<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended July 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0000849433
ANSOFT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 72-1001909
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
Four Station Square, Suite 660
Pittsburgh, Pennsylvania 15219-1119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 261-3200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares of the registrant's Common Stock outstanding as of the
close of business on September 4, 1996 was 7,643,459.
<PAGE> 2
ANSOFT CORPORATION
FORM 10-Q
INDEX
Part I FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets - July 31, 1996
and April 30, 1996 1
Consolidated Statements of Operations - Three months
ended July 31, 1996 and 1995 2
Consolidated Statements of Cash Flows - Three months
ended July 31, 1996 and 1995 3
Notes to the Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANSOFT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
July 31, April 30,
1996 1996
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 406 $10,728
Accounts receivable 1,820 1,666
Marketable Securities held to maturity 554 119
Deferred Taxes 700 700
Prepaid expenses and other assets 395 91
------- -------
Total current assets 3,875 13,304
Plant and Equipment 1,026 724
Marketable Securities held to maturity 8,554 1,340
Other asset 3 13
Intangible asset 3,058 10
------- -------
Total assets $16,516 $15,391
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Line of Credit $ 3,300 $ --
Accounts payable 320 345
Accrued expenses 592 131
Accrued wages 87 209
Deferred revenue 657 415
------- -------
Total current liabilities 4,956 1,100
Total liabilities 4,956 1,100
------- -------
Stockholders' equity:
Preferred stock, par value $.01 per share;
1,000 shares authorized, no shares
outstanding -- --
Common stock, par value $.01 per share;
10,000 authorized shares; issued and
outstanding 7,641 and 7,636
shares, respectively 76 76
Additional paid-in capital 17,210 17,204
Accumulated deficit (5,726) (2,989)
------- -------
Total stockholders' equity 11,560 14,291
------- -------
Total liabilities and stockholders'
equity $16,516 $15,391
======= =======
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 1
<PAGE> 4
ANSOFT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended July 31,
1996 1995
---- ----
<S> <C> <C>
Revenues:
License $ 1,961 $ 1,780
Service and other 357 89
------- -------
Total revenue 2,318 1,869
Costs and expenses:
Sales and marketing 1,429 1,110
Research and development 498 403
General and administrative 294 263
In process research and development 3,054 --
------- -------
Total costs and expenses 5,275 1,776
------- -------
Income (loss) from
operations (2,957) 93
Interest income 220 --
Interest expense -- (2)
------- -------
Income (loss) before income taxes (2,737) 91
Income taxes -- --
------- -------
Net income (loss) $(2,737) $ 91
======= =======
Net income (loss) per share $ (0.35) $ 0.01
======= =======
Weighted average shares
outstanding 7,907 6,893
======= =======
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 2
<PAGE> 5
ANSOFT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three months ended July 31,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,737) $ 91
Adjustments to reconcile net loss to
net cash provided by operating activities:
Purchased in process research and development 3,054 --
Depreciation 58 44
Amortization 6 5
Changes in assets and liabilities:
Accounts receivable (155) (32)
Prepaid expenses and other assets 7 --
Other long-term assets 10 --
Accounts payable (25) (66)
Accrued wages and expenses (152) 59
Deferred revenue -- 53
-------- -----
Net cash provided by operating activities 66 154
-------- -----
Cash flows from investing activities:
Purchases of plant and equipment (145) (71)
Acquisition of the EBU, net (5,600) --
Purchases of marketable securities
held to maturity (7,949) --
-------- -----
Net cash used in investing activities (13,694) (71)
-------- -----
Cash flows from financing activities:
Proceeds from line of credit 3,300 --
Payments on note payable -- (5)
Proceeds from the issuance of common stock, net 6 12
Proceeds from related party stockholders, net -- (140)
-------- -----
Net cash provided by (used in) financing activities 3,306 (133)
-------- -----
Net increase (decrease) in cash and
cash equivalents (10,322) (50)
Cash and cash equivalents at beginning of period 10,728 116
-------- -----
Cash and cash equivalents at end of period 406 66
======== =====
Supplemental disclosures of cash flow information:
Cash paid for interest $ -- $ 2
======== =====
Cash paid for income taxes $ 8 $ 6
======== =====
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 3
<PAGE> 6
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. In the opinion of management,
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of financial position and results of operations have been
made. Operating results for interim periods are not necessarily indicative of
results which may be expected for a full year. The information included in this
Form 10-Q should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the fiscal year
ended April 30, 1996 financial statements and notes thereto included in the
Company's annual report on Form 10-K filed with the Commission.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and disclosure of contingent assets and liabilities. The estimates
and assumptions used in the accompanying financial statements are based on
management's evaluation of the relevant facts and circumstances as of the date
of the financial statements. Actual results may differ from those estimates.
(2) Acquisition and related Intangible Assets
On July 24, 1996, the Company acquired The MacNeal Schwendler
Corporation's ("MSC") Electronics Business Unit (the "EBU") for $5.6 million in
cash. The acquisition has been accounted for as a purchase, and the financial
results of the EBU have been included in the accompanying consolidated
financial statements since the date of the acquisition. The cost of the
acquisition has been allocated on the basis of the estimated fair value of the
assets acquired and the liabilities assumed. The allocation of the acquisition
resulted in an in process research and development charge of $3.1 million
because certain acquired technology had not reached technological feasibility.
The intangible assets of $2.5 million and $560,000 consist of the customer list
and established work force, respectively. They are being amortized on a
straight line basis over a seven and three year life, respectively, commencing
in August 1996.
The fair value of the assets and liabilities acquired are presented below:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Plant and Equipment.............................. $ 215
Other Assets..................................... 11
Accrued Liabilities.............................. (491)
Deferred Revenue................................. (243)
In-process research and development.............. 3,054
Intangible assets................................ 3,054
-------
Net assets acquired......................... $ 5,600
=======
</TABLE>
The following unaudited pro forma summary presents information as if the
acquisition of the EBU occurred at the beginning of the period presented. The
EBU has no separate legal status as it was an integral part of MSC's overall
operations. As a result, separate financial statements have not been maintained
for the EBU. Historically, MSC did not allocate general and administrative
costs to the EBU, so any such allocation at this time would be arbitrary. The
pro forma information is provided for information purposes only. It is based on
historical information and does not necessarily reflect the actual results that
would have occurred, nor is it necessarily indicative of future results of
operations of the combined enterprise.
Page 4
<PAGE> 7
<TABLE>
<CAPTION>
Three months ended July 31,
1996 1995
---- ---
(In thousands)
<S> <C> <C> <C>
Revenue................................... $ 2,970 $ 2,515
Net income (loss)......................... $(2,631) $ 166
Net income (loss) per share............... $ (0.33) $ 0.02
</TABLE>
(3) Borrowings
The Company has available a secured line of credit from a domestic
financial institution at an interest rate varying from a minimum of 1% below
the Broker's Call Rate to a maximum equaling the Broker's Call Rate. The line
of credit is secured by the marketable securities held with the institution. As
of July 31, 1996, the outstanding balance was $3.3 million and the interest
rate charged was 6.25%. The availability of the unused line of credit,
approximately $1.2 million as of July 31, 1996, is subject to certain borrowing
base requirements.
Page 5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The Company develops, markets and supports EDA software, based upon
electromagnetic principles, for the design of electronic, communications and
electromechanical components and systems. The Company was incorporated in 1984
and commenced commercial shipments of its first software product, focused on
the electronic component industry, in 1987. The Company subsequently offered
solutions in both electromechanical ("EM") and signal integrity ("SI")
products. The SI products are targeted at two markets: High Speed and High
Frequency. The importance of any individual product has diminished as the
Company has introduced new products.
Revenue consists primarily of fees for licenses of the Company's software
products and fees for customer service and support. Revenue from the sale of
software licenses is recognized upon shipment of the products and fulfillment
of acceptance terms, if any. No significant obligations, including the
performance of services essential to the functionality of the software, remain
unfulfilled at the time revenue is recognized on software licenses, and with
respect to any remaining insignificant obligations, either the related revenue
is unbundled and deferred, based on the estimated fair value of related
services, or the related estimated costs are accrued. When the Company receives
advance payment for software products, such payments are recorded as deferred
revenue and recognized as revenue when products are shipped and other
obligations, if any, have been satisfied. Other revenue from customer training,
support and other services is recognized as the service is performed.
Costs directly attributable to the cost of license and service revenue are
not material in any reported period. Accordingly, the Company has not
separately disclosed these costs.
The discussion in this Form 10-Q contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company that involve risks and uncertainties. The Company's
future results could differ materially from the results presented herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed from time to time in the Company's public reports
filed with the Securities and Exchange Commission, including the risks
discussed in the "Risk Factors" section included in the Company's Registration
Statement on Form S-1 as declared effective by the Securities and Exchange
Commission on April 3, 1996 and the report on Form 10-K for the fiscal year
ended April 30, 1996.
Page 6
<PAGE> 9
Results of Operations
The following table sets forth the percentage of total revenue of each
item in the Company's statements of operations:
<TABLE>
<CAPTION>
Three months ended July 31,
1996 1995
---- ----
<S> <C> <C>
Revenues:
License 85% 95%
Service and other 15 5
---- ----
Total revenue 100 100
Costs and expenses:
Sales and marketing 62 59
Research and development 21 22
General and administrative 12 14
In process research and development 132 --
---- ----
Total costs and expenses 227 95
---- ----
Income (loss) from operations (127) 5
Interest income 9 --
Interest expense -- --
---- ----
Income (loss) before income taxes (118) 5
Income taxes -- --
---- ----
Net income (loss) (118)% 5%
==== ====
</TABLE>
Comparison of The Three Months Ended July 31, 1996 and 1995
Revenue. Total revenue for the first quarter of fiscal 1997 was $2.3
million, an increase of 24% as compared to the $1.9 million reported in the
first quarter of fiscal 1996. The revenue growth is primarily attributed to the
continued growth of the installed base of customers licensing the Company's
existing products and to a lesser extent, new product introductions. In
addition, the increase in service and other revenue was attributed to increased
purchased annual maintenance agreements and reflects the continued growth of
the installed base of customers and increased focus on marketing annual
maintenance agreements and to a lesser extent, revenue recognized on the
research and development cost sharing agreements.
International revenue accounted for 38% and 37% of the Company's total
revenue in the first quarter of fiscal 1997 and 1996, respectively. The Company
expects that international revenues will account for an increasing portion of
its revenues in the future.
