STOCK PURCHASE AGREEMENT
among
VIASOFT, INC., a Delaware Corporation
and
LfA-Gesellschaft fur Vermogensverwaltung mbH (LfA-GV), a German Limited
Liability Company
and
Xxxxxx Xxxxxxxxx, an individual,
and
Xxxx Xxxxxxxxx, an individual,
and
Xxxxxxxxx Xxxxxxx, an individual,
and
Xxxxxxx Xxxxxxx, an individual,
November 11, 1996
STOCK PURCHASE AGREEMENT
This Agreement is entered into as of November 11, 1996, by and among
VIASOFT, INC., a Delaware corporation (the "Buyer"), Xxxxxx Xxxxxxxxx, an
individual and citizen of Germany, Xxxx Xxxxxxxxx, an individual and citizen of
Germany, Xxxxxxxxx Xxxxxxx, an individual and citizen of Germany, and Xxxxxxx
Xxxxxxx, an individual and citizen of Germany (collectively the "Individual
Sellers"), and LfA-Gesellschaft fur Vermogensverwaltung mbH (LfA-GV), a German
limited liability company ("Investor") (Investor and the Individual Sellers are
referred to collectively herein as "Sellers".) The Buyer and the Sellers are
referred to collectively herein as the "Parties."
The Sellers in the aggregate own all of the registered share capital of
Rottger & Xxxxxxxxx Software-Technik GmbH, a limited liability company organized
under the laws of Germany (the "Company").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
registered share capital of the Company in return for cash, in the case of
Investor, and Buyer Common Stock and Contingent Payments, in the case of the
Individual Sellers.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"Affiliate" has the meaning set forth in Rule 12-2 of the regulations
promulgated under the Securities Exchange Act.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Buyer Common Stock" has the meaning set forth in Section 2(c) below.
"Closing" has the meaning set forth in Section 2(g) below.
"Closing Date" has the meaning set forth in Section 2(g) below.
"Closing Shares" has the meaning set forth in Section 2(c) below.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Company" has the meaning set forth in the preface above.
"Commitment Schedule" has the meaning set forth in Section 5(k) below.
"Company Governmental Authorizations" has the meaning set forth in
Section 4(k) below.
"Company License Revenues" means (x) all license fees from the sale or
licensing of the Software,
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booked by the Company, the Subsidiaries, the Buyer or any Affiliate of the Buyer
during the period from January 1, 1997 through June 30, 1997 (including license
fees so booked attributable to the sale or sublicensing of Software by
distributors or resellers, net of all royalties paid or due to distributors or
resellers on account of such sale or sublicensing), plus (y) all license fees
from the sale or licensing of Software bookable by the Company, the
Subsidiaries, the Buyer or any Affiliate of the Buyer in accordance with GAAP
(applied on a basis consistent with prior practices of the Buyer) at June 30,
1997, but which have not been booked as of such date, minus (z) license fees
from the sale or licensing of Software booked or bookable by the Company, the
Subsidiaries, the Buyer or any Affiliate of the Buyer from January 1, 1997 to
February 15, 1997, which have been treated as Consolidated 1996 Revenues for
purposes of determining the First Contingent Payment in accordance with Section
2(d) below. Company License Revenues shall be determined in accordance with GAAP
applied consistently with prior practices of the Buyer; provided, however, that
notwithstanding GAAP the determination of licensee fees shall include those
portions of license fees which GAAP might otherwise require to be allocated to
ongoing warranty or maintenance and support obligations. Company License
Revenues shall not include revenue derived from maintenance renewals or other
prepaid maintenance fees. The term "Software," as used for the purpose of
calculating Company License Revenues, shall include any enhanced versions of the
Software and an allocable portion of any product sold by the Company, the
Subsidiaries, the Buyer or any Affiliate of the Buyer which includes any version
or component of the Software (in which case the allocable portion shall be
determined by dividing the standard list price for the version or component of
the Software by the total standard list prices of all combined software
products, and multiplying the resulting fraction by the revenue received for the
combined product).
"Company Share" means any portion of the registered capital stock of
the Company.
"Confidential Information" means the confidential and proprietary
information of the Company and its Subsidiaries not known to the public
regarding the Company's and its Subsidiaries' products and business including,
but not limited to, the Intellectual Property of the Company and its
Subsidiaries. Confidential Information does not include information in the
public domain as of the date of this Agreement, or subsequently published or
otherwise made part of the public domain through no fault of the Sellers or
their Affiliates.
"Consolidated 1996 Revenues" means and includes (A) the Company's and
the Subsidiaries' consolidated revenues for the fiscal year ending December 31,
1996 plus (B) all license revenues booked by the Company or the Subsidiaries
during the period from January 1, 1997 through February 15, 1997 with respect to
the customers named on the list of current prospects listed in Section 2(d) of
the Disclosure Schedule (including Affiliates of such customers) (the "Current
Prospects"), plus (C) all license revenues from Current Prospects bookable by
the Company or the Subsidiaries in accordance with GAAP (applied on a basis
consistent with the prior practices of Buyer) at February 15, 1997, but which
have not been booked as of such date. For the purposes of this calculation,
license revenues shall be determined in accordance with GAAP applied
consistently with prior practices of the Buyer; provided, however, that
notwithstanding GAAP the determination of license revenues shall include those
portions of license revenue which GAAP might otherwise require to be allocated
to ongoing warranty or maintenance and support obligations. License revenues
shall not include revenue derived from maintenance renewals or other prepaid
maintenance fees. To the extent Consolidated 1996 Revenues, as calculated
pursuant to the foregoing definition, exceed $20,500,000, the portion of
Consolidated 1996 Revenues in excess of $20,500,000 shall not be treated as
"Consolidated 1996 Revenues for purposes of determining the First Contingent
Payment" as that term is used in the definition of Company License Revenues.
