii) Seller and the Taiwan Subcontractors have not been
delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against Seller or the Taiwan Subcontractors,
nor has Seller executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of Seller or
the Taiwan Subcontractors is presently in progress, nor has Seller been notified
of any request for such an audit or other examination.
(v) Seller does not have any liabilities for unpaid federal,
state, local and foreign Taxes which have not been accrued for or reserved on
the Financial Statements, whether asserted or unasserted, contingent or
otherwise. There are no liens or similar encumbrances relating to or
attributable to Taxes on the Purchased Assets.
3.9 Title; Transfer Free of Liens. Seller has, or will obtain prior to
-----------------------------
the Closing, good, valid and marketable title to, or in the case of leased
properties and assets, valid leasehold interest in, all of its tangible
properties and assets, real, personal and mixed, used in the Taiwan Business,
free and clear of any liens or other interest of third parties. At the Closing,
Seller will sell, convey, assign, transfer and deliver to Buyer good, valid and
marketable title and all the Seller's right and interest in and to all of the
Purchased Assets, free and clear of all claims, liabilities, liens, pledges,
mortgages, restrictions and encumbrances of any kind, whether accrued, absolute,
contingent or otherwise ("Encumbrances"). All tangible personal property of
Seller included in the Purchased Assets is in good operating condition and
repair, ordinary wear and tear excepted.
3.10 Intellectual Property Rights.
----------------------------
(a) Seller owns all right, title and interest in and to, or valid
licenses for use of, all patents, copyrights, know-how, processes, trade
secrets, trademarks, service marks, trade names and other Intellectual Property
Rights worldwide (the "Intellectual Property Rights") used in or necessary for
the Taiwan Business as conducted to the date hereof or proposed to be conducted,
including, without limitation, the technology, software, software tools and
processes developed or discovered or used in connection with the Taiwan
Business, free and clear of all Encumbrances and Seller has the right to
transfer or license all such rights to Buyer (all of which are referred to as
"Proprietary Rights"). The foregoing representation as it relates to software,
inventions, know-how, processes or other technology owned by third parties (the
"Third Party Technology") are embodied in the Third Party Licenses (as defined
below), all of which are valid and enforceable. The Third Part Licenses are in
full force and effect and Seller has not breached any of such licenses. Exhibit
-------
3.10 ("Intellectual Property Rights") attached hereto contains an accurate and
- ----
complete description of (i) all patents, patent applications, trademarks (with
9
<PAGE>
separate listings of registered and unregistered trademarks), trade names, and
registered copyrights owned or licensed by Seller and used in the Taiwan
Business and a list of all licenses and other agreements relating thereto, and
(ii) a list of all licenses and other agreements with third parties, whether
Seller is licensee or licensor used in the Taiwan Business (the "Third Party
Licenses"). No royalties or other fees are payable by Seller or the Taiwan
Subcontractors under any Third Party Licenses used in or necessary for the
conduct of the Taiwan Business as conducted through the Closing. All of Seller's
trademarks, trademark registrations or trade name registrations related to the
Taiwan Business are valid and in full force and effect; and consummation of the
transactions contemplated hereby will not alter or impair any such rights. None
of Seller's copyrights have entered the public domain except by expiration of
their term. No claims have been asserted against Seller or the Taiwan
Subcontractors (and Seller is not aware of any claims which are likely to be
asserted against Seller or which have been asserted against others) by any
person challenging Seller's conduct of the Taiwan Business under any patents,
trademarks, trade names, copyrights, trade secrets or know-how utilized by
Seller or the Taiwan Subcontractors (including, without limitation, the Third
Party Technology used in the Taiwan Business) or challenging or questioning the
validity or effectiveness of any Third Party Licenses or other license or
agreement relating thereto. To Seller's knowledge, there is no valid basis for
any claim of the type specified in the immediately preceding sentence which
could in any material way relate to or interfere with the continued conduct by
Seller or Buyer of the Taiwan Business. The use or exploitation of any patents,
trademarks, trade secrets, trade names, copyrights or know-how by Seller in the
Taiwan Business does not infringe on the rights of, constitute misappropriation
of, or in any way involve unfair competition with respect to, any confidential
information or intangible property right of any third person or entity,
including without limitation any patent, trade secret, copyright, trademark or
trade name.
(b) No third party has any right to manufacture, reproduce,
distribute, market or exploit within the Protected Territory any of the
software, inventions or other work product under any of Seller's Proprietary
Rights used in or necessary for the Taiwan Business or any adaptations,
translations, or derivative works based on software, inventions or other work
product under any of Seller's Proprietary Rights or any portion thereof. Except
with respect to rights of third parties to Third Party Technology, no third
party has any right to manufacture, reproduce, distribute, market or exploit
within the Protected Territory any works or materials of which any of the
software, inventions or other work product under any of Seller's Proprietary
Rights used in or necessary for the Taiwan Business are a "derivative work" as
that term is defined in the United States Copyright Act, Title 17, U.S.C.
Section 101.
(c) No employee of Seller and no employee of the Taiwan Subcontractors
who performs or has performed services relating to the Taiwan Business is in
violation of any term of any employment contract, consulting agreement, patent
disclosure agreement or any other contract or agreement relating to the
Intellectual Property Rights or, to Seller's knowledge, any other party or
relating to Intellectual Property Rights, either because of the nature of the
Taiwan Business as conducted by Seller or proposed to be conducted by Seller or
as a result of work performed or actions taken by such employee on behalf of
Seller. Seller and Seller's employees have not wrongfully used, disclosed or
misappropriated any third party's confidential or proprietary information used
in the Taiwan Business.
10
<PAGE>
(d) Each person presently or previously employed by Seller or by the
Taiwan Subcontractors in connection with services relating to the Taiwan
Business (including independent contractors, if any) with access to confidential
information has executed a confidentiality and non-disclosure agreement (in the
form provided by Seller to Buyer or its representatives) which is effective
commencing at the first date of employment. Such confidentiality and non-
disclosure agreements constitute valid and binding obligations of Seller and
such person, enforceable in accordance with their respective terms. To Seller's
knowledge, neither the execution or delivery of such agreements, nor the
carrying on of the Taiwan Business as employees by such persons, nor the conduct
of the Taiwan Business as currently anticipated, will conflict with or result in
a breach of the terms, conditions or provisions of or constitute a default under
any contract, covenant or instrument under which any of such persons is
obligated.
(e) No service or product liability or performance warranty claims
which individually or in the aggregate could exceed $10,000 have been
communicated to or threatened against Seller nor, to Seller's knowledge, is
there any specific situation, set of facts or occurrence that provides a basis
for such claim.