Revenue from the HP agreement accounted for 16% and 8% revenue in the
first quarter of fiscal 1997 and 1996, respectively. The HP Agreement will
expire in January 1997, and will not be renewed. HP has the right to sell the
HFSS product through January 1998. Since January 1994, the Company has directly
marketed its Maxwell(R) Eminence product, which expands on the functionality of
HFSS, to target the commercial wireless communications and defense/aerospace
markets through its worldwide direct sales force and its international
distributors.
Page 7
<PAGE> 10
Sales and Marketing. Sales and marketing expenses consist of salaries,
commissions paid to internal sales and marketing personnel and international
distributors, promotional costs and related operating expenses. Sales and
marketing expenses increased by 29% to $1.4 million in the first quarter of
fiscal 1997, as compared to $1.1 million in the first quarter of fiscal 1996.
Sales and Marketing expense represented 62% of total revenue, compared to 59%
in the first quarter of fiscal 1996. The increase is primarily attributed to
increased marketing efforts, including advertising in trade publications and
increased participation in industry trade shows. The Company expects to
increase sales and marketing expenditures both domestically and internationally
as part of its continuing effort to expand its markets, introduce new products,
build marketing staff and programs and expand its international presence.
Research and Development Expenses. Research and development expenses
include all costs associated with the development of new products and
enhancements to existing products. Research and development expenses increased
24% to $498,000 in the first quarter of fiscal 1997, as compared to $403,000 in
the first quarter of fiscal 1996. The increase is due to increased costs
associated with continuing product development and enhancement of existing
products. The Company anticipates that it will continue to devote substantial
resources to product research and development.
General and Administrative Expenses. General and administrative expenses
increased 12% to $294,000 in the first quarter of fiscal 1997, as compared to
$263,000 in the first quarter of fiscal 1996. The increase is due to additional
costs required to support the increase in operations, including the hiring of
additional administrative personnel, along with other general cost increases.
The Company expects general and administrative expenses to continue to increase
as a result of the Company's recent acquisition.
In Process Research and Development Expenses. On July 24, 1996, the
Company acquired MSC's EBU for $5.6 million in cash. The cost of the
acquisition has been allocated on the basis of the estimated fair value of the
assets acquired and the liabilities assumed. The allocation of the acquisition
resulted in an in process research and development charge of $3.1 million
because certain acquired technology had not reached technological feasibility.
Liquidity and Capital Resources
As of July 31, 1996, the Company had $406,000 in cash and cash
equivalents. Net cash provided by operating activities was $66,000 in the
first quarter of fiscal 1997. Net cash used in investing activities was $13.7
million in the first quarter of fiscal 1997, consisting primarily of the
purchase of marketable securities held to maturity of $7.9 million and the
acquisition of the EBU for $5.6 million. Net cash used in financing activities
consisted primarily of $3.3 million in proceeds received on the Company's line
of credit which was used as part of the cash payment for the acquisition.
As of July 31, 1996, the Company had a net working capital of $(1.1)
million. The negative working capital balance resulting from the use of working
capital in connection with the acquisition of the EBU in July 1996. The Company
also has available an unused portion of a line of credit, which is
collateralized by the marketable securities of the Company. As of July 31,
1996, $3.3 million was outstanding under the line of credit with approximately
$1.2 million available for borrowing on this line of credit. The Company
believes that the available funds, together with the cash available under its
line of credit and cash flows from operations will be sufficient to meet its
anticipated cash needs for working capital and capital expenditures for at
least the next twelve months. Thereafter, if cash generated from operations is
insufficient to satisfy the Company's liquidity requirements, the Company may
seek additional funds through equity or debt financing. There can be no
assurance that additional financing will be available or that, if available,
such financing will be on terms favorable to the Company.
Page 8
<PAGE> 11
PART II FINANCIAL INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits filed as part of this Quarterly Report on Form 10Q are listed
below and are incorporated herein by reference:
Exhibit No.
10.1 Asset Purchase Agreement By and Between Ansoft Corporation
and The MacNeal Schwendler Corporation dated July 24, 1996.
11.1 Statement regarding computation of per share earnings.
27.1 Financial Data Schedule.
(b) The Company filed the following reports on Form 8-K during the period from
April 30, 1996 to July 31, 1996.
Date
of Report Item Reported
--------- -------------
May 8, 1996 Item 5. Other Events.
June 5, 1996 Item 5. Other Events.
Page 9
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date September 11, 1996
ANSOFT CORPORATION
By: /s/ NICHOLAS CSENDES
------------------------
Nicholas Csendes
President and Chief Executive Officer
By: /s/ THOMAS A.N. MILLER
------------------------
Thomas A.N. Miller
Chief Financial Officer and Director
Page 10
<PAGE> 1
EXHIBIT 10.1
==============================================================================
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ANSOFT CORPORATION
AND
THE MACNEAL - SCHWENDLER CORPORATION
FOR THE PURCHASE OF THE ASSETS OF ITS
ELECTRONIC BUSINESS UNIT DIVISION
JULY 24, 1996
=============================================================================
<PAGE> 2
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement) is entered into and is
effective this 24th day of July, 1996, by and between Ansoft Corporation, a
Delaware corporation ("Purchaser"), and The MacNeal-Schwendler Corporation, a
Delaware corporation ("Seller"). (The term "Party", as used herein, shall mean
either Seller or Purchaser, individually, as the context so requires, and the
term "Parties", as used herein, shall mean Seller and Purchaser, together).
RECITALS:
This Agreement sets forth the terms and conditions upon which Purchaser is
purchasing certain assets used by Seller in the conduct of the business of its
Electronic Business Unit (the "EBU") division (the "Business"), and Seller is
selling to Purchaser such assets (the "EBU Assets").
In consideration of the mutual agreements covenants, representations and
warranties contained herein, and in reliance thereon, Purchaser and Seller
hereby agree as follows:
1. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1. "AFFILIATE" shall mean any company or other entity which controls, is
controlled by or is under common control with the designated Party. For the
purposes of the foregoing, ownership, directly or indirectly, of twenty percent
(20%) or more of the voting stock or other equity interest shall be deemed to
constitute control.
1.2. "ENCUMBRANCE" shall mean any right to, or interest in, property,
which subsists in a third-party and which constitutes a claim, lien, charge or
liability attached to and binding upon the property, including, but, not limited
to, a judgment lien, mechanics lien, lease, and security interest.
1.3. "KNOWLEDGE" and words of similar import shall mean, with respect to
any Party, actual knowledge of a particular fact or other matter being possessed
by any officer or other individual currently having principal responsibility for
a business or administrative function of such Party, including individuals
serving in such a capacity in or for the Business.
2. TRANSFER OF ASSETS AND PROPERTIES
2.1. EBU ASSETS. Subject to the terms and conditions of this Agreement,
Seller shall sell and convey to Purchaser, free and clear of all Encumbrances
whatsoever (other than those encumbrances specifically identified in SCHEDULE
2.1 (the "Permitted Encumbrances")) , and
<PAGE> 3
Purchaser shall purchase from Seller, all of Seller's right, title an interest
in and to the EBU Assets listed or described on SCHEDULE 2.1. Notwithstanding
anything to the contrary contained herein, any part of Seller's proprietary
software programs known as "MSC/ARIES" and "MSC/NASTRAN" that are currently
incorporated in the software programs known as "MSC/EMAS" and "Microwave Lab"
are expressly excluded from the EBU Assets. However, Seller and Purchaser do
hereby acknowledge that, as a condition to and in consideration for this
Agreement, Purchaser shall grant Seller a non-exclusive, royalty-free license
to certain portions of the software code contained in "MSC/ARIES" and
"MSC/NASTRAN" in the form of Exhibit 5.2.4 hereto.
3. CONSIDERATION AND TERMS
3.1. CONSIDERATION FOR EBU ASSETS.
3.1.1. The aggregate monetary consideration to be paid by Purchaser
to Seller for the EBU Assets (the "Purchase Price") shall consist of a cash
payment in the amount of Five Million Six Hundred Thousand Dollars ($5,600,000).
3.1.2. As additional consideration, Purchaser also shall assume and
pay the Assumed Liabilities.
3.2. PAYMENT OF CONSIDERATION. Subject to the terms and conditions of
this Agreement, at the Closing (as defined below), Purchaser shall deliver to
Seller the aggregate amount due under Section 3.1.1, by wire transfer of
immediately available funds sent to Seller's bank account as follows, or to such
other bank within the continental United States as Seller may have designated by
notice to Purchaser:
Bank Name: Union Bank of California
Bank Address: 400 California Street
San Francisco, CA 94104
ABA Number: #1210-0001-5
Account Name: The MacNeal-Schwendler Corporation
Account Number: #032-019610
3.3. ALLOCATION OF PURCHASE PRICE. The Parties agree that the
Purchase Price shall be allocated based upon the fair market values of the EBU
Assets conforming with the requirements of Section 1060 of the Code. For a
period up to 90 days after the Closing Date (as defined below), the Parties
agree to negotiate with each other in good faith in an effort to agree on a
mutually acceptable allocation of the Purchase Price among the EBU Assets;
provided, however, that, should the Parties fail to agree, each shall be free to
establish its own allocation for all purposes, including its own tax filings.
Each Party agrees not to assert, in connection with any tax return, tax audit or
similar proceeding, any allocation of the Purchase Price that differs from that
agreed upon pursuant to this Section.
-2-
<PAGE> 4
3.4. CERTAIN TAXES. Seller shall bear and be responsible for payment of,
or reimbursement to Purchaser for, all taxes, duties, charges, fees, levies or
other assessment imposed by any taxing authority (the "Taxes") that are or may
be imposed by any government or political subdivision thereof and that are
payable or arise as a result of this Agreement, or any transfer pursuant to this
Agreement or any Ancillary Agreement (as defined below), notwithstanding the
Party upon which such Taxes are actually imposed. Upon the request of Seller,
Purchaser shall furnish to Seller properly completed exemption certificates for
any Taxes from which Seller claims to be exempt.
4. ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1. GENERAL LIMITATION ON ASSUMPTION OF LIABILITIES. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2, 4.3, and 4.5
below, Seller shall transfer the EBU Assets to Purchaser free and clear of all
Encumbrances, and without any assumption of liabilities and obligations, and
Purchaser shall not, by virtue of its purchase of the EBU Assets, assume or
become responsible for any liabilities or obligations of Seller or any other
Person (defined to include any individual, corporation, company, limited or
general partnership, trust or estate, joint venture, association or other
entity). For purposes of this Section 4 the phrase "liabilities and obligations"
shall include, without limitation, any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown, asserted or
unasserted, choate or inchoate, liquidated or unliquidated, secured or
unsecured.