"Contingent Payments" has the meaning set forth in Section 2(d) below.
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"Converted Financial Statements" has the meaning set forth in Section
5(j) below.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Embedded Products" has the meaning set forth in Section 4(n) below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution or defined benefit retirement plan or arrangement, (c) fringe
benefit plan or program, or (d) any other bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, medical, health or other
insurance plan, agreement, policy or arrangement that covers current or former
employees or directors of the Company or any of its Subsidiaries.
"Employment Agreement" has the meaning set forth in Section 7(a)(viii)
below.
"End User" and "End User License" have the meanings set forth in
Section 4(p)(F) below.
"Environmental, Health, and Safety Laws" means all applicable European
Union, German, United Kingdom or United States laws regulating pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
"ERISA" means the United States Employee Retirement Income Security Act
of 1974, as amended.
"Excess Loss Account" has the meaning set forth in Treas. Reg. Section
1.1502-19.
"Financial Statements" has the meaning set forth in Section 4(h) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Body" means any:
(i) supranational body (including the European Union), nation,
state, county, city, town, village, district, or other jurisdiction of any
nature;
(ii) federal, state, local, municipal, foreign, or other
government;
(iii) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
other entity and any court or other tribunal);
(iv) multi-national organization or body; or
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(v) body exercising, or entitled or purporting to exercise,
any administrative, executive, judicial, legislative, police, regulatory, or
taxing authority or power of any nature.
"Indemnified Party" has the meaning set forth in Section 8(e) below.
"Indemnifying Party" has the meaning set forth in Section 8(e) below.
"Individual Seller" has the meaning set forth in the preface above.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, utility models, design patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-
in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation) including
the Software, (g) all other proprietary rights, and (h) all copies and tangible
embodiments thereof (in whatever form or medium).
"Investor" has the meaning set forth in the preface above.
"Knowledge" means actual knowledge after reasonable investigation. In
the case of the Company, "Knowledge" means knowledge of the directors or
officers of the Company or any of its Subsidiaries.
"Legal Requirement" means any federal, state, local, municipal, foreign
or other constitution, ordinance, regulation, rule, statute, treaty, or other
law adopted, enacted, implemented, or promulgated by or under the authority of
any Governmental Body or by the eligible voters of any jurisdiction, and any
agreement, approval, authorization, consent, injunction, judgment, license,
order or permit by or with any Governmental Body or to which any of the Sellers
or the Company or any of its Subsidiaries or the Buyer, as applicable, is a
party or by which any of the Sellers or the Company or any of its Subsidiaries
or the Buyer, as applicable, is bound.
"LfA Landesanstalt" means the LfA Landesanstalt fur Aufbaufinanzierung
Munich an incorporated public law institution organized under the laws of
Germany.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Lock-Up and Pledge Agreement" has the meaning set forth in Section
7(a)(x) below.
"Losses" means all damages, penalties, fines, costs, amounts paid in
settlement, liabilities,
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obligations, Taxes, and losses to the extent not fully covered by insurance
policies in effect at the time of Closing, with respect to settlements between
the Parties hereto or otherwise entered into in accordance with this Agreement
and with respect to judgments, orders, decrees or rulings, not subject to
further appeal, of any court or Governmental Body having jurisdiction over the
matter (including any of the foregoing between any of the Parties to this
Agreement), together with all directly related costs of investigation, expenses
and fees, including court costs and reasonable attorneys' fees and expenses.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
4(h) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(h)
below.
"Notarial Deed" has the meaning set forth in Section 2(h) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Organizational Documents" has the meaning set forth in Section 4(a)
below.
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, any other legal entity, an unincorporated organization, or a
governmental entity (or any department, agency, or political subdivision
thereof).
"Process Agent" has the meaning set forth in Section 10(p) below.
"Product Action Plan" has the meaning set forth in Section 4(n)(ix)
below.
"Prohibited Transaction" means any transaction in connection with an
Employee Benefit Plan not in compliance with applicable Legal Requirements,
including a transaction described in ERISA Sec. 406 and Code Sec. 4975.
"Regulation S" has the meaning set forth in Section 3(a)(v) below.
"Restricted Shares" has the meaning set forth in Section 3(a)(v) below.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the United States Securities Exchange
Act of 1934, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens arising by operation of law for
5
Taxes not yet due and payable, (c) purchase money liens and liens securing
rental payments under capital lease arrangements, in each case disclosed in the
Financial Statements, and (d) other liens arising by operation of law in the
Ordinary Course of Business and not incurred in connection with the borrowing of
money.