3.11 Agreements, Contracts and Commitments. Seller has not breached, or
-------------------------------------
received any claim or threat that it has breached, any of the terms or
conditions of any agreement, contract or commitment to which Seller is a party
or by which it is bound in such a manner as would permit any other party to
cancel or terminate the same or would permit any other party to seek material
damages from Seller thereunder. Each agreement, contract and commitment
material to the Taiwan Business ("Material Contract") is listed on Exhibit 3.11,
------------
is in full force and effect and, except as otherwise disclosed, is not subject
to any material default thereunder of which Seller is aware by any party
obligated to Seller pursuant thereto. Seller has provided Buyer with an
opportunity to review true and complete copies of all Material Contracts to
which they are bound.
3.12 Restrictions on Business Activities. There is no agreement, judgment,
-----------------------------------
injunction, order or decree binding upon Seller or, to its knowledge, its
partners which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice used in the Taiwan
Business, any disposition of property by the Taiwan Business or the conduct of
the Taiwan Business by Seller, as currently conducted or proposed to be
conducted.
3.13 Litigation. There is no action, suit or proceeding, claim,
----------
arbitration or investigation in progress or pending before any court or
governmental agency against or relating to the Taiwan Business or its properties
or assets, nor, to Seller's knowledge, is there a threat thereof or any basis
therefor. Neither Seller nor the Shareholder is a party to any decree, order or
arbitration award (or agreement entered into in any administrative, judicial or
arbitration proceeding with any governmental authority) with respect to the
properties, assets, personnel or business activities of the Taiwan Business.
3.14 Government Approvals; Consents. All consents, approvals or
------------------------------
authorization of any local, state or federal governmental authority or agency
("Governmental Entity") which has jurisdiction over the parties or any other
person required to be obtained in connection with the execution and delivery of
this Agreement or the performance of the transactions contemplated hereby have
been obtained.
11
<PAGE>
3.15 Employees. A list of all employees of Seller and of the Taiwan
---------
Subcontractors relating to the Taiwan Business is set forth in Exhibit 3.15,
------------
which correctly reflects, in all material respects, such employees' salaries or
wages, other compensation, dates of employment, positions and birth dates.
Neither Seller nor the Taiwan Subcontractors are party to any collective
bargaining agreement, nor has Seller directly or indirectly experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. Seller and the Taiwan Subcontractors do not have any
pending claims by employees or former employees for workman's compensation.
3.16 Employee Benefits. There is no unfunded prior service cost with
-----------------
respect to any bonus, deferred compensation, pension, profit-sharing,
retirement, stock purchase, stock option, or other employee benefit or fringe
benefit plans, whether formal or informal, maintained by Seller or the Taiwan
Subcontractors in connection with the Taiwan Business. Each bonus, deferred
compensation, pension, profit-sharing, retirement, stock purchase, stock option,
and other employee benefit or fringe benefit plans, whether formal or informal,
maintained by Seller conforms to all applicable requirements of law. Exhibit
-------
3.16 lists and describes all profit-sharing, bonus, incentive, deferred
- ----
compensation, vacation, severance pay, retirement, stock option, group insurance
or other plans (whether written or not) providing employee benefits in
connection with the Taiwan Business. All required labor and national health
insurance contributions (employer and employee) in connection with the Taiwan
Business have been made.
3.17 Environmental Matters.
---------------------
(a) As of the date hereof and as of the Closing, no substance that is
regulated by any Governmental Entity or that has been designated by any
Governmental Entity to be radioactive, toxic, hazardous or otherwise a danger to
health or the environment (herein a "Hazardous Material") is present in, on or
under any property that Seller or the Taiwan Subcontractors has at any time
owned, operated, occupied or leased in connection with the Taiwan Business (each
such property is referred to herein as a "Seller Facility").
(b) In connection with the Taiwan Business, Seller and the Taiwan
Subcontractors have not transported, stored, used, manufactured, released or
exposed any of their employees or any other person to Hazardous Materials
("Hazardous Materials Activity") in violation of any applicable local, state or
federal statute, rule, regulation, order or law.
(c) No action, proceeding, permit revocation, writ, injunction or
claim is pending or, to the best of Seller's knowledge, threatened concerning
Hazardous Materials Activities of Seller or any Seller Facility and Seller is
not aware of any fact or circumstance which could involve Seller in any
environmental litigation or impose any environmental liability upon Seller.
3.18 Labor Matters. The Taiwan Business is in compliance with all
-------------
currently applicable laws, rules and regulations respecting employment,
discrimination in employment, terms and conditions of employment and wages and
hours and occupational safety and health and employment practices, and is not
engaged in any unfair labor practice. Seller has not received any notice from
any Governmental Entity, and there has not been asserted before any Governmental
Entity, any claim, action or proceeding to which Seller is a party or involving
12
<PAGE>
Seller, and there is neither pending nor, to Seller's knowledge, threatened any
investigation or hearing concerning Seller arising out of or based upon any such
laws, rules, regulations or practices.
3.19 Compliance with Laws. The Taiwan Business has complied in all
--------------------
material respects with, is not in material violation of, and has not received
any notices of violation with respect to, any federal, state or local statute,
law or regulation with respect to the conduct of the Taiwan Business, or the
ownership or operation of the Taiwan Business.
3.20 Governmental Authorizations and Licenses. Seller or the Taiwan
----------------------------------------
Subcontractors are the holder of all licenses, authorizations, permits,
concessions, certificates and other franchises of any Governmental Entity
required to operate the Taiwan Business as now conducted and as currently
proposed to be conducted (collectively, the "Licenses"). The Licenses are in
full force and effect. There is not now pending, or to the knowledge of Seller
is there threatened, any action, suit, investigation or proceeding against
Seller or the Taiwan Subcontractors before any Governmental Entity with respect
to the Licenses, nor is there any issued or outstanding notice, order or
complaint with respect to the violation by Seller or the Taiwan Subcontractors
of the terms of any License or any rule or regulation applicable thereto.
3.21 Complete Copies of Materials. Seller has delivered or made available
----------------------------
true and complete copies of each document which has been requested by Buyer or
its counsel in connection with their legal and accounting review of Seller.
3.22 Representations Complete. None of the representations, warranties or
------------------------
covenants made by Seller or the Shareholder in this Agreement, any Ancillary
Agreement or any written statement delivered hereto or in connection with the
transactions contemplated herein, nor any statement made in any Schedule,
Exhibit or certificate furnished to Buyer pursuant to this Agreement, when all
such documents are read together in their entirety, contains or will at the
Closing contain any untrue statement of a material fact, or omits or will omit
at Closing to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading.
3.23 Securities Act. Seller acknowledges that any Stock Consideration to
--------------
be issued pursuant to this Agreement will not be registered under the Securities
Act and is being acquired by it in a transaction exempt from the registration
requirements thereof. Seller further acknowledges that it has received all
information it desires concerning Consilium, the Stock Consideration and any
other matter it deems relevant or material to an investment in the Stock
Consideration. Seller has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Stock Consideration and is able to bear the economic risk of
investment in the Stock Consideration. Seller is acquiring any Stock
Consideration for its own account for the purpose of investment. Seller will
not offer, sell, transfer or otherwise dispose of any Stock Consideration or any
interest therein except in accordance with the Securities Act and any applicable
state securities or "blue sky" laws. Seller agrees that the certificates
representing any Stock Consideration may bear legends to the effect that the
Stock Consideration has not been registered under the Securities Act and that
neither the Stock Consideration nor any interest therein may be offered, sold,
transferred or otherwise
13
<PAGE>
disposed of except in accordance with the Securities Act and any applicable
state securities or "blue sky" laws.