4.2. ASSUMED LIABILITIES AND OBLIGATIONS. On the Closing Date, Purchaser
shall acquire the EBU Assets subject only to, and shall undertake, assume,
perform and otherwise pay, satisfy and discharge, and hold Seller harmless from
the following liabilities and obligations, excluding any liabilities and
obligations to Affiliates of Seller (collectively, the "Assumed Liabilities"):
(i) all obligations of Seller accruing subsequent to the Closing
Date under the contracts, leases, agreements, orders, guarantees and commitments
listed or described in SCHEDULE 2.1, provided that the rights thereunder have
been duly and effectively assigned to Purchaser;
(ii) all obligations of Seller accruing after the Closing Date
under the Permits and Licenses described in SCHEDULE 2.1, provided that the
rights thereunder have been duly and effectively assigned to Purchaser;
(iii) the payables and accrued expenses of Seller at the Closing
Date as listed on Schedule 4.2;
(iv) the accrued vacation liability of the Transferred Employees,
to the extent they accept employment with Purchaser, for up to 15 days of
accrued vacation per Transferred Employee; and
-3-
<PAGE> 5
(v) service obligations and express warranty obligations of Seller
with respect to the software programs known as "MSC/EMAS" and "Microwave Lab"
(the "Products") to repair or replace defective units of the Products sold by
the Seller under the terms of any contract, commitment or sale transaction
entered into in the ordinary course of business and shipped not more than one
year prior to the Closing Date; provided, however, that Purchaser in no event
assumes any obligation of Seller for incidental or consequential damages or for
any personal injury claim arising out of the sale of a defective Product prior
to the Closing Date, the sole warranty obligation of Purchaser assumed hereunder
being the obligation to repair or replace defective Products as herein provided.
4.3. ASSIGNMENT OF EMPLOYMENT AGREEMENTS. Seller shall assign and
Purchaser shall assume Seller's obligations under the written employment
contracts or agreements with the employees identified in SCHEDULE 4.3 (the
"Contract Employees").
4.4. OFFER OF EMPLOYMENT TO OTHER EMPLOYEES. Purchase shall offer
employment to each of the employees listed on SCHEDULE 4.4 (the "Other
Employees") on terms comparable to their current employment with Seller and for
work at a place of employment not more than 30 miles from the current place of
employment of such Other Employees. Seller shall terminate such Other
Employees as of the Closing Date.
4.5. OTHER EMPLOYEE BENEFITS. Except as otherwise provided in Section
4.3, Seller agrees that, with respect to claims for workers compensation and all
claims under Seller's employee benefit programs, agreements, contracts or any
other arrangement by persons, including the Contract Employees and the Other
Employees (together, the "Transferred Employees"), or any other employees of
Seller arising out of events occurring prior to the Closing, whether reported or
unreported as of the Closing and whether insured or uninsured (including, but
not limited to, workers, compensation, life insurance, medical and disability
programs), Seller shall, at its own expense, honor or cause its insurance
carrier to honor such claims which have merit; provided nothing herein shall
prevent Seller from contesting any such claim in good faith. Without limiting
the scope of the preceding sentence, Seller shall be responsible for any and all
claims and liabilities arising out of or relating to (i) its employment of the
Transferred Employees prior to the Closing, (ii) the termination by Seller of
the employment of any such Transferred Employee, including severance benefits,
and (iii) the provision of any employee benefits to such Transferred Employees
(and their beneficiaries and eligible dependents) attributable to their
employment with, or their participation in any plans or programs maintained or
contributed to by, Seller or any of its Affiliates; provided, however, that in
the event Purchaser does not hire a Transferred Employee, Seller subsequently
terminates said Transferred Employee and Purchaser thereupon, within one (1)
year of the Closing Date, hires Transferred Employee, Purchaser shall reimburse
Seller for any severance benefit actually paid to said Transferred Employee by
Seller upon Seller's termination of said Transferred Employee.
5. CLOSING
The occurrence of the following events shall constitute the Closing.
-4-
<PAGE> 6
5.1. TIME; LOCATION. Subject to the conditions contained herein, the
Closing shall be held on July 19, 1996 (the "Closing Date") at 10:00 a.m., local
time, at the offices of O'Melveny & Myers LLP, Los Angeles, California or such
other time or place as the Parties shall mutually agree in writing.
5.2. DOCUMENTS. At the Closing, Seller shall execute and deliver the
following instruments of transfer and assignment (collectively, the "Ancillary
Agreements"):
5.2.1. A general bill of sale and an assignment and assumption
agreement substantially in the forms attached at Exhibit 5.2.1, transferring to
Purchaser good and indefeasible title to all of the tangible personal property
included in the EBU Assets, subject only to Permitted Encumbrances and the
Assumed Liabilities and assigning to Purchaser, Seller's right, title and
interest in each of the contracts, licenses and other agreements included in the
EBU Assets, together with all consents of third parties that Seller has been
able to obtain that are required to make each such assignment effective as to
such third parties;
5.2.2. Assignments of Trademarks (U.S. and foreign) substantially
in the form of Exhibit 5.2.2 hereto;
5.2.3. Assignments of Copyrights (U.S. and foreign), substantially
in the form of Exhibit 5.2.3 hereto;
5.2.4. The License Agreement, substantially in the form of Exhibit
5.2.4 hereto;
5.2.5. The Facilities Agreement, substantially in the form of
Exhibit 5.2.5 hereto;
5.2.6. The Software Maintenance and Services Agreement,
substantially in the form of Exhibit 5.2.6 hereto;
5.2.7. All documents referred to in Articles 8 and 9 of this
Agreement; and
5.2.8. Such additional instruments of conveyance and transfer as
Purchaser may reasonably require in order to more effectively vest in it, and
put it in possession of, the EBU Assets.
5.3. REASONABLE STEPS. Prior to the Closing Date, Seller shall take such
reasonable steps as may be necessary or appropriate so that on the Closing Date,
Purchaser shall be placed in actual possession and control of all of the EBU
Assets.
6. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
6.1. ORGANIZATION, GOOD STANDING AND POWER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and has all requisite corporate power and authority to execute and
deliver this Agreement and the Ancillary
-5-
<PAGE> 7
Agreements, to consummate the transactions contemplated hereby and thereby and
to perform all the terms and conditions hereof and thereof to be performed by
it.
6.2. AUTHORIZATION OF AGREEMENT AND ENFORCEABILITY. Seller has taken all
necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements, the performance by it of all terms and
conditions hereof and thereof to be performed by it and the consummation of the
transactions contemplated hereby and thereby. This Agreement constitutes, and
the Ancillary Agreements to which Seller is a party, upon Seller's execution and
delivery thereof, will constitute, the legal, valid and binding obligations of
Seller, enforceable in accordance with their terms except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws presently or hereafter in effect relating to or affecting the
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
6.3. NO VIOLATION; CONSENTS. The execution, delivery and performance by
Seller of this Agreement and the Ancillary Agreements, and the consummation of
the transactions contemplated hereby and thereby will not (with or without the
giving of notice or the lapse of time, or both) (i) violate any provision of the
charter or bylaws of Seller, (ii) violate, or, except as required by the Permits
referred to in Section 6.9 hereof, require any consent, authorization or
approval of, or exemption by, or filing under any provision of any law, statute,
rule or regulation to which Seller or the EBU Assets are subject, (iii) violate
any judgment, order, writ or decree of any court applicable to Seller or the EBU
Assets, (iv) except for such consents or approvals as are required by the
contracts referred to in Section 6.8 hereof, conflict with, result in a breach
of, constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval under
any agreement, contract, commitment, lease or other instrument, document or
undertaking to which Seller is a party or any of the EBU Assets is bound or (v)
result in the creation or imposition of any Encumbrance upon the EBU Assets.
6.4. FINANCIAL STATEMENTS. Seller has delivered to Purchaser true and
complete copies of (i) a pro-forma balance sheet of the Business at May 31,
1996, and (ii) pro forma statements of income for the fiscal years ended 1996,
1995 and the four months ended May 31, 1996. True and correct copies of such
financial statements are attached hereto as SCHEDULE 6.4. Such financial
statements, including the related schedules and notes, were prepared in good
faith and present the financial position of the Business at the dates indicated
and the results of operations of the Business for the periods then ended, based
on the assumptions set forth therein.
6.5. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
SCHEDULE 6.5, since May 31, 1996, in connection with the Business, Seller has
not:
6.5.1. Amended in any material respect or terminated any contract
listed on Schedule 2.1, other than in the ordinary course of business consistent
with past practice, or as intended to effectuate the transactions contemplated
by this Agreement;
-6-
<PAGE> 8
6.5.2. Suffered the occurrence of any events that, individually or
in the aggregate, have had, or could reasonably be expected to have, a material
adverse effect on the EBU Assets;
6.5.3. Sold, transferred, replaced or leased any of the EBU Assets
or sold units of the Products at a discount, except for transactions in the
ordinary course of business consistent with past practice;
6.5.4. Waived or released any material rights with respect to the
EBU Assets or the Business;
6.5.5. Transferred or granted any rights to any Proprietary Rights
(as defined below), other than in the ordinary course of business consistent
with past practice;
6.5.6. Entered into any transaction or made any commitments (for
capital expenditures or otherwise) other than in the ordinary course of business
consistent with past practice;
6.5.7. Increased the compensation of Transferred Employees, except
following normal review procedures or as reasonably deemed necessary in the
ordinary course of business consistent with past practice; or
6.5.8. Materially altered its commercial customs with customers of
the Products, except as intended to effectuate the transactions contemplated by
this Agreement.