"Sellers" has the meaning set forth in the preface above. Each of the
Sellers may be referred to herein as a Seller.
"Sellers' Representative" has the meaning set forth in Section 8(h)
below.
"Software" means the Company's and its Subsidiaries' software products
as described in detail on Exhibit A to this Agreement.
"Software Author" means a Person who has authored or participated in
the development of the Software or any portion thereof.
"Subsidiary" means any corporation or other legal entity with respect
to which a specified Person (or a Subsidiary thereof) owns a majority of the
common stock or equity interest or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors or similar governing
body.
"Tax" and "Taxes" means any German, United Kingdom or United States, or
other federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Sec. 59A), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, municipal trade,
sales, use, ad valorem, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not, and including
any liability for any of the foregoing relating to a predecessor entity.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Termination Date" means the date upon which this Agreement is
terminated in accordance with any provision of Section 9 below.
"Third Party Claim" has the meaning set forth in Section 8(e) below.
"Trade Secrets" has the meaning set forth in Section 4(n) below.
2. PURCHASE AND SALE OF COMPANY SHARES.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from each of the Sellers, and each
of the Sellers agrees to sell to the Buyer, all of such Seller's Company Shares
for the consideration specified in paragraphs (b), (c), (d) and (f) of this
Section 2. The Sellers understand and agree that the Buyer may designate, prior
to Closing, one or more Affiliated entities, in which Buyer holds, directly or
indirectly, more than fifty percent (50%) voting power and equity interest, to
effect the purchase transactions described in this Agreement, including but not
limited to transferring title to the Buyer Common Stock issued by the Buyer.
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(b) Purchase Price for Investor's Company Shares. In exchange for the
Company Shares held by Investor, which represent 50.4% of the outstanding
Company Shares, the Buyer agrees to pay to Investor at the Closing the sum of US
$10,000,000 in cash in immediately available funds in Germany.
(c) Initial Purchase Price for Individual Sellers' Company Shares. In
exchange for the Company Shares held by the Individual Sellers, which in the
aggregate represent 49.6% of the outstanding Company Shares, the Buyer agrees to
(i) issue to the Individual Sellers at the Closing an aggregate number of shares
(the "Closing Shares") of the Buyer's Common Stock, US $0.001 par value (the
"Buyer Common Stock") equal in value to US $18,500,000, valued as set forth in
this paragraph, and (ii) pay to the Individual Sellers the Contingent Payments,
if any, specified in Section 2(d) below. The Closing Shares shall be valued on
the basis of the average closing price of the Buyer Common Stock on The NASDAQ
Stock Market for the seven (7) trading days ending on the fourth (4th) business
day immediately prior to the Closing Date (adjusted for any stock splits or
other forms of recapitalization between the fourth (4th) business day
immediately prior to the Closing Date and the Closing Date). No adjustment shall
be made in the number of Closing Shares to be issued at the Closing on account
of any fluctuations in the market price or value of Buyer Common Stock
subsequent to the fourth (4th) business day prior to the Closing Date. The
Closing Shares shall be allocated pro rata among the Individual Sellers, based
on their respective percentage ownership of Company Shares set forth in the
Disclosure Schedule.
(d) Contingent Payments to Individual Sellers. In addition to the
Closing Shares issuable to the Individual Sellers pursuant to Section 2(c)
above, the Individual Sellers shall be eligible to receive additional,
contingent earn-out consideration ("Contingent Payments") on the following terms
and conditions:
(i) First Contingent Payment. If the Consolidated 1996
Revenues are greater than $18,500,000, then the Individual Sellers
shall be entitled to receive, in the aggregate, additional cash
consideration from the Buyer (the "First Contingent Payment") equal to
the amount, if any, by which the Consolidated 1996 Revenues exceed US
$18,500,000; provided, that the amount of the First Contingent Payment
shall in no event exceed US $2,000,000. The Buyer shall make the First
Contingent Payment, if any, on February 28, 1997, in immediately
available funds in Germany. The First Contingent Payment, if any, shall
be allocated pro rata among the Individual Sellers based on their
respective percentage ownership of the Company Shares set forth in the
Disclosure Schedule.
(ii) Second Contingent Payment. If the Company License
Revenues are at least $7.2 million, but less than $8.5 million, the
Buyer shall make a Contingent Payment to the Individual Sellers of $1
million. If the Company License Revenues are equal to or greater than
$8.5 million, the Buyer shall make a Contingent Payment to the
Individual Sellers of $2 million. Any such Contingent Payment, if any
(the "Second Contingent Payment"), shall be allocated pro rata among
the Individual Sellers based on their respective percentage ownership
of the Company Shares set forth in the Disclosure Schedule. Each
Individual Seller may elect to receive such Seller's portion of the
Second Contingent Payment, if any, in cash or in shares of Buyer Common
Stock, valued for such purpose on the basis of the average closing
price of the Buyer Common Stock on The NASDAQ Stock Market for the
seven (7) trading days ending on June 30, 1997 (adjusted for any stock
splits or other forms of recapitalization subsequent to June 30, 1997
and prior to payment of the Second Contingent Payment, if any). No
adjustment shall be made in the number of shares of Buyer Common Stock
to be so issued on account of any fluctuations in the market price or
value of Buyer Common Stock subsequent to June 30, 1997. Each
Individual Seller shall notify the Buyer of its election to receive any
Second Contingent Payment in cash or Buyer Common Stock within ten (10)
days after the date
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on which the Buyer notifies the Sellers' Representative that the
Company License Revenues has been determined, and the Buyer shall make
the Second Contingent Payment, if any, no later than August 30, 1997.