4. Representations and Warranties of Consilium and Buyer. Consilium and Buyer
-----------------------------------------------------
hereby represent, warrant and agree as follows:
4.1 Organization. Each of Consilium and Buyer is a corporation duly
------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby.
4.2 Authorization. All corporate action on the part of each of Consilium
-------------
and Buyer and their directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement and all other agreements
and instruments to be executed in connection herewith or pursuant hereto have
been taken or will have been taken prior to the Closing hereunder. This
Agreement and the agreements attached hereto are valid and binding obligations
of Consilium and Buyer, enforceable in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
4.3 No Conflict. The execution and delivery by Consilium and Buyer of
-----------
this Agreement and all other agreements and instruments to be executed and
delivered in connection herewith or pursuant hereto, and the performance by
Consilium and Buyer of their respective duties and obligations hereunder and of
all other acts necessary or appropriate for the consummation of the transactions
contemplated hereunder, will not violate Consilium's or Buyer's Certificate of
Incorporation or Bylaws or any material contract, agreement, understanding,
arrangement or instrument to which Consilium or Buyer is a party or by which it
is bound.
4.4 Securities and Exchange Commission Documents. Consilium has furnished
--------------------------------------------
or made available to Seller, a true and complete copy of Consilium's Annual
Report on Form 10-K for the year ended October 31, 1995 ("Form 10-K"). The
financial statements contained in the Form 10-K were prepared in accordance with
generally accepted accounting principles, consistently applied throughout the
periods covered thereby.
4.5 Government Approvals; Consents. All consents, approvals or
------------------------------
authorization of any Governmental Entity which has jurisdiction over the parties
or any other person required to be obtained in connection with the execution and
delivery of this Agreement or the performance of the transactions contemplated
hereby have been obtained.
4.6 Issuance of Stock Consideration. Any Stock Consideration to be issued
-------------------------------
pursuant to this Agreement will, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable shares of Consilium Common Stock, and shall
be free of any preemptive rights.
14
<PAGE>
5. Covenants of Seller and Shareholder.
-----------------------------------
5.1 Operation in Ordinary Course. Immediately following the execution of
----------------------------
the Agreement, subject to requirements of law, Seller shall take no action nor
fail to take any action, without the prior written consent of Consilium, where
such action or failure to act would not be in the ordinary course of business or
would result in a material adverse effect on the business, prospects or
financial condition of the Taiwan Business or on the Purchased Assets, and
Seller shall pay all liabilities of Seller in connection with the Taiwan
Business in accordance with their terms, including payment (directly or
indirectly through the Taiwan Subcontractors) of any employee bonuses, whether
customary or otherwise, arising prior to the Closing. Between the date hereof
and the Closing, Seller shall notify Buyer of any material adverse change in the
Purchased Assets or the Taiwan Business or operations that might affect, devalue
or result in claims against the Purchased Assets or the Taiwan Business, or any
legal or governmental action commenced or threatened against the Purchased
Assets or the Taiwan Business that might affect, devalue or result in claims
against the Purchased Assets or the Taiwan Business. Notwithstanding the
generality of the foregoing, so long as this Agreement remains in effect, Seller
agrees not to (i) transfer, or grant any license to any third party (whether
exclusive or non-exclusive) with respect to, any of the Purchased Assets or the
Taiwan Business; (ii) enter into or amend any agreements pursuant to which any
other party is granted exclusive marketing rights with respect to the Taiwan
Business; (iii) amend, modify, or terminate or violate any material terms of or
fail to renew the terms of any of the Material Contracts, except as contemplated
by this Agreement; or (iv) revalue any of its assets, including without
limitation, writing down the value of inventory, other than in the ordinary
course of business.
5.2 Cooperation with Buyer and Consilium. Seller and the Shareholder
------------------------------------
agree to assist Buyer and Consilium in developing relationships with current and
prospective clients and agree not to interfere with Buyer's and Consilium's
development of such relationships.
5.3 Obligation to Register Copyrights. Consilium and Buyer understand
---------------------------------
that Seller is in the process of registering certain copyrights in the United
States, and they acknowledge that Seller has the sole right to register such
copyrights. Seller hereby agrees to complete the registration process for such
copyrights as are necessary in order to permit Buyer to register the exclusive
license to be granted to Buyer pursuant to the Software Licensing Agreement.
5.4 Exclusivity. Until the earlier of the termination of this Agreement
-----------
as provided in Section 9 or the Closing, neither Seller, nor any of its
directors, officers, employees, financial advisors or agents or shareholders
will (i) solicit, encourage, initiate or participate in any negotiations or
discussions with any third party with respect to any offer or proposal to merge
with or acquire either a majority of the capital stock of Seller or all or
substantially all of the Taiwan Business or the Purchased Assets, whether by
merger, purchase of assets or otherwise; (ii) disclose to any third party any
information concerning Seller's business, properties, books or records of
Seller, except in the ordinary course of business or as required by law; or
(iii) cooperate with any third party to make any proposal to merge with or
acquire a majority of the capital stock of Seller or all or any part of the
Purchased Assets, other than inventory in the ordinary course of business. Any
party receiving a formal or informal offer or proposal for such a merger, change
of control transaction or asset acquisition (or an offer or proposal to enter
negotiations
15
<PAGE>
therefor) shall immediately inform Consilium thereof (including the
terms of such offer) and provide Consilium with copies of any documents relating
thereto.
5.5 No Public Announcement. Neither Seller nor Consilium will make any
----------------------
public announcement concerning the matters set forth in this Agreement (other
than as required by law and after consultation with the other party) without the
prior consent of the other party.
5.6 Covenant Not to Compete. The parties acknowledge that pursuant to the
-----------------------
Agreement, Buyer shall acquire substantially all of the assets of the Taiwan
Business, a distinguishable business unit within Seller's operations, including
all of the goodwill of Seller related to the Taiwan Business as conducted and
proposed to be conducted by Seller as of effective date of the Acquisition, as
more specifically defined below (the "Protected Business"). Consilium and Buyer
wish to protect their investment in the assets acquired pursuant to the
Agreement, including Intellectual Property Rights, and avoid disclosure of
proprietary and confidential information of Buyer by restricting the activities
of Seller that might compete with or otherwise reduce the value of Consilium's
or Buyer's business with respect to the Acquisition or result in disclosure of
proprietary or confidential information of Buyer, and as part of the
consideration and inducement to Consilium and Buyer for consummating the
Acquisition, Seller is willing to agree and abide by such restrictions as set
forth in this Section 5.6.