6.6. TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES. Seller owns
and will transfer to Purchaser at the Closing good, marketable and indefeasible
title to all of the EBU Assets, free and clear of all Encumbrances, other than
Permitted Encumbrances. The lease covering the real property leased by Seller
and identified in SCHEDULE 2.1 is in full force and effect and constitutes the
legal, valid and binding obligation of the lessor thereunder, enforceable in
accordance with its terms, except to the extent that enforcement may be limited
by bankruptcy, insolvency, moratorium or other similar laws presently or
hereinafter in effect relating to or affecting the enforcement of creditors'
rights generally and by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
6.7. PROPRIETARY RIGHTS.
6.7.1. All common law, pending and registered trademarks and
service marks; common law and registered copyrights; and trade names; and all
trade secrets, designs, plans, specifications, technical information and other
proprietary rights of Seller, whether or not registered, which are being
assigned to Purchaser pursuant to this Agreement are (collectively, the
"Proprietary Rights") are listed in Schedule 2.1. Except as indicated on
Schedule 6.7, encompassed within such Proprietary Rights, in combination with
the rights granted pursuant to the License Agreement attached hereto as Exhibit
5.2.4, are substantially all the common law and registered copyrights, trade
secrets, designs, plans, specifications, technical information and
-7-
<PAGE> 9
other proprietary rights of Seller used in and necessary to sell, service and
maintain the Products in accordance with current and past practices of Seller.
6.7.2. Except as disclosed in SCHEDULE 6.7: (i) Seller owns and has
the sole rights to use each of the Proprietary Rights or possesses adequate
licenses or other valid right to use and assign (without the making of any
payment to others or the obligation or grant rights to others in exchange) all
the Proprietary Rights; (ii) the validity of the Proprietary Rights and the
rights therein of Seller have not been questioned in any litigation to which
Seller is a party, nor, to Seller's Knowledge, is any such litigation or other
claim threatened; and (iii) the conduct of the Business does not conflict with
patent rights, licenses, trademark rights, trade name rights, copyrights or
other intellectual property rights of others.
6.7.3. None of the Proprietary Rights is involved in any pending or
threatened litigation or claim. Seller does not have any Knowledge that any use
of any Proprietary Right has heretofore been, or is now being, made by any
Person other than Seller, and Seller has no Knowledge of any infringement of any
Proprietary Rights owned or licensed by Seller. No present or former director,
officer, employee or consultant of Seller or any Affiliate of Seller has any
interest in any of the Proprietary Rights.
6.7.4. To Seller's Knowledge, no employee of Seller or any of its
Affiliates is in default of any employment contract, agreement, arrangement or
noncompetition agreement relating to the Proprietary Rights.
6.8. Contracts and Commitments.
Except as may be disclosed on SCHEDULE 2.1 hereto, (i) each of the
agreements, contracts, commitments, leases and other instruments, documents and
undertakings listed on SCHEDULE 2.1 is valid and enforceable in accordance with
its terms, Seller and, to Seller's Knowledge, the other parties thereto, are in
compliance with the provisions thereof, Seller and, to the Seller's knowledge,
the other party thereto is not in default in the performance, observance or
fulfillment of any material obligation, covenant or condition contained therein,
and no event has occurred that with or without the giving of notice or lapse of
time, or both, would constitute a default by Seller or, to Seller's Knowledge,
such other parties thereunder; (ii) no such agreement, contract, commitment,
lease or other instrument, document or undertaking in the reasonable opinion of
Seller, contains an contractual requirement with which there is a reasonable
likelihood Seller or any other party thereto will be unable to comply; (iii)
other than for maintenance and use of the Products as indicated on SCHEDULE 2.1,
no advance payments have been received by Seller by or on behalf of any party to
any of the agreements, contracts, commitments, leases and other instruments
listed on SCHEDULE 2.1 for services to be rendered or products to be delivered
to such party after the Closing Date; and (iv) no consent or approval of any
party to any agreement, contract, commitment, lease or other instrument,
document or undertaking listed on SCHEDULE 2.1 is required for the execution of
this Agreement or the consummation of the transactions contemplated hereby. The
customer agreements listed on Schedule 2.1 represent all of the currently
operative customer agreements to which Seller is a party which relate to the
sale of Products by Seller.
-8-
<PAGE> 10
6.9. PERMITS, LICENSES. Seller has all material permits, licenses,
registrations, orders and approvals of federal, state or local government or
regulatory bodies that are required solely to operate the Business (including
without limitation those required under any Environmental Law (defined below))
(collectively, the "Permits") and, except as described in SCHEDULE 6.9, Seller
is in compliance with the terms and conditions of the Permits. SCHEDULE 2.1
hereto sets forth a correct and complete list of all Permits, each one of which
is in full force and effect. To Seller's Knowledge, no suspension or
cancellation of any of the Permits is threatened and no cause exists for such
suspension or cancellation. Any Permits that cannot be transferred or require
consent or approval for the transfer thereof are specifically identified on
SCHEDULE 2.1 hereto as nontransferable or requiring such consent or approval.
6.10. COMPLIANCE WITH LAWS. Seller has at all times conducted, and is
presently conducting, the Business so as to comply with all laws, statutes,
ordinances, rules and regulations applicable to the conduct or operation of the
Business or the ownership or use of the EBU Assets, except where such
noncompliance has not or will not result in material adverse effect upon, or a
forfeiture of, the EBU Assets.
6.11. LEGAL PROCEEDINGS. Except as described in SCHEDULE 6.11 hereto,
there is no claim, action, suit, proceeding, investigation or inquiry pending
before any federal, state or other court or governmental or administrative
agency or, to Seller's Knowledge, upon reasonable investigation, threatened
against Seller with respect to the Business or any of the EBU Assets, or
relating to the transactions contemplated by this Agreement. Except as set forth
on SCHEDULE 6.11 hereto, none of the matters set forth thereon will have a
material adverse effect on the Business. Except as set forth on SCHEDULE 6.11
hereto, Seller is not a party to or subject to the provisions of any judgment,
order, writ, injunction, decree or award of any court, arbitrator or
governmental, regulatory or administrative official, body or authority that
relates to the EBU Assets or the Business or that might affect the transactions
contemplated by this Agreement.
6.12. ABSENCE OF UNDISCLOSED LIABILITIES. Other than the Assumed
Liabilities, Seller has no liabilities or obligations (as defined in Section
4.1) which may be charged against the EBU Assets or the holder thereof following
the Closing.
6.13. EMPLOYEES. SCHEDULE 6.13 sets forth a true and correct list of all
Transferred Employees. Among other items, SCHEDULE 6.13 shall include the
following information for each Transferred Employee: (i) rate of compensation
for the past three years or for such shorter period of time as applicable; (ii)
age, in years; (iii) present position (title and short description of duties);
and (iv) the number of years of service credited for purposes of vesting and
eligibility under any employee benefit plan.
6.14. LABOR AND EMPLOYMENT MATTERS.
6.14.1. With respect to any non-multiemployer employmee benefit
plan as defined in Section 3.3 of the Employee Retirement Income Security Act of
1974 ("ERISA") (an "Employee Benefit Plan") which covers the Transferred
Employees: (1) except as set forth on SCHEDULE 6.14.1, neither such Employee
Benefit Plan nor any fiduciary has engaged in a prohibited transaction as
defined in Section 406 of ERISA (for which no individual or class
-9-
<PAGE> 11
exemption exists under Section 408 of ERISA) or any prohibited transaction as
defined in Section 4975 of the IRC (for which no individual or class exemption
exists under Section 4975 of the IRC); (2) all filings and reports as to such
Employee Benefit Plan required to have been made on or before the Closing Date
to the Internal Revenue Service (the "IRS"), to the United States Department of
Labor or, if applicable, to the Pension Benefit Guaranty Corporation, have been
or will be duly made on or before that date; (3) all disclosures to Transferred
Employees relating to such Employee Benefit Plan required by ERISA to have been
made on or before the Closing Date have been or will be duly made on or before
that date; (4) there is no litigation, disputed claim (other than routine
claims for benefits), governmental proceeding or investigation pending or
threatened with respect to any such Employee Benefit Plan, its related trust,
or any fiduciary, administrator or sponsor of such Employee Benefit Plan; and
(5) such Employee Benefit Plan has been established, maintained, funded and
administered in all material respects in accordance with its governing
documents, and any applicable provisions of ERISA, the IRC and all regulations
and rulings promulgated thereunder.
6.14.2. With respect to any non-multiemployer employee pension
benefit plan within the meaning of Section 3(2) of ERISA (an "Employee Pension
Benefit Plan") which covers the employees of Seller: (1) such Employee Pension
Benefit Plan is qualified under Section 401(a) of the IRC; favorable
determination letters as to qualification of such Employee Pension Benefit Plan
under IRC Section 401(a) have been issued by the IRS; and such Employee Pension
Benefit Plan has been administered in all material respects in accordance with
its governing documents, ERISA, the IRC and all regulations and rulings
promulgated thereunder; (2) such Employee Pension Benefit Plan has been funded
in accordance with its governing documents, ERISA and the IRC, and there has
been no accumulated funding deficiency, whether or not waived, at any time; (3)
there has been no Reportable Event within the meaning of Section 4043(b) of
ERISA; and (4) all filings, premium payments, reports and notices as to each
Employee Pension Benefit Plan required to have been made on or before the
Closing Date to the Pension Benefit Guaranty Corporation ("PBGC") have been or
will be duly made on or before that date.
6.14.3. With respect to any group health plan subject to the
requirements of IRC Section 4980B and ERISA Title I, Part 6 ("COBRA"), which
covers the employees of the Seller: (1) such group health plan has been
administered in all material respects in accordance with its governing
documents, and COBRA; and (2) all filings, reports, premium payments (if any)
and notices as to each such group health plan required to have been made on or
before the Closing Date to government agencies, participants and/or
beneficiaries have been or will be duly made on or before that date.
6.14.4. Seller is not a party to or obligated to contribute to any
multiemployer Employee Benefit Plan.
6.14.5. There has not been any (i) termination or partial
termination of any Employee Pension Benefit Plan maintained by Seller (or any
person, firm or corporation which is or was under common control within the
meaning of Section 4001(b) of ERISA, with Seller (hereinafter called
"affiliate") during the period of such common control, at a time when Title IV
-10-
<PAGE> 12
of ERISA applied to such Plan, (ii) commencement of any proceeding to
terminate any such Plan pursuant to ERISA, or otherwise, or (iii) written
notice given to Seller or any affiliate of the intention to commence or seek
the commencement of any such proceeding, which (under (i)) resulted or (under
(ii) or (iii)) would result in an insufficiency of plan assets necessary to
satisfy benefit commitments under Title IV of ERISA or benefits vested under
the Plan. Neither Seller nor any affiliate has incurred or will incur
withdrawal liability, complete or partial, under the Multiemployer Pension Plan
Amendments Act of 1980 on or prior to the Closing Date.