If the Second Contingent Payment is made in cash, it shall be made in
immediately available funds in Germany.
(iii) Calculation of Contingent Payments. The Parties agree to
use the following audit and dispute notification procedures for
calculating the Contingent Payments:
(A) As promptly as possible after December 31, 1996,
but in any event no later than February 15, 1997, the Buyer
shall cause the Company to deliver to the Sellers'
Representative consolidated financial statements of the
Company and its Subsidiaries for the fiscal year ended
December 31, 1996, including any audited portions thereof (the
"1996 Financial Statements"), prepared in accordance with
GAAP, applied consistently with the Company's past practice,
but without any adjustments, if any, applicable as a result of
the acquisition of the Company Shares by the Buyer.
.
(B) As promptly as possible after February 15, but in
any event no later than February 27, 1997, the Buyer shall
cause the Company to deliver to the Sellers' Representative
the Buyer's calculation of Consolidated 1996 Revenues. Unless,
within thirty (30) days after receipt of the Buyer's
determination of Consolidated 1996 Revenues, the Sellers'
Representative shall challenge the Buyer's determination of
Consolidated 1996 Revenues, the Buyer's determination shall be
binding upon the Sellers and the Sellers' Representative.
(C) As promptly as possible after June 30, 1997, but
in any event no later than August 15, 1997, the Buyer shall
cause the Company to deliver to the Sellers' Representative
the Buyer's calculation of Company License Revenues. Unless,
within thirty (30) days after receipt of the Buyer's
determination of Company License Revenues, the Sellers'
Representative shall challenge the Buyer's determination of
Company License Revenues, the Buyer's determination shall be
binding upon the Sellers and the Sellers' Representative.
(D) The Sellers' Representative and the independent
certified accountants of his choice (the "Sellers' Auditors")
shall have the right to review the work papers of the Buyer
and any accountants or auditors utilized by the Buyer (the
"Buyer's Auditors") in preparing the 1996 Financial
Statements, and in determining the Consolidated 1996 Revenues
or Company License Revenues. The Sellers' Representative and
the Sellers' Auditors, if any, and the Buyer and the Buyer's
Auditors shall work in good faith and cooperate in the
resolution of any dispute as to the 1996 Financial Statements
and the determination of the Consolidated 1996 Revenues and
Company License Revenues.
(E) If the Sellers' Representative gives written
notice within 30 days after his receipt of the Buyer's
determination of Consolidated 1996 Revenues, or his receipt of
the Buyer's determination of Company License Revenues, of
disagreement with the respective amounts shown therein (any
such notice from the Sellers' Representative is referred to
herein as a "Dispute Notice"), and if the Buyer and the
Sellers' Representative are unable to resolve any such
disagreement within 60 days after the date of the Dispute
Notice, the disagreement shall be submitted to arbitration by
written notice of either Party to the other within seventy
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(70) days after the date of the Dispute Notice (an
"Arbitration Notice") in accordance with the provisions set
forth in Section 2(e) below.
(F) In connection with the calculations described in
this Section 2(d), the Buyer shall pay the fees and
disbursements of the Buyer's Auditors and the Individual
Sellers shall pay the fees and disbursements of the Sellers'
Auditors, if any.
(e) Dispute Resolution procedures Applicable to Calculation of
Contingent Payments. The Parties agree to use the following dispute resolution
procedures for resolving any Dispute Notice:
(A) If any Party delivers an Arbitration Notice, then
within ten (10) days after the other Party's receipt of such
notice, the Buyer and the Sellers' Representative shall
designate in writing one arbitrator to resolve the dispute,
which shall be the Munich office of one of the "Big Six"
accounting firms other than KPMG or Xxxxxx Xxxxxxxx; provided,
that if the parties hereto cannot agree on an arbitrator
within such 10-day period, the arbitrator shall be selected at
random from among the four remaining firms.
(B) Within fifteen (15) days after the designation of
the arbitrator, the arbitrator, the Buyer and the Sellers'
Representative shall meet, at which time the Buyer and the
Sellers' Representative shall be required to set forth in
writing all disputed issues and a proposed ruling on each such
issue.
(C) The arbitrator shall use his best efforts to rule
on each disputed issue within thirty (30) days after the
initial meeting. The determination of the arbitrator as to the
resolution of any dispute shall be binding and conclusive upon
all parties hereto.
(D) The prevailing party in any arbitration shall be
entitled to an award of reasonable costs and expenses incurred
in connection with the arbitration. The non-prevailing party
shall pay such fees, together with the fees of the arbitrator
and the costs and expenses of the arbitration.
(E) Any arbitration pursuant to this Section 2(e)
shall be conducted in Munich, Germany.