(a) Restrictions. Subject to Section 5.6(c) below, until the earlier
------------
of (i) five (5) years from the date hereof or (ii) a time when Consilium and
Buyer acknowledge to Seller in writing that they are no longer doing business in
the Protected Territory or any specified part thereof (as defined below), Seller
agrees that it will not, in a Protected Territory:
(i) Engage, directly or indirectly, as owner, partner, officer,
director, advisor, agent, promoter, proprietor, stockholder, joint venturer,
employee, consultant, trustee, manager, licensor, or in any other capacity
whatsoever, participate in the promotion, financing, ownership, operation,
development, management or control of, or assist in or carry on, through a
corporation, partnership, other business entity or arrangement or any other
medium, in any business activity competitive with the Protected Business; or
(ii) Directly or indirectly, (A) solicit the services of or
cause the solicitation of the services of any of the officers, employees,
consultants, agents and/or independent contractors of Consilium or Buyer or in
any manner attempt to persuade any such person to discontinue any relationship
with Consilium or Buyer, (B) solicit any customer or supplier of Consilium or
Buyer to cease doing business with Buyer or (C) disparage Consilium or Buyer,
its products, its employees or its services.
(b) Certain Definitions.
-------------------
(i) "Protected Business" means manufacturing execution systems
("MES") and factory automation, including related software and consulting
services.
(ii) "Protected Territory" means every county and city (or
other applicable political subdivision) of the following countries in which the
Taiwan Business has done
16
<PAGE>
business: Taiwan, People's Republic of China, Singapore, Malaysia, Thailand,
Japan, Hong Kong, the Philippines, Indonesia and Korea.
(c) Exclusions from Covenant. Nothing contained in Paragraph (a) of
------------------------
this Section 5.6 shall prohibit Seller from owning up to one percent (1%) of the
outstanding shares of any class of equity securities of a corporation engaged in
any such prohibited activity whose securities are listed on a national
securities exchange or on the Nasdaq National Market or quoted daily in the
over-the-counter listing of The Wall Street Journal, or any comparable overseas
-----------------------
public securities exchange or market. Notwithstanding anything contained in
Section 5.6(a), Seller may continue to solicit and conduct business in any
manner whatsoever with respect to LSI Logic Corporation and any of its
subsidiary companies worldwide.
(d) Reasonableness of Restrictions. Seller agrees that the definition
------------------------------
of the Protected Business, the time period provided for and the geographical
area encompassed by the covenants herein contained are necessary and reasonable
in order to protect Consilium and Buyer in the conduct of the Protected
Business, the protection of Buyer's proprietary and confidential information and
the utilization of the assets, tangible and intangible, including the goodwill
of Seller, acquired pursuant to the Agreement.
(e) Remedies. The parties expressly agree that monetary damages would
--------
be inadequate to compensate Consilium or Buyer for any breach by Seller of its
agreements set forth in this Section 5.6 and, accordingly, that in the event of
any breach or threatened breach by Seller of any such agreement, Consilium or
Buyer will be entitled to seek and obtain preliminary and permanent injunctive
relief in any court of competent jurisdiction, in addition to monetary damages
for material breach of this Agreement and any other remedies at law or in equity
to which they may be entitled.
(f) Severability. The covenants contained in Paragraph (a) of this
------------
Section 5.6 shall be deemed to be a series of separate covenants, one for each
of the counties and cities (or other applicable political subdivisions) of the
designated countries. Further, the agreements contained in the rest of this
Section 5.6 shall be deemed to be separate covenants. If in any judicial
proceeding a court shall refuse to enforce all of the separate covenants deemed
included in this Section 5.6, any unenforceable covenant shall be deemed
eliminated from the provisions hereof for the purposes of such proceeding to the
extent necessary to permit the remaining separate covenants to be enforced in
such proceeding. In addition, the duration of each separate covenant may be
limited by a court in which enforcement of said covenant is sought to the extent
necessary to permit the enforcement of said separate covenants.
5.7 Due Diligence Assistance. Seller shall make available to Consilium or
------------------------
its representatives all information concerning the Purchased Assets and the
Taiwan
17
<PAGE>
Business as may be reasonably requested by Consilium, including but not
limited to reasonable access to the premises of the Taiwan Business.
5.8 Financial Statements and Other Reports. Prior to the Closing, Seller
--------------------------------------
shall deliver to Buyer copies of unaudited financial statements for the Taiwan
Business for the fiscal years ended October 31, 1995, 1994 and 1993, including a
balance sheet of Seller as at each of the fiscal years ended October 31, 1995,
1994 and 1993 and the related statements of income and cash flow (the foregoing
financial statements are collectively referred to as the "Financial
Statements"). The Financial Statements shall be prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods indicated and will fairly and accurately present the financial position
of the Taiwan Business in all material respects as at the dates thereof and the
results of operations and changes in financial position for the periods then
ended. There has been no change in Seller's accounting policies, except as
described in notes to Seller's Financial Statements.
6. Covenants of Consilium and Buyer.
--------------------------------
6.1 Employment of Taiwan Business Employees. Buyer agrees that it shall
---------------------------------------
offer at-will employment to the existing personnel (as of the Closing) of the
Taiwan Business (including employees of the Taiwan Subcontractors), as listed on
Exhibit 3.15, whose primary duties relate to the Taiwan Business (the "Taiwan
- ------------
Employees"), at positions and for compensation substantially similar to such
personnel's current positions and compensation. It is understood by the parties
that each of the Taiwan Employees shall continue to be employed for the benefit
of Buyer by the Taiwan Subcontractor currently employing him or her for such
time period as is necessary for Buyer to qualify to transact business in Taiwan
and shall thereafter be directly employed by Buyer.
7. Mutual Covenants.
----------------
7.1 No Action to Make Representations and Warranties Untrue; Best Efforts
---------------------------------------------------------------------
Regarding Consents and Conditions. Neither Consilium, Buyer, Seller nor the
- ---------------------------------
Shareholder shall take any action that would result in any of their respective
representations and warranties set forth herein becoming materially untrue or in
any of the conditions to Closing set forth herein not being substantially
satisfied. In the event of, and promptly after becoming aware of, the
occurrence of or the pending or threatened occurrence of any event which would
cause or constitute such a breach or inaccuracy, each party shall give detailed
notice thereof to the other and shall use its best efforts to prevent or
promptly remedy such breach or inaccuracy. Each of Consilium, Buyer, Seller and
the Shareholder shall promptly apply for or otherwise seek, and use its best
efforts to obtain, all consents and approvals required to be obtained by it for
the consummation of the Acquisition, and Seller and the Shareholder shall use
their best efforts to obtain all necessary consents, waivers and approvals under
any of Seller's agreements, contracts, licenses or leases in connection with the
18
<PAGE>
Acquisition. Consilium, Buyer, Seller and the Shareholder shall use its best
efforts to effectuate the transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to closing under this Agreement.