6.14.6. Except as disclosed in SCHEDULE 6.14.6, Seller (i) is not a
party to any collective bargaining agreement or discussions or negotiations with
any person or group looking toward any such agreement, (ii) has not within the
last five (5) years experienced any strike, grievance, unfair labor practice
claim or other labor difficulty (other than grievances and unfair labor practice
claims in which Seller's only exposure was to monetary damages of $5,000 or
less) with respect to the Transferred Employees, (iii) is aware of no threatened
strike, grievance, unfair practice claim or other labor difficulty, and there
exists no reasonable basis for the assertion of any grievance or unfair labor
practice claim or other charge or complaint against Seller by or before the
National Labor Relations Board or any state labor relations board or commission
or representative thereof, (iv) is aware of no filing by any employee or
employee group seeking recognition as a collective bargaining representative or
unit, (v) has no reason to believe that any former employer of any of its
employees is contemplating remedial action of any nature against that employee
or Seller based on the employee having terminated the former employment and
having become an employee of Seller. With respect to the Transferred Employees,
Seller has complied, to the extent applicable, with all material requirements of
the Worker Adjustment and Retraining Act.
6.15. NO FINDER. Seller has not taken any action that would give to any
Person a right to a finder's fee or any type of brokerage commission in relation
to, or in connection with, the transactions contemplated by this Agreement.
6.16. INTEREST IN BUSINESS. Seller has not granted, and there is not
outstanding, any option, right, agreement or other obligation pursuant to which
any Person could claim a right to acquire in any way all or any part of, or
interest in, the Business.
6.17. CONDITION OF ASSETS. To Seller's Knowledge, all material buildings,
structures and equipment that are part of the EBU Assets are structurally sound,
are in good operating condition and repair (subject only to routine maintenance
and repair) and are usable in the conduct of the Business consistent with past
practice and conform to all applicable laws and regulations relating to their
construction, use and operation.
6.18. ENVIRONMENTAL MATTERS.
As used herein, the following terms shall have the meaning ascribed to them
hereby:
"ENVIRONMENTAL LAW" shall mean any federal (including but not limited to
the Federal Water Pollution Control Act, 33 U.S.C. Sections 1251 ET SEQ., the
Toxic Substances Control Act, 15 U.S.C. Sections 2601 ET SEQ., the Clean Air
Act, 42 U.S.C. Sections 7401 ET SEQ., the
-11-
<PAGE> 13
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Sections 9601 ET SEQ., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 ET SEQ., the Hazardous Materials Transportation Act, 49 U.S.C.
Sections 1801 ET SEQ., and the Federal Insecticide Fungicide and Rodenticide
Act, 7 U.S.C. Sections 136 ET SEQ.), state or local statute, ordinance, rule or
regulation any judicial or administrative order or judgment (whether or not by
consent), any common law doctrine and any provision or condition of any permit,
license or other operating authorization relating to (i) the protection of the
environment or the public welfare from actual or potential exposure (or the
effects of exposure) to any actual or potential release, discharge, disposal or
emission (whether past or present) of any Regulated Substance or (ii) the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of any Regulated Substance.
"REGULATED SUBSTANCE" shall mean petroleum, petroleum hydrocarbons or
petroleum products and any other chemical, material, substance or waste that is
identified (by listing or characteristic) and regulated (or the clean-up of
which can be required) by any federal, state or local statute, ordinance, rule
or regulation intended to protect the environment or the public health or
welfare, including but not limited to the statutes, ordinances, rules or
regulations relating to clean air, clean water, hazardous and solid waste
disposal, safe drinking water, endangered species, occupational safety and
health, oil spill prevention, groundwater protection, and toxic substances
control.
6.18.1. Seller has not received any notice relating to the Business
or the EBU Assets alleging any violation of any Environmental Law or any written
request for information from any governmental agency or other Person pursuant to
any Environmental Law, and Seller is, with respect to the Business and the EBU
Assets, in compliance with all applicable Environmental Laws;
6.18.2. There are no Regulated Substances released by Seller or, to
Seller's Knowledge, any other Person on or beneath the leased real property
described on Schedule 2.1 in quantities or concentrations that could give rise
to obligations, responsibilities or liabilities of Seller or Purchaser under any
Environmental Law;
6.18.3. Seller has not received any notice or order from any
governmental agency or private or public entity in connection with the Business
advising it that Seller is responsible for or potentially responsible for
remediation or paying for the cost of investigation or remediation of any
Regulated Substance, and Seller has not entered into any agreements pertaining
thereto;
6.18.4. To Seller's Knowledge, the leased real property included
among the EBU Assets does not contain any: (i) underground storage tanks; (ii)
underground injection wells; (iii) septic tanks in which process wastewater or
any Regulated Substances have been disposed; (iv) asbestos; (v) equipment using
PCBS; or (vi) drums buried in the ground; and
6.18.5. There are no environmental studies, analyses or reports in
the possession of Seller or its Affiliates relating to the EBU Assets.
-12-
<PAGE> 14
6.19. INSURANCE LOSSES AND PRODUCT WARRANTY CLAIMS. SCHEDULE 6.19 sets
forth (a) a true and correct summary of the loss experience for the past year
under each insurance policy maintained by Seller or its Affiliates with respect
to the Business and each insurance policy Known by Seller to have been
maintained by Seller and any other Person which may provide any coverage for
Environmental Losses, and (b) all product warranty claims made against Seller
with respect to the Products for the past three years. Seller is not aware of
any additional pending or threatened product warranty claims with respect to the
Products. There are no product warranty claims with respect to the Products
pending, or to Seller's knowledge, threatened, that are (i) outside the scope of
the customer support currently provided to customers in the ordinary course of
business, or (ii) unusual in amount relative to past warranty claims made
against Seller.
6.20. COMPLETENESS AND ACCURACY. All information set forth on any Schedule
hereto is true, correct and complete. All contracts, permits and other documents
and instruments furnished or made available to Purchaser by Seller are true,
complete and accurate originals or copies of originals and include all
amendments, supplements, waivers and modifications thereto except where
non-compliance would not materially adversely affect Seller's evaluation of the
Business or the EBU Assets. There is no fact, development or threatened
development (excluding general economic factors affecting business in general)
that Seller has not disclosed to Purchaser in this Agreement or the Schedules
hereto that materially adversely affects or, so far as Seller can now foresee,
may materially adversely affect the EBU Assets.
7. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
7.1. ORGANIZATION, GOOD STANDING, POWER. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware and has all requisite corporate power and authority to own and lease
the EBU Assets and to carry on the Business and to execute and deliver this
Agreement and the Ancillary Agreements to which Purchaser is a party, to
consummate the transactions contemplated hereby and thereby and to perform all
the terms and conditions hereof and thereof to be performed by it.
7.2. AUTHORIZATION OF AGREEMENT AND ENFORCEABILITY. Purchaser has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which Purchaser is a party, the
performance by it of all terms and conditions hereof and thereof to be performed
by it and the consummation of the transactions contemplated hereby and thereby.
This Agreement constitutes, and the Ancillary Agreements, upon Purchaser's
execution and delivery thereof, will constitute, the legal, valid and binding
obligations of Purchaser, enforceable in accordance with their terms except to
the extent that enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws presently or hereafter in effect relating to
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
-13-
<PAGE> 15
7.3. NO VIOLATIONS; CONSENTS. The execution, delivery and performance by
Purchaser of this Agreement and the Ancillary Agreements to which Purchaser is a
party and the consummation of the transactions contemplated hereby and thereby
will not (i) violate any provision of the charter or bylaws of Purchaser, (ii)
violate, or, require any consent, authorization or approval of, or exemption by,
or filing under any provision of any law, statute, rule or regulation to which
Purchaser is subject, (iii) violate any judgment, order, writ or decree of any
court applicable to Purchaser, (iv) conflict with, result in a breach of,
constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval under
any agreement, contract, commitment, lease or other instrument, document or
undertaking to which Purchaser is a party or any of the EBU Assets is bound or
(v) result in the creation or imposition of any Encumbrance upon the EBU Assets.
7.4. LEGAL PROCEEDINGS. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any federal, state or other court or
governmental or administrative agency or, to Purchaser's Knowledge, threatened
against Purchaser or any of Purchaser's properties, assets, operations or
businesses that might prevent or delay the consummation of the transactions
contemplated hereby.
7.5. NO FINDER. Purchaser has not taken any action which would give to
any Person a right to a finder's fee or any type of brokerage commission in
relation to, or in connection with, the transactions contemplated by this
Agreement.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the
fulfillment at or prior to the Closing of each of the following conditions:
8.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller contained in this Agreement shall have been true in all
material respects as of the Closing Date.
8.2. PERFORMANCE OF AGREEMENT. Seller shall have performed all
obligations and agreements and complied in all material respects with all
covenants and conditions contained in this Agreement to be performed or complied
with by it at or prior to the Closing Date.
8.3. SELLER'S CERTIFICATE. Purchaser shall have received a certificate
from Seller, dated as of the Closing Date, reasonably satisfactory in form and
substance to Purchaser and its counsel, certifying as to the matters specified
in Section 8.1 and Section 8.2 hereof. The matters set forth in such certificate
shall constitute representations and warranties of Seller hereunder.
8.4. SECRETARY'S CERTIFICATE. Purchaser shall have received a
certificate, dated the Closing Date, of the Secretary of Seller with respect to
the Incumbency and specimen signature of each officer or representative of
Seller executing this Agreement, the certificate referred to in Section 8.3 and
the Ancillary Agreements to which Seller is a party.
-14-
<PAGE> 16
8.5. LICENSE AGREEMENT. Seller shall have executed and delivered a
License Agreement to Purchaser in substantially the same form as attached hereto
as Exhibit 5.2.4.
8.6. FACILITIES AGREEMENT. Seller shall have executed and delivered a
Facilities Agreement in substantially the same form as attached hereto as
Exhibit 5.2.5.
8.7. SOFTWARE MAINTENANCE AND SERVICES AGREEMENT. Seller shall have
executed and delivered a Software Maintenance and ServicesAgreement in
substantially the same form as attached hereto as Exhibit 5.2.6.
8.8. LANDLORD'S CONSENT. SELLER SHALL HAVE DELIVERED THE LANDLORD'S
CONSENT, ATTACHED HERETO AS EXHIBIT 8.8, EXECUTED BY THE LANDLORD NAMED THEREIN.