(f) Purchase of Company Indebtedness. At the Closing, the Buyer shall
also (i) pay to the LfA Landesanstalt an amount of cash in immediately available
funds to purchase the short-term and long-term indebtedness for borrowed money
owed by the Company to the LfA Landesanstalt at a purchase price equal to the
outstanding principal amount thereof, plus accrued interest at the rate
specified therein through the Closing Date; and (ii) repay an amount of
short-term indebtedness for borrowed money owed by the Company to certain
financial institutions (other than the LfA Landesanstalt) provided that the sum
of the purchase price paid to the LfA Landesanstalt for such indebtedness and
the amount paid to financial institutions shall not exceed $4,162,000 (the
principal amount of such indebtedness outstanding), plus accrued interest (at
the rate specified therein) from the dates of the last regularly scheduled
payments of interest and through the Closing Date. The Sellers shall deliver to
Buyer no later than November 25, 1996 a schedule separately listing each
indebtedness referred to in this Section 2(f), including for each indebtedness
separate descriptions of (i) then outstanding principal, (ii) then accrued
interest, (iii) and projected accrued interest as of the Closing Date. The
Company may draw on its current lines of credit in the Ordinary Course
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of Business prior to the Closing, upon obtaining the prior consent of Buyer
which shall not be unreasonably withheld. The Company shall use its best efforts
to pay off any such amounts prior to the Closing Date.
(g) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Company in
Munich, Germany, commencing at 9:00 a.m. local time on the second business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Buyer and the Sellers may mutually
determine (the "Closing Date"); provided that the signing of the Notarial Deed
shall take place contemporaneously with the Closing in Switzerland, or such
other location as shall be mutually agreed by the Parties.
(h) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 7(a) below, (ii) the Buyer will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section 7(b)
below, (iii) each Seller and the Buyer will sign a notarial deed of transfer
(the "Notarial Deed") with respect to all of such Seller's Company Shares,
reasonably satisfactory to the Buyer and its counsel, (iv) the Buyer will
deliver to each of the Sellers the consideration specified in Sections 2(b) and
(c) above, and (v) the Buyer will make the payments specified in Section 2(f)
above.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) Representations and Warranties of the Sellers. Each of the Sellers
represents and warrants to the Buyer that, with respect to such Seller, the
statements contained in this Section 3(a) are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 3(a)).
(i) Organization of Investor. Investor represents and warrants
that Investor is duly organized and validly existing as a German
limited liability company.
(ii) Authorization of Transaction. The Seller has full power
and authority (including, if the Seller is a corporation, full
corporate power and authority) to execute and deliver this Agreement
and to perform such Seller's obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Seller,
enforceable in accordance with its terms and conditions. The Seller
need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to enter into, or consummate the transactions
contemplated by, this Agreement. Neither bankruptcy nor judicial
composition procedures have been applied for or have been commenced
with respect to the properties of the Seller, and there are no
circumstances that could justify the voidance of this Agreement
pursuant to the provisions of the German Bankruptcy Code
("Konkursordnung"), the German Reorganization Code
("Vergleichsordnung") or the German Voidable Preference Act
("Anfechtungsgesetz"). The transactions contemplated by this Agreement
will not result in the sale of all of the present assets of such Seller
within the meaning of Section 419 of the German Civil Code.
(iii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any Legal Requirement to which
the Seller is subject or, if the Seller is a corporation, any provision
of its Organizational
10
Documents, or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any
notice or consent under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller is a party or by
which the Seller is bound or to which any of the Seller's assets is
subject.
(iv) Brokers' Fees. Except for the fees of Broadview
Associates which shall be paid as provided in Section 10(l), the Seller
has no agreement or obligation, contingent or otherwise, to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could
become liable or obligated.
(v) Individual Seller Due Diligence. Each Individual Seller
(A) has received and reviewed an annual report to stockholders of the
Buyer for the year ended June 30, 1996; an annual report of the Buyer
on Form 10-K for the fiscal year ended June 30, 1996; and all of
Buyer's quarterly reports on Form 10-Q and current reports on Form 8-K
filed since June 30, 1996, (B) was provided the opportunity to ask
questions of and receive answers from the Buyer, or its
representatives, concerning the operations, business and financial
condition of the Buyer, and all such questions have been answered to
the Seller's full satisfaction and any information necessary to verify
such response has been made available to the Seller; (C) has received
such documents, materials and information as the Seller deems necessary
or appropriate for evaluation of the Buyer Common Stock; (D) confirms
that the Seller has carefully read and understands these materials and
has made such further investigation as was deemed appropriate to obtain
additional information to verify the accuracy of such materials; (E)
believes that the Seller has such knowledge and experience in financial
and business matters that the Seller is capable of evaluating the
merits and risks of an investment in the Buyer Common Stock and is
making such investment subject to the risks disclosed in the Buyer's
public disclosures, (G) understands and acknowledges that (i) the
Closing Shares and any shares of Buyer Common Stock issued in
accordance with Section 2(d) above (collectively, "Restricted Shares")
have not been registered under the Securities Act, and may not be
offered or sold in the United States or to, or for the account or
benefit of, any "U.S. person" (as defined in Regulation S promulgated
under the Securities Act ("Regulation S")), unless such securities are
registered under the Securities Act or such offer or sale is made
pursuant to an exemption from the registration requirements of the
Securities Act and (ii) the Restricted Shares are being issued by the
Buyer pursuant to the terms of Regulation S, which permits securities
to be sold to non-"U.S. persons" in "offshore transactions" (as defined
in Regulation S), subject to certain terms and conditions; (H) is
receiving the Restricted Shares for his or her own account; and (I) is
not a "U.S. person" and has executed this Agreement outside the United
States and the offer to such Individual Seller and sale of the
Restricted Shares will occur outside the United States.