7.2 Due Diligence; Investigation and Audits. At any times prior to the
---------------------------------------
Closing as may be reasonably requested, each party shall make available to the
other party and the other party's employees, agents and representatives all
information concerning the operation, business and prospects of such party as
may be reasonably requested by the other party, and provide reasonable access by
such persons to the other party's premises. Each party will cooperate with the
other party for the purpose of permitting the other party to discuss such
party's business and prospects with such party's customers, creditors, suppliers
and other persons having business dealings with such party.
7.3 Cooperation. Subject to compliance with applicable law, both prior to
-----------
and after the Closing, each of Consilium and Seller shall cooperate with the
other in all matters related to the Acquisition, including all actions necessary
to transfer the Intellectual Property Rights.
7.4 Adjustment for Customer Payments, Taxes, Etc. Seller will promptly
--------------------------------------------
remit to Consilium any misdirected payments that are received by Seller from
third parties after the Closing attributable to the Material Contracts and that
are properly payable to Consilium. Consilium will promptly remit to Seller any
misdirected payments received by Consilium from third parties under the Material
Contracts for amounts invoiced by Seller prior to the Closing or otherwise
properly payable to Seller. Upon request and receipt of an appropriate invoice
from Consilium, Seller will promptly remit to Consilium amounts necessary to
reimburse Consilium for any payment made by Consilium on account of required
withholding or taxes which this Agreement provides are to be paid by Seller.
Consilium will promptly remit to Seller any refund received by Consilium from
any taxing or other authority on account of withholding or taxes previously paid
by Consilium that were for the account of Seller. Obligations under this
Section 7.4 will survive for a period of two (2) years following the Closing
Date. Notwithstanding the above, any remittance due from Seller prior to the
payment of all Additional Consideration shall be deducted from the next payment
due to Seller under Section 2.2; any remittance not fully satisfied from the
next such payment shall be remitted by Seller to Consilium promptly after such
payment of Additional Consideration was due.
8. Conditions to Close.
-------------------
8.1 Conditions to Each Party's Obligations to Close the Acquisition. The
---------------------------------------------------------------
respective obligation of each party to consummate the transactions contemplated
hereby shall be subject to the satisfaction of the following conditions:
19
<PAGE>
(a) Approvals. All authorizations, consents, orders or approvals of,
---------
or declarations or filings with, or expiration of waiting periods imposed by,
any Governmental Entity necessary for the consummation of the transactions
contemplated by this Agreement shall have been filed, occurred or been obtained.
(b) Legal Action. No temporary restraining order, preliminary
------------
injunction or permanent injunction or other order preventing the consummation of
the Acquisition shall have been issued by any Governmental Entity and remain in
effect, and no litigation seeking the issuance of such an order or injunction,
or seeking the imposition against Consilium, Buyer, Seller or the Shareholder of
substantial damages if the Acquisition is consummated, shall be pending which,
has a reasonable probability of resulting in such order, injunction or damages.
In the event any such order of injunction shall have been issued, each party
agrees to use its reasonable efforts to have any such injunction lifted.
(c) Statutes. No action shall have been taken, and no statute, rule,
--------
regulation or order shall have been enacted, promulgated or issued or deemed
applicable to the Acquisition by any Governmental Entity which would (i) make
the consummation of the Acquisition illegal, (ii) prohibit Consilium's or
Buyer's ownership or operation of the Purchased Assets or compel Consilium or
Buyer to dispose of or hold separate all or a material portion of the Assets as
a result of the Acquisition, or (iii) render Consilium, Buyer, Seller or the
Shareholder unable to consummate the Acquisition.
8.2 Conditions to Consilium's and Buyer's Obligations to Close.
----------------------------------------------------------
Consilium's and Buyer's obligations to consummate the transactions contemplated
hereby shall be subject to the satisfaction of the following conditions, any one
or more of which may be waived by Consilium and Buyer, in whole or part on or as
of the Closing Date.
(a) Seller's and the Shareholder's Representations and Warranties.
-------------------------------------------------------------
The representation and warranties of Seller and the Shareholder contained in
this Agreement shall be true and correct in all material respects on the Closing
Date with the same effect as though made on that date.
(b) Seller's and Shareholder's Covenants. Seller and the Shareholder
------------------------------------
shall have performed and complied with all of the terms, covenants and
conditions set forth herein which are to be performed or complied with by Seller
or the Shareholder before or as of the Closing Date.
(c) Employees. Not less than 80% of the Taiwan Employees shall have
---------
accepted employment with Buyer directly or indirectly; and each of James Wang,
Hersong Chen and Chris Ting (the "Key Employees") shall have accepted employment
with Buyer pursuant to the terms of the Employment and Noncompetition Agreements
(the "Employment and Noncompetition Agreements").
20
<PAGE>
(d) Shareholder Employment and Noncompetition Agreement. The
---------------------------------------------------
Shareholder shall have accepted employment with Buyer and shall have executed
and delivered a Shareholder Employment and Noncompetition Agreement.
(e) Software Licensing Agreement. Buyer and Seller shall have
----------------------------
executed and delivered the Software Licensing Agreement in substantially the
form attached hereto as Exhibit 8.2(e).
--------------
(f) Consents and Approvals. All material government approvals and
----------------------
agreements and consents of any third party necessary for Seller's consummation
of the transactions contemplated hereby shall have been obtained, and Seller
shall have satisfied any notice requirements under applicable bulk sales laws.
(g) Due Diligence Investigation. Representatives of Consilium shall
---------------------------
have completed a due diligence investigation concerning Seller and the results
of such investigation shall have been satisfactory in the sole discretion of
Consilium.
(h) Assignment of Material Contracts. On or prior to the Closing
--------------------------------
Date, the Material Contracts and the Leases shall have been assigned to Buyer
and Seller shall have received consents to all such assignments from the parties
to the Material Contracts.
(i) Amendment of Agreement; New Contract. On or prior to the Closing
------------------------------------
Date, Seller shall have amended its current agreement with United
Microelectronics Corporation, which has an effective date of June 6, 1994 (the
"UMC Agreement"), to the satisfaction of Consilium, and Seller shall have
entered into an agreement with United Semiconductor Company (the "USC
Agreement") satisfactory to Consilium, each in the sole discretion of Consilium.
(j) Closing Date. The Closing of the Acquisition shall have occurred
------------
on or before July 8, 1996.
8.3 Seller's and Shareholder's Conditions to Close. Seller's and
----------------------------------------------
Shareholder's obligations to consummate the transactions contemplated hereby
shall be subject to the satisfaction of the following conditions, any one or
more of which may be waived by Seller, in whole or in part, on or as of the
Closing Date.
(a) Consilium's and Buyer's Representations and Warranties. The
------------------------------------------------------
representations and warranties of Consilium and Buyer contained in this
Agreement shall be true and correct in all material respects on the Closing Date
with the same effect as though made on that date.
(b) Consilium's and Buyer's Covenants. Consilium and Buyer shall have
---------------------------------
performed and complied with all of the terms, covenants and conditions set forth
21
<PAGE>
herein which are to be performed or complied with by Consilium and Buyer before
or as of the Closing Date.