8.9. INJUNCTION. On the Closing Date, there shall be no injunction, writ,
preliminary restraining order or any order of any nature in effect issued by a
court of competent jurisdiction directing that the transactions provided for
herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any governmental body or other Person shall have been instituted or threatened
which the questions of validity or legality of the transactions contemplated
hereby or which if successfully asserted might otherwise have a material adverse
effect on the conduct of the Business or impose any additional material
financial obligation on, or require the surrender of any material right by,
Purchaser.
8.10. ACTIONS AND PROCEEDINGS. All corporate actions, proceedings,
instruments and documents required to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters shall
be reasonably satisfactory to counsel for Purchaser, and such counsel shall have
been furnished with such certified copies of such corporate actions and
proceedings and such other instruments and documents as it shall have reasonably
requested.
8.11. CONSENTS. Other than such consents as are identified on Schedule
8.11, any third-party and governmental consents, approvals or authorizations
necessary for the conveyance of the EBU Assets or valid consummation of the
transactions contemplated hereby shall have been obtained.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligations of Seller are subject to the fulfillment at or prior
to the Closing of each of the following conditions:
9.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained in this Agreement shall have been true in all
material respects as of the Closing Date.
-15-
<PAGE> 17
9.2. PERFORMANCE OF AGREEMENT. Purchaser shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to the Closing Date.
9.3. PURCHASER'S CERTIFICATE. Seller shall have received a certificate
from Purchaser, dated as of the Closing Date, reasonably satisfactory in form
and substance to Seller and its counsel, certifying as to the fulfillment of all
matters specified in Section 9.1 and Section 9.2 hereof. The matters set forth
in such certificate shall constitute representations and warranties of Purchaser
hereunder.
9.4. SECRETARY'S CERTIFICATE. Seller shall have received a certificate,
dated the Closing Date, of the Secretary or any Assistant Secretary of Purchaser
with respect to the incumbency and specimen signature of each officer or
representative of Purchaser executing this Agreement, the certificate referred
to in Section 9.3 and the Ancillary Agreements to which Purchaser is a party.
9.5. INJUNCTION. On the Closing Date, there shall be no injunction, writ,
preliminary restraining order or any order of any nature in effect issued by a
court of competent jurisdiction directing that the transactions provided for
herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any governmental body or other Person shall have been instituted or threatened
which the questions of validity or legality of the transactions contemplated
hereby.
9.6. ACTIONS OR PROCEEDINGS. All corporate actions, proceedings,
instruments and documents required to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters shall
be reasonably satisfactory to counsel for Seller, and such counsel shall have
been furnished with such certified copies of such corporate actions and
proceedings and such other instruments and documents as it shall have reasonably
requested.
9.7. CONSENTS. Other than such consents as are identified on Schedule
8.11, any third-party and governmental consents, approvals or authorizations
necessary for the conveyance of the EBU Assets or the valid consummation of the
transactions contemplated hereby shall have been obtained.
10. OBLIGATIONS AFTER THE CLOSING DATE
10.1. CONFIDENTIALITY. Seller hereby covenants and agrees that, except as
may be required by law, rule or regulation or court order, unless this Agreement
is terminated, it will not at any time reveal, divulge or make known to any
Person (other than Purchaser or its agents or Affiliates) any information that
relates solely to the Business or the EBU Assets (whether now possessed by
Seller or furnished by Purchaser after the Closing Date), including, but not
limited to, customer lists or other customer information, trade secrets or
formulae, marketing plans or proposals, financial information or any data,
written material, records or documents used by or relating to the Business that
are of a non-public, confidential nature. Purchaser hereby covenants and agrees
that, except as may be required by law, rule or regulation or court order,
unless this
-16-
<PAGE> 18
Agreement is terminated, it will not at any time reveal, divulge or make known
to any Person (other than Seller or its agents or Affiliates) any information
that relates to Seller's non-EBU businesses (whether now possessed by Purchaser
or furnished by Seller after the Closing Date), including, but not limited to,
customer lists or other customer information, trade secrets, formulae,
marketing plans or proposals, financial information or any data, written
material, records or documents that are of a non-public, confidential nature.
10.2. COVENANT NOT TO INTERFERE. Seller covenants and agrees that for a
period of two years after the Closing Date, neither Seller nor any Affiliate
will employ any Transferred Employee. Seller and Purchaser hereby covenant and
agree that, for a period of two years after the Closing Date, (a) Seller shall
not solicit the employment of any employee of Purchaser or induce any employee
of Purchaser to leave Purchaser's employ, and (b) Purchaser shall not solicit
the employment of any employee of Seller or induce any employee of Seller to
leave Seller's employ.
10.3. FURTHER ASSURANCES OF SELLER. From and after the Closing Date,
Seller shall, at the request of Purchaser, execute, acknowledge and deliver to
Purchaser, without further consideration, all such further assignments,
conveyances, endorsements, deeds, special powers of attorney, consents and other
documents, and take such other action, as Purchaser may reasonably request (i)
to transfer to and vest in Purchaser, and protect is rights, title and interest
in, all the EBU Assets and (ii) otherwise to consummate the transactions
contemplated by this Agreement. In addition, from and after the Closing Date,
Seller shall afford Purchaser and its attorneys, accountants and other
representatives access, during normal business hours, to any books and records
relating to the Business that Seller may retain as may reasonably be required in
connection with the preparation of financial information or tax returns of
Purchaser. From and after the Closing Date, Seller shall cooperate with
Purchaser's auditors in connection with the preparation of any report or filing
required in connection with the transactions contemplated hereby, such
cooperation to be provided by Seller at no cost to Purchaser.
10.4. FURTHER ASSURANCES OF PURCHASER. From and after the Closing Date,
Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such books and records
relating to the Business as may reasonably be required in connection with the
preparation of financial information for periods concluding on or prior to the
Closing Date. Purchaser shall cooperate in all reasonable respects with Seller
with respect to its former interest in the Business and in connection with
financial account closing and reporting and claims and litigation asserted by or
against third parties, including, but not limited to, making employees available
at reasonable times to assist with, or provide information in connection with
financial account closing and reporting and claims and litigation, provided,
that Seller reimburses Purchaser for its reasonable out-of-pocket expenses
(including out-of-pocket costs of employees so assisting) in connection
therewith.
10.5. RETENTION OF AND ACCESS TO RECORDS; COOPERATION. For a period of not
less than ten years after the Closing Date, Purchaser shall preserve and retain
the corporate, accounting, legal, auditing and other books and records of the
Business (including but not limited to, any governmental or non-governmental
actions, suits, proceedings or investigations arising out of the
-17-
<PAGE> 19
conduct of the business and operations of the Business prior to the Closing
Date); provided, however, that such ten-year period shall be extended in the
event that any action, suit, proceedings or investigation has been commenced or
is pending or threatened at the termination of such ten-year period and such
extension shall continue until any such action, suit, proceeding or
investigation has been settled through judgment or otherwise or is no longer
pending or threatened. Notwithstanding the foregoing, Purchaser may discard or
destroy any of such books and records prior to the end of such ten-year period
or period of extension, if applicable, if it has given Seller 60 days' prior
written notice of its intent to do so and Seller has not taken possession of
such books and records, at its expense, within such 60-day period.
Notwithstanding anything to the contrary in this Section 10.5, Seller shall
retain all tax records of the Business prepared prior to the Closing Date.
Purchaser shall provide reasonable access to Seller to review any records that
Purchaser retains and to make copies thereof and shall cooperate fully with
Seller (including, without limitation), making available employees to assist
Seller at reasonable rates to be agreed by the Parties) in preparation and
documentation of all necessary financial statements, tax returns and reports or
the resolution of any tax audits, claims, litigation or disputes concerning
Seller's tax liabilities or the Assumed Liabilities. In the event Purchaser
sells or otherwise transfers the Business before the tenth anniversary of the
Closing Date, to the extent reasonably obtainable Purchaser agrees to include
in the documents transferring such Business a provision obligating the new
purchaser or transferee to abide by these provisions, in which event Purchaser
shall be relieved of any obligation hereunder.
10.6. ACCOUNTS RECEIVABLE PAYMENT In the event that either Party hereto at
any time receives any funds from any third party that are properly payable to
the other Party hereto, the Party receiving such funds shall promptly remit such
funds to the Party entitled to such funds.
10.7. OBTAINING CONSENTS. Seller and Purchaser shall cooperate and use
their best efforts to obtain promptly after the Closing the consents listed on
Schedule 8.11; provided, however, that to the extent the contract or other
relationship which is the subject of such consent has expired in accordance with
its terms, the parties shall have no further obligation to obtain such consent.
Any such contract or agreement shall be deemed to have been assigned to
Purchaser by Seller in accordance with the terms and conditions of the
Assignment and Assumption Agreement attached hereto as Exhibit 5.2.1 at the time
such consent is obtained without further action of the parties.
11. TERMINATION
11.1. TERMINATION OF AGREEMENT. This Agreement may be terminated:
(i) by the mutual consent of Seller and Purchaser;
(ii) by Seller or Purchaser if the Closing has not taken place on
or before September 30, 1996; provided, however, that no Party then in breach of
any of its obligations hereunder shall have the right to terminate;
-18-
<PAGE> 20
(iii) by Purchaser upon notice to Seller if any of the conditions
set forth in Article 8 hereof become impossible to satisfy (other than by reason
of the failure of Purchaser to fulfill its obligations under this Agreement);
and
(iv) by Seller upon notice to Purchaser if any of the conditions
set forth in Article 9 hereof became impossible to satisfy (other than by reason
of the failure of Seller to fulfill its obligations under this Agreement).
11.2. RETURN OF DOCUMENTS. If this Agreement is terminated for any reason
pursuant to this Article 11, each Party shall return to the other Party all
documents and copies thereof which shall have been furnished to it by such other
Party or, with the agreement of the other Party, shall destroy all such
documents and copies thereof and certify in writing to the other Party any such
destruction. The obligations of the Parties under Section 10. 1 hereof shall
survive termination of this Agreement.
11.3. REMEDIES. If this Agreement is terminated by Seller or Purchaser as
permitted under Section 11.1 and not as a result of a breach of a representation
or warranty or the failure of any Party to perform its obligations hereunder,
such termination shall be without liability of any Party. If a Party terminates
this Agreement as a result of the failure of the other Party to perform its
obligations hereunder, the nonbreaching Party shall be entitled to reimbursement
from the breaching Party for all expenses incurred by the nonbreaching Party in
connection with this Agreement and the transaction contemplated hereby;
provided, that the foregoing shall not be exclusive of or foreclose the
nonbreaching Party's ability to pursue such other rights and remedies as may be
available to the nonbreaching Party at law or equity.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
The term "LOSSES" as used herein shall mean all losses, liabilities, costs,
claims, fines, penalties, damages, diminution in value, and expenses, including
interest and court costs, costs of investigation and reasonable fees and
disbursements of counsel and consultants.