(vi) Investment.
(A) Each Individual Seller acknowledges that for a
period of forty (40) days following the Closing Date (the
"Restricted Period"), the Individual Seller shall not (i)
engage in any activity for the purpose of, or which may
reasonably be expected to have the effect of, conditioning the
market in the United States for the Restricted Shares or (ii)
unless such Restricted Shares are registered under the
Securities Act or an exemption from the registration
requirements of the Securities Act is available, offer, sell
or transfer the Restricted Shares in the United States or to,
or for the account or benefit of, a "U.S. person". Each
Individual Seller understands that the Restricted Shares or
any interest therein
11
are only transferrable on the books and records of the
transfer agent and registrar of the Buyer. Each Individual
Seller further understands that such transfer agent and
registrar will not register any transfer of the Restricted
Shares which the Buyer in good faith believes violates the
restrictions set forth in this paragraph, and that the Buyer
may place stop transfer orders with its transfer agent with
respect to certificates representing Restricted Shares.
(B) Unless the Restricted Shares shall first have
been registered under the Securities Act, any proposed offer,
sale or transfer during the Restricted Period of any of the
Restricted Shares shall be subject to the condition that the
Individual Seller must deliver to the Buyer (i) a written
certification that neither the record nor beneficial ownership
of the Restricted Shares has been offered or sold in the
United States or to, for the account or benefit of, any "U.S.
person", (ii) a written certification of the proposed
transferee that such transferee (or any account for which such
transferee is acquiring such Restricted Shares) is not a "U.S.
person", that such transferee is acquiring such Restricted
Shares for such transferee's own account ( or an account over
which it has investment discretion), and that such transferee
is knowledgeable of and agrees to be bound by the restrictions
on re-sale set forth in this section and Regulation S during
the Restricted Period, and (iii) a written opinion of United
States counsel, in form and substance reasonably satisfactory
to the Buyer, to the effect that the offer, sale and transfer
of such Restricted Shares are exempt from registration under
the Securities Act.
(C) Each Individual Seller agrees that for the
duration of the Restricted Period the stock certificates
representing the Restricted Shares shall bear the legend set
forth below:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS STOCK
CERTIFICATE HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OF THE UNITED STATES OF
AMERICA (THE "SECURITIES ACT") OR ANY OTHER SECURITIES LAWS
AND HAVE BEEN ISSUED IN RELIANCE UPON THE EXEMPTION FROM SUCH
REGISTRATION CONTAINED IN REGULATION S UNDER THE SECURITIES
ACT. THE SHARES OF COMMON STOCK REPRESENTED BY THIS STOCK
CERTIFICATE MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY
"U.S. PERSON" (AS DEFINED IN REGULATION S UNDER THE SECURITIES
ACT) PRIOR TO FORTY (40) DAYS FOLLOWING THE DATE OF THIS
CERTIFICATE, UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT IS AVAILABLE.
The Buyer may place stop transfer orders with its transfer
agent with respect to such certificates. The Buyer agrees
that, at any time and from time to time after the expiration
of the Restricted Period, the Buyer will instruct the transfer
agent for the Buyer's Common Stock to remove the foregoing
legend from the Restricted Shares, provided that the Buyer may
require delivery by the Sellers of an opinion of United States
counsel reasonably acceptable to the Buyer to the effect that
the legend may be removed from the Restricted Shares in
accordance with the Securities Act.
12
(vii) Company Shares. The Seller owns and will convey to the
Buyer at the Closing, the Company Shares set forth next to the Seller's
name in Section 4(c) of the Disclosure Schedule, free and clear of any
rights of third parties, in particular of any Security Interests,
options, rights of first refusal or other rights to acquire, dispose of
or vote the Company Shares. Such Seller is neither contractually nor
under statutory law prevented from conveying the Company Shares to the
Buyer effectively and free of any rights of third parties. The Seller
is not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting or disposition of any capital
stock of the Company.
(b) Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Sellers that the statements contained in this Section 3(b)
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 3(b)).
(i) Organization of the Buyer. The Buyer and each of its
Subsidiaries is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation,
and is duly authorized to conduct business and is in good standing
under the laws of each jurisdiction where such qualification is
required.
(ii) Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of
the Buyer, enforceable in accordance with its terms and conditions. The
Buyer need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to enter into, or consummate the transactions
contemplated by, this Agreement.
(iii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any Legal Requirement to which
the Buyer or any of its Subsidiaries is subject or any provision of the
Buyer's or any of its Subsidiaries' Organizational Documents or (B)
conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or
consent under any agreement, contract, lease, license, instrument, or
other arrangement to which the Buyer or any of its Subsidiaries is a
party or by which it is bound or to which any of its assets is subject.