(c) Consents and Approvals. All material government approvals and
----------------------
agreements and consents of any third party necessary for Consilium's and Buyer's
consummation of the transactions contemplated hereby shall have been obtained.
(d) Offer of Employment. The Key Employees shall be offered
-------------------
employment with Buyer pursuant to terms of the Employment and Noncompetition
Agreements.
(e) Closing Date. The Closing shall have occurred on or before July
------------
8, 1996.
9. The Closing.
-----------
9.1 Closing. The closing of the Acquisition and the other transactions
-------
contemplated herein (the "Closing") shall take place on July 8, 1996, at 2:00
p.m., Pacific Time, at the offices of Gray Cary Ware & Freidenrich in Palo Alto,
California, or at such other time or place as may be mutually agreed by
Consilium and Seller (the "Closing Date").
9.2 Seller's and Shareholder's Actions at the Closing. At the Closing,
-------------------------------------------------
Seller will deliver or cause to be delivered to Buyer the following:
(a) Possession. Full possession and enjoyment of the Purchased
----------
Assets, which, in the case of the equipment and the tangible personal property
included in the Purchased Assets, shall be delivered by making them available
during normal business hours in designated locations at the principal place of
business for the Taiwan Business.
(b) Bills of Sale. Such instruments of sale, assignment and transfer
-------------
conveying all right, title and interest with respect to all of the Purchased
Assets to Buyer, all in such form as Buyer may reasonably request;
(c) Additional Documents. Such additional duly executed documents of
--------------------
assignment or transfer of title as may be reasonably necessary to transfer and
assign to Buyer the Purchased Assets and to permit Buyer to register ownership
of any of the Purchased Assets in its own name;
(d) Consents. All necessary written consents of third parties to the
--------
transfer to Buyer of any item of the Purchased Assets and consents to
assignments of all Material Contracts;
22
<PAGE>
(e) Software Licensing Agreement. The Software Licensing Agreement
----------------------------
required under Section 8.2(e) of this Agreement;
(f) Bring Down Certificate. A certificate addressed to Consilium and
----------------------
the Buyer and executed by the Seller and the Shareholder as of the Closing Date
to the effect that each representation and warranty of Seller and the
Shareholder made in this Agreement is true and correct in all material respects
on and as of the date of such certificate with the same effect as though each
such representation or warranty had been made or given on and as of such date,
and that Seller and the Shareholder have performed and complied with all the
terms, covenants and conditions set forth herein which are to be performed or
complied with by them before or as of the Closing; and
(g) Additional Agreements. The Employment and Noncompetition
---------------------
Agreements and the Shareholder Employment and Noncompetition Agreement required
under Sections 8.2(c) and 8.2(d), respectively, of this Agreement.
9.3 Consilium and Buyer Actions at the Closing. At the Closing, Consilium
------------------------------------------
or Buyer will deliver to Seller:
(a) Payment of Purchase Price. A check or wire transfer of funds
-------------------------
representing the Initial Payment against delivery of the items specified in the
preceding Section 9.2;
(b) Software Licensing Agreement. The Software Licensing Agreement
----------------------------
required under Section 8.2(e) of this Agreement;
(c) Additional Agreements. The Employment and Noncompetition
---------------------
Agreements and the Shareholder Employment and Noncompetition Agreement required
under Sections 8.2(c) and 8.2(d), respectively, of this Agreement; and
(d) Bring Down Certificate. A certificate addressed to the Seller and
----------------------
executed by Consilium and the Buyer as of the Closing Date to the effect that
each representation and warranty of Consilium and Buyer made in this Agreement
is true and correct in all material respects on and as of the date of such
certificate with the same effect as though each such representation or warranty
had been made or given on and as of such date, and that Consilium and Buyer have
performed and complied with all the terms, covenants and conditions set forth
herein which are to be performed or complied with by it before or as of the
Closing.
10. Termination.
-----------
10.1 Termination. This Agreement, and the transactions contemplated
-----------
hereby, may not be terminated except as follows:
(a) Upon the mutual consent of Consilium and Seller; or
23
<PAGE>
(b) By Consilium or Seller if any of the conditions set forth in
Section 7.1 hereof shall not have been satisfied unless those conditions have
been waived by the appropriate party at the time of the Closing; or
(c) By Consilium, if any of the conditions to its obligations set
forth in Section 8.2, hereof, shall not have been satisfied unless those
conditions have been waived by Consilium at the time of Closing; or
(d) By Seller, if any of the conditions to its obligations set forth
in Section 8.3, hereof, shall not have been satisfied unless those conditions
have been waived by Seller at the time of Closing; or
(e) By Consilium or Seller, if the Closing has not occurred on or
before July 8, 1996 (or such later date as may have been approved by the parties
hereto), provided, however, that the right to terminate this Agreement under
this Paragraph 10.1(e) shall not be available to any party whose failure to
fulfill or perform any obligation under this Agreement has been the cause of, or
has resulted in, the failure of the Closing to occur on or before such date.
10.2 Remedies. If Consilium or Seller shall terminate this Agreement
--------
pursuant to the provisions of this Section 10, such termination shall not waive
or terminate any rights or remedies which the terminating party may have against
the other party hereto, whether at law or equity, and such termination shall not
affect the confidentiality obligations of any party hereto. In addition to any
other rights or remedies to which a party may be entitled by virtue of the other
party's breach hereof, the nonbreaching party shall be entitled to require the
breaching party to consummate the transactions contemplated hereby in accordance
with the terms of this Agreement, if necessary through injunction or other court
order or process. Nothing contained herein shall be deemed to require any party
to terminate this Agreement rather than to proceed with the Closing if a
condition precedent to the obligations of such party has not been satisfied.
11. Survival of Representations, Warranties and Covenants; Indemnification.
----------------------------------------------------------------------
11.1 Survival of Representations, Warranties and Covenants. The
-----------------------------------------------------
representations, warranties, agreements and covenants of Seller and Shareholder
contained in this Agreement shall survive the Closing for a period ending at
midnight, PST, on the second anniversary of the Closing Date and shall in no
manner be limited by any investigation of the subject matter thereof made by or
on behalf of either party or by the satisfaction of any condition to the
Closing. At the end of such period, all such agreements, covenants,
representations or warranties by Seller shall expire and be of no further force
and effect, provided, however, that Seller will remain liable thereafter to the
extent one or more Claims (as defined in Section 11.2) shall have been asserted
in writing by Consilium on or before the expiration of such period. Consilium's
and Buyer's representations, warranties and covenants contained in this
Agreement shall
24
<PAGE>
terminate as of the earlier of the termination of this Agreement in accordance
with its terms or the Closing, unless otherwise specified herein.