12.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Parties shall survive for two years after the Closing Date;
provided that there shall be no termination of any such representation or
warranty as to which a claim has been asserted prior to the termination of such
survival period. Except as otherwise expressly provided in this Agreement, all
covenants, agreements, undertakings and indemnities set forth in this Agreement
shall survive indefinitely. Any Party's right to indemnification or other
remedies based upon the representations and warranties, covenants, agreements
and undertakings of the other Party will not be affected by any investigation or
Knowledge of any conditions by such Party. Any investigation by such Party shall
be for its own protection only and shall not affect or impair any right or
remedy hereunder.
12.2. INDEMNIFICATION BY SELLER. "Seller Liabilities" shall mean all
Losses resulting from, arising out of, or incurred by any of Purchaser or its
Affiliates, or any of their respective successors or assigns and their
respective directors, officers and employees (each a "Purchaser
-19-
<PAGE> 21
Indemnified Party") after the Closing Date in connection with (i) any
breach of any of the representations or warranties made by Seller in this
Agreement, (ii) any default by Seller in respect of performance of any of the
covenants or agreements of Seller in this Agreement or (iii) any attempt
(whether or not successful) by any Person to cause or require Purchaser to pay
any liability of, or claim against, Seller of any kind in respect of the
operation of the Business prior to the Closing Date, to the extent not
specifically assumed or subject to an indemnity by Purchaser under the terms of
this Agreement. Subject to the further provisions of this Article 12, Seller
covenants and agrees with Purchaser that Seller shall pay, and shall indemnify
all Purchaser Indemnified Parties, and hold them harmless from, against and in
respect of, any and all Seller Liabilities.
12.3. LIMITATIONS ON SELLER'S OBLIGATION TO INDEMNIFY.
12.3.1. Seller shall have no obligation to indemnify any Purchaser
Indemnified Party based upon any breach by Seller of any representation or
warranty as to which Seller has not received notice of a claim for
indemnification within two years after the Closing Date. The aggregate
indemnification liability of Seller for misrepresentations and breaches of
warranty shall not exceed $5,600,000.
12.3.2. Seller shall have no indemnification obligation to any
Purchaser Indemnified Party for breaches of the representations and warranties
of Seller unless and until the total amount of all Seller's Liabilities shall
exceed $100,000. Nothing herein shall be deemed to limit or restrict in any
manner any rights or remedies available at law, in equity or otherwise against
Seller based on a willful misrepresentation or willful breach of warranty by
Seller hereunder.
12.4. INDEMNIFICATION BY PURCHASER. "Purchaser Liabilities" shall mean all
Losses resulting from, arising out of, or incurred by any of Seller or its
Affiliates, or any of their respective successors or assigns and their
respective directors, officers and employees (each a "Seller Indemnified Party")
after the Closing Date in connection with (i) any breach of any of the
representations or warranties made by Purchaser in this Agreement, (ii) any
default by Purchaser in respect of any of the covenants or agreements of
Purchaser in this Agreement, (iii) any attempt (whether or not successful) by
any Person to cause or require Seller to pay or discharge any Assumed Liability
or any liability of, or claim against, Purchaser of any kind in respect of the
operation of the Business on or after the Closing Date to the extent not
specifically subject to an indemnity by Seller under the terms of this
Agreement. Subject to the further provisions of this Article 12, Purchaser
covenants and agrees with Seller that Purchaser shall pay, and shall indemnify
all Seller Indemnified Parties, and hold them harmless from, against and in
respect of, any and all Purchaser Liabilities.
12.5. LIMITATIONS ON PURCHASER'S OBLIGATION TO INDEMNIFY.
12.5.1. Purchaser shall have no obligation to indemnify any Seller
Indemnified Party based upon any breach by Purchaser of any representation or
warranty as to which Purchaser has not received notice of a claim for
indemnification within two years after the
-20-
<PAGE> 22
Closing Date. The aggregate indemnification liability of Purchaser for
misrepresentations and breaches of warranty shall not exceed $5,600,000.
12.5.2. Purchaser shall have no indemnification obligation to any
Seller Indemnified Party for breaches of the representations and warranties of
Purchaser unless and until the total amount of all Purchaser's Liabilities shall
exceed $100,000. Nothing herein shall be deemed to limit or restrict in any
manner any rights or remedies available at law, in equity or otherwise against
Purchaser based on a willful misrepresentation or willful breach of warranty by
Purchaser hereunder.
12.6. PROCEDURES FOR INDEMNIFICATION.
12.6.1. Each Indemnified Party shall promptly give notice hereunder
to the indemnifying Party after becoming aware of any claim as to which recovery
may be sought against the indemnifying Party because of the indemnity in this
Article 12, and, if such indemnity shall arise from the claim of a third party,
shall permit the indemnifying Party to assume the defense of any such claim and
any litigation or other proceeding resulting from such claim; provided, that any
Indemnified Party may, in any event, at its own expense, monitor and participate
in, but not control, the defense of any such claim or litigation.
Notwithstanding the foregoing, the right to indemnification hereunder shall not
be affected by any failure of an Indemnified Party to give such notice (or by
delay by an Indemnified Party in giving such notice) unless, and then only to
the extent that, the rights and remedies of the indemnifying Party shall have
been prejudiced as a result of the failure to give, or delay in giving, such
notice. The notice required hereunder shall specify the basis for the claim for
indemnification to the extent ascertainable at the time of the notice. Failure
by an indemnifying Party to notify an Indemnified Party of its election to
defend any such claim or action by a third party within 30 days after notice
thereof shall have been given to the indemnifying Party shall be deemed a waiver
by the indemnifying Party of its right to control the defense of such claim or
action. Nothing herein shall be deemed to prevent an Indemnified Party from
making a contingent claim for indemnification hereunder, provided the
Indemnified Party has reasonable grounds to believe that the claim or demand for
indemnification will be made and sets forth the estimated amount of such claim
to the extent then ascertainable.
12.6.2. The indemnifying Party shall not, without the written
consent of the Indemnified Party, in the defense of such claim or any litigation
resulting therefrom, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement, unless the
claimant provides to the Indemnified Party an unqualified release from all
liability in respect of the claim and the settlement does not subject the
Indemnified Party to any damages, other than the payment of money damages which
the indemnifying Party has agreed to assume and pay pursuant to this Agreement.
12.6.3. If the indemnifying Party shall not assume the defense of
any such claim by a third party, or litigation resulting therefrom, after
receipt of notice from the Indemnified Party, the Indemnified Party may defend
against such claim or litigation in such manner as it deems appropriate.
-21-
<PAGE> 23
12.6.4. If an indemnifying Party shall not, within 30 days after
its receipt of the notice required by Section 12.6.1 hereof, advise the
Indemnified Party that the indemnifying Party denies the right of the
Indemnified Party to indemnity in respect of the claim, then the Indemnified
Party's right to such claim shall be deemed to be finally determined between the
Parties hereto. If the indemnifying Party shall notify the Indemnified Party
that it disputes any claim made by the Indemnified Party, then the Parties
hereto shall endeavor to settle and compromise such claim, and if unable to
agree on any settlement or compromise, such claim for indemnification shall be
settled by arbitration as provided in Article 13 of this Agreement, and any
liability established by reason of such settlement, compromise or arbitration
shall be deemed to be finally determined. Any claim that is finally determined
in the manner set forth above shall be paid promptly by the indemnifying Party
in cash.
12.7. PAYMENT OF INDEMNIFICATION OBLIGATIONS. Each Party shall pay within
sixty (60) days after the final determination thereof to any Indemnified Party
the amount of all damages, losses, deficiencies, liabilities, costs, expenses,
claims and other obligations to which the foregoing indemnity relates.
12.8. INTEREST ON UNPAID OBLIGATIONS. If all or part of any
indemnification obligation under this Agreement is not paid when due, the
indemnifying Party shall pay the Indemnified Party interest on the unpaid amount
of such obligation for each day from the date the amount became due until it is
paid in full, payable on demand, at the rate equal to the lower of (i) the
maximum rate permitted by law or (ii) two percent (2%) per annum plus the "Prime
Rate" as published from time to time in THE WALL STREET JOURNAL.
12.9. EXCLUSIVE REMEDY. Other than as provided in Sections 12.3.2 and
12.5.2, the indemnification rights of any Indemnified Party under this Article
12 shall be the sole and exclusive rights and remedies of such Indemnified Party
at law, in equity or otherwise for any misrepresentation, breach of warranty or
failure to fulfill any covenant or agreement under or in connection with this
Agreement on the part of any Party.
13. GENERAL
13.1. EXPENSES. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated,
Purchaser and Seller shall pay their own fees, expenses and disbursements,
including the fees and expenses of their respective counsel, accountants and
other experts, in connection with the subject matter of this Agreement and all
other costs and expenses incurred in performing and complying with all
conditions to be performed under this Agreement.
13.2. PUBLICITY. Seller and Purchaser shall coordinate all publicity
relating to the transactions contemplated by this Agreement, and no party shall
issue any press release, publicity statement or other public notice relating to
this Agreement, of the transactions contemplated by this Agreement, without
obtaining the prior consent of both Seller and Purchaser, except to the extent
that a particular action is required by applicable law in the reasonable opinion
of either Seller's or Purchaser's counsel.
-22-
<PAGE> 24
13.3. WAIVERS. The waiver by either Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
13.4. BINDING EFFECT; BENEFITS. This Agreement shall inure to the benefit
of the Parties hereto, and shall be binding upon the Parties hereto and their
respective successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the Parties hereto, or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
13.5. BULK TRANSFERS LAWS. Purchaser hereby waives compliance by Seller
with the provisions of any and all laws relating to bulk transfers in connection
with the sale of the EBU Assets. Seller covenants and agrees to indemnify and
save harmless Purchaser from and against any and all losses, liability, cost and
expense (including reasonable attorneys fees) arising out of noncompliance with
such bulk transfers laws.