(iv) Brokers' Fees. The Buyer has no agreement or obligation,
contingent or otherwise, to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement for which any Seller or the Company could become liable or
obligated. The Buyer shall pay any fees and expenses owing to Xxxxxxx,
Xxxxxx & Xxxxxxxxx in connection with such transactions.
(v) Buyer Common Stock. The Buyer Common Stock, when issued to
the Individual Sellers pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, free and clear of any
restrictions on transfer (other than pursuant to the Lock-Up and Pledge
Agreements and restrictions under applicable securities laws), Taxes
(other than income Taxes payable by Sellers on account of the
transactions contemplated by this Agreement), Security Interests,
options, warrants,
13
purchase rights, contracts, commitments, equities, claims and demands.
(vi) Filing of Reports. The Buyer has complied with all
applicable periodic reporting requirements under the Securities
Exchange Act. Neither the Form 10-K of the Buyer for the fiscal year
ended June 30, 1996, nor the Forms 10-Q of the Buyer for each fiscal
quarter to date in 1996 contain any material misstatement of fact or
omit any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made,
not misleading. Since the date of the most recent Form 10-Q or Form 8-K
filed by the Buyer (whichever is later), no event has occurred which
requires the Buyer to file a form 8-K, and neither the Buyer nor any of
its Subsidiaries has Knowledge of any fact that has specific
application to the Buyer and its Subsidiaries (other than general
economic or industry conditions) and that materially and adversely
affects the assets or the business, prospects, financial condition or
results of operations of the Buyer and its Subsidiaries, taken as a
whole, that has not been set forth in the Company's filings under the
Securities Exchange Act, this Agreement or Annex II to this Agreement.
(vii) Reporting Issuer. The Buyer represents and warrants to
each Individual Seller that it is a "reporting issuer" (as defined in
Regulation S). The Buyer, its Affiliates and any person acting on
behalf of, or as agent of, any of the foregoing, whether as principal
or agent, (A) has distributed the Restricted Shares to the Individual
Sellers and will do so only in an "offshore transaction" (as defined in
Regulation S), (B) has not engaged and will not engage with respect to
the Restricted Shares in any "directed selling efforts" (as defined in
Regulation S) in or directed toward the United States, (C) has complied
and will comply with all "offering restrictions" (as defined in
Regulation S) in respect of the Restricted Shares and (D) has not made
and will not make any offers or sales of any of the Restricted Shares
or any interest therein in the United States or to, or for the account
or benefit of, any "U.S. person" (as defined in Regulation S).
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS
SUBSIDIARIES.
The Sellers represent and warrant to the Buyer that, except as set
forth in the disclosure schedule separately delivered by the Sellers to the
Buyer on the date hereof and initialed by the Parties (the "Disclosure
Schedule"), the statements contained in this Section 4 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4). Nothing
in the Disclosure Schedule shall be deemed adequate to disclose an exception to
a representation or warranty made herein, however, unless the Disclosure
Schedule identifies the exception with particularity and describes the relevant
facts in reasonable detail. Without limiting the generality of the foregoing,
the mere listing (or inclusion of a copy) of a document or other item shall not
be deemed adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the existence of
the document or other item itself). The Buyer will identify in writing to the
Sellers, prior to executing this Agreement and initialing the Disclosure
Schedule, each and every item in the Disclosure Schedule where the Buyer
believes that the disclosure does not provide adequate particularity or detail,
and the Sellers shall amend such description to the Buyer's reasonable
satisfaction prior to execution of the Agreement. The Buyer's initialing of the
Disclosure Schedule shall constitute acceptance by the Buyer of the exceptions
listed or described therein. The Disclosure Schedule will be divided into three
(3) parts, one for the Company and one for each Subsidiary, and each of the
three parts will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4, and items within the Disclosure
Schedule may be incorporated from one item of the Disclosure Schedule to another
item by cross-reference. References
14
herein to sections or paragraphs of the Disclosure Schedule are to the relevant
section or paragraph of the subsection of the Disclosure Schedule applicable to
the Company or the relevant Subsidiary, as the context requires.
(a) Organization, Qualification, and Corporate Power. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing,
and in good standing (or the local equivalent) under the laws of the
jurisdiction of its incorporation, as set forth in the Disclosure Schedule. Each
of the Company and its Subsidiaries is duly authorized to conduct business and
is in good standing under the laws of each jurisdiction where such qualification
is required except as set forth in the Disclosure Schedule. Each of the Company
and its Subsidiaries has full corporate power and authority and all public and
private concessions, licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. Neither bankruptcy, receivership nor judicial composition
procedures have been applied for or have been started with respect to the
properties of the Company or its Subsidiaries, and there are no circumstances
that could justify the voidance of this Agreement pursuant to the provisions of
the German Bankruptcy Code ("Konkursordnung"), the German Reorganization Code
("Vergleichsordnung") the German Voidable Preference Act ("Anfechtungsgesetz"),
or the United Kingdom Insolvency Act of 1986. Section 4(a) of the Disclosure
Schedule includes a correct and complete copy of the most current excerpt from
the German Commercial Register and the most current version of the Bylaws
("Gesellschaftsvertrag") of the Company, and of the Certificate of Incorporation
and Bylaws (or local equivalent) of each of its Subsidiaries (collectively, the
"Organizational Documents"), and lists the directors and officers, of each of
the Company and its Subsidiaries as of the date hereof.