11.2 Indemnification by Seller and the Shareholder.
---------------------------------------------
(a) Seller and the Shareholder will jointly and severally defend,
indemnify and hold harmless Consilium from and against any and all demands,
claims, debts, damages, losses and liabilities (individually a "Claim" or
collectively "Claims") which are asserted against, incurred by or imposed upon
Buyer and which constitute, directly result from, or relate to (i) the
inaccuracy of any representation or the breach of any warranty made in this
Agreement or otherwise made in writing and delivered by any Seller or
Shareholder to Consilium in connection with the transactions contemplated
hereby; (ii) any failure of Seller or the Shareholder to perform or comply with
any of their respective covenants and agreements set forth herein or in any
other document executed in connection with the transactions contemplated hereby;
(iii) any liabilities, obligations or commitments of, and all claims against
Seller, its shareholders, directors, officers, employees or agents or the Taiwan
Subcontractors involving any of the Purchased Assets (including the Intellectual
Property Rights), arising from or based upon (A) any condition, event or action
existing on or occurring before the Closing Date, (B) Seller's use and operation
of any retained assets after the Closing Date, or (C) noncompliance with the
bulk sales or similar laws of Taiwan, except to the extent that such
liabilities, obligations, commitments or claims are Assumed Liabilities and (iv)
any Excluded Liabilities.
(b) Consilium shall indemnify and save harmless the Seller and the
Shareholder from and against any and all Claims which are asserted against,
incurred by, or imposed upon the Seller or the Shareholder and which constitute,
directly result from, or relate to the inaccuracy of any representation or the
breach of any warranty made in this Agreement or otherwise made in writing and
delivered by Consilium or the Buyer to the Seller or the Shareholder in
connection with the transactions contemplated hereby.
(c) The indemnification obligations set forth herein shall terminate
as to any Claim (or any potential Claim by an appropriate party) not asserted by
Consilium in writing prior to midnight, PST, on the second anniversary of the
Closing Date. The term "Claim" shall include, but not be limited to, any claim
or action by any claimant, creditor, interest holder or other party in interest.
As used in this Section 11, the term "Indemnitor" means the party against whom
indemnification hereunder is sought, and the term "Indemnitee" means the party
seeking indemnification hereunder. The following are conditions precedent to
any liability of an Indemnitor under Section 11.2(a) or Section 11.2(b):
(i) Indemnitee shall give Indemnitor prompt written notice of
any event or assertion of which it has knowledge concerning any Claims and as to
which it may request indemnification.
25
<PAGE>
(ii) Indemnitee shall cooperate with and assist Indemnitor in
defending or settling the Claims.
(iii) Indemnitee shall permit Indemnitor to control the defense
or settlement of the Claims, including selection of counsel to represent
Indemnitor and Indemnitee, provided that such counsel shall be reasonably
satisfactory to Indemnitee. Indemnitee may maintain separate counsel at its own
cost and expense in connection with any Claim.
(iv) In no event shall Indemnitee compromise or settle a Claim
without the prior written approval of Indemnitor, which approval shall not be
unreasonably withheld.
(v) The assumption of the defense of any Claim by Indemnitor
shall be an acknowledgment by Indemnitor that such Claim is subject to
indemnification under the provisions of this Section 11.2 and that such
provisions are binding on Indemnitor. If, however, Indemnitor fails or refuses
to undertake the defense of such Claim within ten (10) days after written notice
of such Claim has been delivered to Indemnitor by Indemnitee, Indemnitee shall
have the right to undertake the defense, and, subject to Section 11.2(c)(iv)
above, compromise and settlement of such Claim with counsel of its own choosing.
Failure of Indemnitee to furnish written notice to Indemnitor of a Claim shall
not release Indemnitor from Indemnitor's obligations hereunder, except to the
extent Indemnitor is prejudiced by such failure.
(d) The amounts for which Indemnitee may seek indemnification under
this Section shall extend to, and as used herein the term "Claim" shall include,
reasonable attorneys' fees, reasonable accountants' fees, costs of litigation
and other expenses reasonably incurred by Indemnitee in the investigation or
defense of any claim asserted against Indemnitee and any amounts paid in
settlement or compromise of any claim asserted against it, but only to the
extent that the claim asserted is or would have been subject to the provisions
of this Section 11.
(e) Subject to the next sentence, any payment due to Indemnitee (or
payable to Indemnitee) pursuant to a Claim shall be paid by bank cashier's check
or wire transfer. Without limiting any other rights it may have, Consilium may,
at its sole option by notice to Seller, satisfy an amount due to Consilium
pursuant to any Claim by withholding such amount from any amounts due to or to
become due to Seller pursuant to Section 2.2 hereof.
(f) The indemnification obligations of an Indemnitor under this
Section 11.2 shall continue in full force and effect as to any Claim as to which
notice has been given pursuant to Section 11.2(c)(i) until such Claim has been
settled either by mutual agreement of the parties concerned, by mediation or
arbitration in accordance with the provisions of this Agreement or in the event
of a Claim resulting from legal action by a third party, by the final
arbitration award or final order, decree or judgment
26
<PAGE>
of a court of competent jurisdiction in the United States of America (the time
for appeal having expired with no appeal having been taken). Any dispute over a
claim under Section 11.2 (a "Contested Claim") shall be settled by mediation or
arbitration in accordance with Sections 12.14 and 12.15. The right of Indemnitee
to be indemnified under this Section 11.2 shall not limit, reduce or otherwise
affect any other rights and remedies it may have with respect to the matters
indemnified under this Agreement.
12. Miscellaneous Provisions.
------------------------
12.1 Notices. Any notices or other communications required or permitted
-------
hereunder shall be in writing and shall be personally delivered, deposited in
the United States mail, first class postage pre-paid with return receipt
requested, transmitted by telecopy or telex, or sent by a private messenger or
carrier which issues delivery receipts, to the parties at the following
addresses:
(i) If to Seller:
Systematic Designs International, Inc.
11805 N.E. 99th Street, Suite 1380
Vancouver, WA 98682
Attn: Jack C. Griffith
with copies to:
Buckley Le Chevalier, P.C.
Five Centerpointe Drive, Suite 250
Lake Oswego, OR 97035
Attn: Robert Le Chevalier
(ii) If to the Shareholder:
Jen-Shih Jessi Niou
18005 NE 99th St.
Suite 1380
Vancouver, WA 98682
with copies to:
Jane M. Niou
1512 SE 126th Court
Vancouver, WA 98683
27
<PAGE>
(iii) If to Consilium or Buyer:
Consilium, Inc.
485 Clyde Avenue
Mountain View, CA 94043
Attn: Ed Norton
with a copy to:
Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, CA 94301-1825
Attention: Diane Holt Frankle
Any party may change the addresses specified above by notice to the other party
in accordance with this Section. Notices shall be effective when actually
received.
12.2 Attorney Fees. If any legal action is necessary to enforce the terms
-------------
and conditions of this Agreement, the prevailing party shall be entitled to
recover all costs of suit and reasonable attorneys' fees.