13.6. NOTICES. All notices, requests, demands, elections and other
communications which either Party to this Agreement may desire or be required to
give hereunder shall be in writing and shall be deemed to have been duly given
if delivered personally, by a reputable courier service which requires a
signature upon delivery, by mailing the same by registered or certified first
class mail, postage prepaid, return receipt requested, or by telecopying with
receipt confirmation (followed by a first class mailing of the same) to the
Party to whom the same is so given or made. Such notice, request, demand,
waiver, election or other communication will be deemed to have been given as of
the date so delivered or electronically transmitted or seven days after mailing
thereof.
13.6.1. If to Seller, to:
THE MACNEAL-SCHWENDLER CORPORATION
815 COLORADO BOULEVARD
LOS ANGELES, CALIFORNIA 90041
ATTENTION: LOUIS GRECO
TELECOPY: (213) 259-4969
With a copy to:
D. Stephen Antion, Esq.
O'Melveny & Myers LLP,
400 South Hope Street
Los Angeles, California 90071-2899
Telecopy: (213) 669-6407
-23-
<PAGE> 25
13.6.2. If to Purchaser, to:
Nicholas Csendes
Ansoft Corporation
Four Station Square, Suite 660
Pittsburgh, PA 15219
Telecopy: (412) 471-9427
With a copy to:
Ronald W. Schuler, Esq.
Buchanan Ingersoll
Professional Corporation
One Oxford Centre
301 Grant Street, 20th Floor
Pittsburgh, PA 15219-1410
Telecopy: (412) 562-1041
or to such other address as such Party
shall have specified by notice to the
other Party hereto.
13.7. ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules hereto), the Ancillary Agreements and the documents delivered pursuant
hereto and thereto constitute the entire agreement and understanding between the
Parties hereto as to the matters set forth herein and supersede and revoke all
prior agreements and understandings, oral and written, between the Parties
hereto or otherwise with respect to the subject matter hereof. No change,
amendment, termination or attempted waiver of any of the provisions hereof shall
be binding upon any Party unless set forth in an instrument in writing signed by
the Party to be bound or their respective successors in interest.
13.8. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
13.9. HEADINGS. The article, section and other headings contained in this
Agreement are for reference purposes only and shall not be deemed to be a part
of this Agreement or to affect the meaning or interpretation of this Agreement.
13.10. GOVERNING LAW AND CHOICE OF FORUM. The validity and interpretation
of this Agreement shall be construed in accordance with, and governed by the
internal laws of the Commonwealth of Pennsylvania without regard to such state's
conflict of laws provisions.
13.11. DISPUTE RESOLUTION.
13.11.1. Any controversy, dispute or claim arising out of or
relating to this Agreement, or any modification, amendment or extension to this
Agreement or to any Ancillary
-24-
<PAGE> 26
Agreement or collateral document, or any modification, amendment or extension
thereto, or the breach thereof, including any claim to rescind or set aside any
of the same (individually a "Claim" and collectively "Claims"), shall be
settled by arbitration conducted in New York, New York in accordance with the
provisions of this Section 13.11 and in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") in effect on
the date the claim is brought. To the extent that any of the Commercial
Arbitration Rules of the AAA conflict with the provisions of this Agreement,
the provisions of this Agreement shall take precedence. The parties retain the
right to seek and obtain interim relief pending receipt of an award in
accordance with the terms of this Section for the purpose of maintaining and
preserving the status quo as provided in subparagraph (b) below. The award
rendered by the Arbitration Panel (as hereafter defined) shall be final and
binding as between the parties hereto and their heirs, executors,
administrators, successors and assigns, and judgment on the award may be
entered by any court having jurisdiction thereof. Notwithstanding the
foregoing, a party hereto may join the other party hereto as Indemnitor to any
Third Party Claim pending in a court of record, to enforce its indemnity rights
for such claim, without resorting to arbitration.
13.11.2. The parties hereto agree that notwithstanding and, in
addition to, the rights and remedies available hereunder, each of the Purchaser,
on the one hand, and Seller, on the other hand, reserves the right to seek and
obtain temporary restraining orders or other emergency temporary or preliminary
equitable injunctive relief from the courts of the State of New York situate in
New York County or the federal courts situated in the Southern District of New
York, to preserve the status quo by enjoining or restraining a party hereto
pending final and binding arbitration hereunder or to compel arbitration as
provided herein, and the parties hereto acknowledge and agree to the right to
seek such relief. The parties hereto expressly agree and acknowledge that
seeking relief from the courts as provided in this Section shall not be deemed a
waiver of any party's right to arbitrate nor shall the existence or exercise of
such right be deemed to be an adequate remedy at law in connection therewith.
13.11.3. Claims shall be heard and decided, and awards rendered on
such Claims by a panel of three (3) arbitrators (the "Arbitration Panel") one of
whom shall be selected by Purchaser, the second of whom shall be selected by
Seller and the third of whom shall be selected by the other two arbitrators and
shall chair the tribunal. If one party fails or refuses to select an arbitrator
within 30 days after notice of the selection of the first arbitrator, or the two
arbitrators selected fail to select the third arbitrator within 30 days after
their selection, the necessary arbitrator or arbitrators shall be selected by
the AAA from its National Panel of Commercial Arbitrators who are on the
approved list of arbitartors in New York, New York. The decision of a majority
of the arbitrators comprising the Arbitration Panel shall govern on any matter
and be the decision of the Arbitration Panel. In case of any question arising as
to the interpretation of these arbitration provisions or the AAA Commercial
Rules of Arbitration applicable to any arbitration effected hereunder, the
decision of a majority of the members of the Arbitration Panel shall be accepted
by the parties as final and conclusive, except that no decision or input of or
notice to the Arbitration Panel shall be required in order for either of the
parties to request and obtain the interim relief set forth in Section 13.11.2
hereof. In the event of the death or disability of any arbitrator pending final
resolution of the Claim, a replacement arbitrator shall
-25-
<PAGE> 27
be chosen in the same manner as such arbitrator was originally chosen, within
fifteen (15) days following notice of such death or disability.
13.11.4. If any party hereto has a Claim and desires to arbitrate
such Claim, such party (the "Claimant") shall give written notice (the
"Arbitration Notice") of the Claim and of its intention to arbitrate to the
other party (the "Respondent") and simultaneously with the giving of the
Arbitration Notice to the Respondent, the Claimant shall file, at the regional
office of the AAA located in New York, New York (or, should such regional office
no longer exist, at the regional office of the AAA located closest to New York,
New York), (i) three (3) copies of the Arbitration Notice or demand for
arbitration, (ii) three (3) copies of this Section 13.11 of this Agreement, and
(iii) the appropriate administrative fee as provided in the Administrative Fee
Schedule of the AAA. The Arbitration Notice shall contain a brief statement
setting forth the nature of the dispute, the amounts involved, if any, and the
remedy sought and shall designate one arbitrator chosen by the Claimant who
shall be on the AAA approved list of arbitrators in Milwaukee, Wisconsin. The
arbitration shall thereafter proceed in accordance with the policies and
procedures of the AAA.
13.11.5. Except otherwise provided herein, the fees and expenses of
the AAA and the Arbitration Panel shall be borne equally by the parties in
accordance with the applicable provisions of the Commercial Arbitration Rules of
the AAA. Each party shall bear its own attorneys fees and expenses and the fees
and expenses of other experts or professionals utilized by such party in
connection with the arbitration provided for herein.
13.11.6. Each of the parties hereto hereby irrevocably consents and
submits to the exclusive personal jurisdiction of United States District Court
for the Southern District of New York and the courts of the State of New York
situate in New York County over any suit, action or proceeding to compel
arbitration in accordance with the provisions of this Section 13.11, and
irrevocably agrees that all claims with respect thereto may be heard and
determined in either such court. Service of process in any such suit, action or
proceeding may be made in the manner hereinabove set forth for the giving of
notices and the same shall constitute valid personal service for all purposes,
each party hereby waiving personal service by other means.
13.12. COOPERATION. The Parties hereto shall cooperate fully at their own
expense, except as otherwise provided in this Agreement, with each other and
their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
13.13. SEVERABILITY. If any term, covenant, condition or provision of this
Agreement or the application thereof to any circumstance shall be invalid or
unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
-26-
<PAGE> 28
13.14. SUCCESSORS AND ASSIGNS. The covenants, agreements and conditions
contained herein or granted hereby shall be binding upon and shall inure to the
benefit of Purchaser and Seller, and each of their respective successors and
permitted assigns. Neither Seller nor Purchaser shall assign, or otherwise
transfer any interest in this Agreement to any other Person except for a Person
which is an Affiliate of Purchaser or a purchaser of the EBU Assets from
Purchaser.
-27-
<PAGE> 29
IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed in
their respective names by an officer thereof duly authorized as of the date
first above written.
ANSOFT CORPORATION
By: /s/ NICHOLAS CSENDES
---------------------------------
Nicholas Csendes
President
THE MACNEAL-SCHWENDLER CORPORATION
By: /s/ THOMAS C. CURRY
---------------------------------
Name: Thomas C. Curry
Title: President and Chief Executive
Officer
-28-
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE PER SHARE EARNINGS (1)
<TABLE>
<CAPTION>
Three months ended July 31,
1996 1995
---- ----
<S> <C> <C>
Net income (loss) $(2,737) $ 91
======= ======
Common and Common Equivalent Shares:
Weighted average number of shares of
common stock outstanding 7,636 6,118
Weighted average common
equivalent shares outstanding 271 775
------- ------
Weighted average number of shares of
common and common equivalent
stock outstanding 7,907 6,893
------- ------
Net income (loss) per common share $ (0.35) $ 0.01
======= ======
</TABLE>
(1) Fully diluted net income per share has not been separately presented, as
the amounts would not be materially different from primary net income per
share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE 3-MOS ENDED JULY 31, 1996 AND THE
BALANCE SHEET AT JULY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000849433
<NAME> ANSOFT CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 406
<SECURITIES> 9,108
<RECEIVABLES> 1,820
<ALLOWANCES> 125
<INVENTORY> 0
<CURRENT-ASSETS> 3,875
<PP&E> 1,026
<DEPRECIATION> 58
<TOTAL-ASSETS> 16,516
<CURRENT-LIABILITIES> 4,956
<BONDS> 0
0
0
<COMMON> 76
<OTHER-SE> 11,484
<TOTAL-LIABILITY-AND-EQUITY> 16,516
<SALES> 1,961
<TOTAL-REVENUES> 2,318
<CGS> 0
<TOTAL-COSTS> 5,275
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,737)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,737)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,737)
<EPS-PRIMARY> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