12.3 Expenses; Finder's Fees. Whether or not the transactions contemplated
-----------------------
hereby are consummated, each of the parties hereto shall pay its own expenses
(including the fees of its attorneys, other professionals and the commissions,
if any, due to any broker) in connection with this Agreement and the
transactions contemplated hereby. Each party shall indemnify and hold the other
party harmless from and against any claim or liability in the nature of a
commission or finders' fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such party or any of its employees or agents is responsible.
12.4 Entire Agreement. This Agreement, including the Exhibits hereto,
----------------
contains all of the terms and provisions and constitutes the entire agreement
between Buyer and Seller with respect to the subject matter hereof. This
Agreement supersedes all prior written, oral and implied understandings,
representations and agreements of Consilium, Buyer, Seller and the Shareholder
relating to the subject matter of this Agreement.
12.5 Amendment. This Agreement may not be amended, modified or
---------
supplemented except pursuant to an instrument in writing executed and delivered
on behalf of each of Consilium, Buyer, Seller and the Shareholder which
instrument, when so executed and delivered, shall thereupon become a part of
this Agreement.
12.6 Further Assurances. From time to time upon request, whether on or
------------------
after the Closing Date, and without further consideration, Consilium, Seller,
Buyer and the Shareholder shall execute and deliver such further instruments and
take such further
28
<PAGE>
actions as the other may reasonably requires to vest buyer with full right and
title to and possession of all Purchased Assets or otherwise to fulfill more
completely the purposes of this Agreement. The officers of Seller are directed
and fully authorized in the name of Seller or otherwise to take, and will take,
all such lawful and necessary or desirable actions.
12.7 Binding Effect. This Agreement and the terms and provisions hereof,
--------------
shall inure to the benefit of, and be binding upon, Consilium, Buyer, Seller and
the Shareholder and each of their respective assigns, successors and legal
representatives.
12.8 Headings. The article, section and other headings contained in this
--------
Agreement are for convenience only, and shall not be used in the construction of
this Agreement.
12.9 Applicable Law. This Agreement, except Section 5.6, shall be
--------------
construed and enforced in accordance with the laws of the State of California as
applied to agreements made and performed in California by residents of
California. Section 5.6 of this Agreement shall be construed and enforced in
accordance with the laws of the State of Washington as applied to agreements
made and performed in Washington by residents of Washington.
12.10 Invalid Provisions. If any term, provision, covenant, or condition
------------------
of this Agreement, or the application thereof to any person or circumstance,
shall be held by a court of competent jurisdiction to be invalid, unenforceable,
or void, the remainder of this Agreement and such term, provision, covenant, or
condition as applied to other persons or circumstances shall remain in full
force and effect.
12.11 Counterparts. This Agreement may be executed in counterparts, each
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of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Agreement shall not bind Consilium, Seller,
Buyer or the Shareholder as an offer or an agreement unless signed by the party
sought to be bound.
12.12 Confidentiality of Information. Until the Closing, all information
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given to either party by the other in connection with this Agreement and
designated as "confidential" by the disclosing party shall be used only for
purposes related to the consummation of the transactions contemplated herein,
and shall be disclosed to either party's employees and representatives and
appropriate third parties only on a "need to know" basis in connection with such
purposes. If the Closing does not occur for any reason, each party shall return
to the other all confidential materials which were provided to such party by the
other party, its employees or customers, and all such disclosures shall be
treated as confidential and shall not be disclosed by the receiving party, its
representatives or employees to others except insofar (a) as such information is
or becomes a matter of public knowledge through no act or failure to act of the
receiving party, its representatives or employees, (b) as may be required by
law, (c) as such information becomes available to the receiving party on a non-
confidential basis
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from a source other than the disclosing party without breach of any confidential
relationship with the disclosing party, or (d) as such information was known to
receiving party prior to its disclosure to the receiving party by the disclosing
party.
12.13 Advice of Legal Counsel. Each party acknowledges and represents
-----------------------
that, in executing this Agreement, it has had the opportunity to seek advice as
to its legal rights from legal counsel and that the person signing on its behalf
has read and understood all of the terms and provisions of this Agreement.
Further, each party has reviewed this Agreement, which may not be construed
against any party by reason of its preparation or word processing.
12.14 Alternative Dispute Resolution. The parties will attempt to settle
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any claim or controversy arising out of this Agreement through consultation and
negotiation in good faith and in a spirit of mutual cooperation. If those
attempts fail, then such dispute will be mediated by either the Judicial
Arbitration and Mediation Service in San Francisco, California or a mediator
mutually acceptable to the parties. By mutual agreement, however, the parties
may postpone mediation until they have each completed some specified but limited
discovery regarding the dispute. The parties may also mutually agree to replace
mediation with some other form of alternative dispute resolution ("ADR"), such
as neutral fact-finding or a mini-trial. Any dispute which the parties cannot
resolve through negotiation, mediation, or another form of ADR within sixty (60)
days of the date of the initial demand for negotiation, mediation, or ADR by one
of the parties shall be submitted to binding arbitration, in accordance with
Section 12.15.
12.15 Arbitration. Any claim, dispute, or controversy arising out of or
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in connection with or relating to this Agreement or the breach or alleged breach
thereof will be submitted by the parties to arbitration by the American
Arbitration Association (the "Association") in the City of San Jose, State of
California, United States of America under the commercial rules then in effect
for that Association, except as provided herein. Each party will choose one
arbitrator within thirty (30) days of receipt of the notice of intent to
arbitrate. Within sixty (60) days of receipt of the notice of intent to
arbitrate, the two arbitrators will choose a neutral third arbitrator who will
act as chairman. If no arbitrator is appointed within the times herein provided,
or any extension of time which is mutually agreed upon, the Association will
make such appointment within thirty (30) days of such failure. The parties will
be entitled to discovery as provided in Sections 1283.05 and 12831.1 of the Code
of Civil Procedure of the State of California or any successor provision,
whether or not the California Arbitration Act is deemed to apply to the
arbitration. The award rendered by the arbitrators will include costs of
arbitration, reasonable attorneys' fees, and reasonable costs for expert and
other witnesses, and judgment on such award may be entered in any court having
jurisdiction thereof. Nothing in this Agreement will be deemed as preventing
either party from seeking injunctive relief (or any other provisional remedy)
from any court having jurisdiction over the parties and the subject matter of
the dispute as provided under Sections 5.6 or 10.2, as necessary to enforce
rights under Section 12.6
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or as necessary to protect either party's name, proprietary information, trade
secrets, know-how, or any other Intellectual Property Rights pursuant to Section
12.12.
IN WITNESS HEREOF, the parties hereto have duly executed this Agreement, as
of the day and year first above written.
"SELLER" "CONSILIUM"
SYSTEMATIC DESIGNS CONSILIUM, INC.
INTERNATIONAL, INC.
By: /s/Jen-Shih Jessi Niou By: /s/Jonathan J. Golovin
---------------------- ----------------------
"SHAREHOLDER" "BUYER"
JEN-SHIH JESSI NIOU CONSILIUM TAIWAN, INC.
By: /s/Jen-Shih Jessi Niou By: /s/Clifton Wong
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