(b) Books and Records. All existing books of account, minute books,
stock record books and other corporate records of the Company and its
Subsidiaries, all of which have been made available to the Buyer, are complete
and correct in all material respects and have been maintained in accordance with
sound business practices and, if applicable, generally accepted accounting
principles applicable in their respective jurisdictions. Without limiting the
generality of the foregoing, the records and minute books of the Company and its
Subsidiaries contain complete and accurate records of all official meetings held
of, and corporation action taken by, the shareholders, the managing directors,
the advisory board and any committees instituted by it, the boards of directors,
and committees of the boards of directors of the Company and its Subsidiaries
during the periods indicated in the Disclosure Schedule, and no meeting of any
such shareholders, managing directors, advisory board, board of directors, or
committee has been held during such periods for which minutes have not been
prepared and are not contained in such records or minute books. At the Closing,
all of those books and records will be in the possession of the Company or the
relevant Subsidiary.
(c) Capitalization. The registered capital of the Company is as set
forth in Section 4(c) of the Disclosure Schedule. All of the Company Shares are
issued and outstanding. No repayments of the stated capital have been made with
respect to the Company Shares. All of the Company Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and there is no
obligation to make additional contributions ("Nachschusspflichten"). Upon
completion of the transactions contemplated by this Agreement, none of the
Company and its Subsidiaries will be either insolvent ("zahlungsunfahig") or
over-indebted ("uberschuldet"). The Company Shares are held of record by the
respective Sellers as set forth in Section 4(c) of the Disclosure Schedule which
includes a copy of the most recent list of Company shareholders filed with the
German Commercial Register. Except for the Company Shares set forth in such
Section 4(c), there are no equity securities of any class of the Company, or any
security convertible or exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. There are no
outstanding or authorized options, warrants, preemptive rights, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments of any character that could
15
require the Company or any of its Subsidiaries to issue, deliver, sell, or
otherwise cause to become outstanding, or to transfer, any capital stock or
other equity securities of the Company or any of its Subsidiaries. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company or its
Subsidiaries. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting, transfer or disposition of the
capital stock of the Company or its Subsidiaries. No certificates have been
issued with respect to the Company Shares and no legend or other reference to
any purported Security Interest appears upon any certificate representing
capital stock of any Subsidiary of the Company. None of the Company Shares or
other securities of the Company has been issued, redeemed or repurchased in
violation of any German Legal Requirements, including the German Statute on
Companies with Limited Liability.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any Legal Requirement to which any of the Company and its
Subsidiaries is subject or any provision of the Organizational Documents of any
of the Company and its Subsidiaries or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice or consent under any material agreement, contract, lease, license,
instrument, or other arrangement to which any of the Company and its
Subsidiaries is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets). None of the Company and its Subsidiaries needs to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
Governmental Body in order for the Parties to consummate the transactions
contemplated by this Agreement.
(e) Brokers' Fees. Except for the fees of Broadview Associates which
shall be paid as provided in Section 10(l), none of the Company and its
Subsidiaries has any agreement or obligation, contingent or otherwise, to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(f) Ownership of Assets. The Company and its Subsidiaries have good and
marketable title to (subject only to statutory Security Interests of the vendors
of assets purchased by the Company and paid for on an installment basis), or a
valid leasehold interest in, the properties and assets used by them, located on
their premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet. All of the properties and assets purchased or
otherwise acquired by the Company and its Subsidiaries since the date of the
Most Recent Balance Sheet (except for supplies, inventory, and personal property
acquired since the date of the Most Recent Balance Sheet in the Ordinary Course
of Business) are listed in Section 4(f) of the Disclosure Schedule.
(g) Subsidiaries. Section 4(g) of the Disclosure Schedule sets forth
for each Subsidiary of the Company (i) its name and jurisdiction of
incorporation, (ii) the number of authorized and issued shares of each class of
its capital stock, and (iii) the number of shares of its capital stock held in
treasury. All of the issued and outstanding shares of capital stock of each
Subsidiary of the Company have been duly authorized and are validly issued,
fully paid, and nonassessable (or the local equivalent). The Company holds of
record and owns beneficially all of the outstanding shares of each Subsidiary of
the Company, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and other applicable securities laws),
Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. None of the Company and its
Subsidiaries controls, directly or indirectly, or has any direct or indirect
equity or ownership interest or participation or sub-participation (including
any enterprise agreement
16
within the meaning of Sections 291 and 292 of the German Stock Corporation Act
("Aktiengesetz")) in, any corporation, partnership, trust, or other business
association which is not a Subsidiary of the Company, and none of the Company
and its Subsidiaries has issued any letter of support ("Patronatserklarung") in
favor of any third party.
(h) Financial Statements. Attached hereto as Exhibit B are the
following financial statements of the Company and its Subsidiaries (collectively
the "Financial Statements"): (A) audited consolidated balance sheets and
statements of income, changes in stockholders' equity, and cash flow as of and
for the fiscal years ended December 31, 1994, and December 31, 1995 (the "Most
Recent Fiscal Year End"), and (B) unaudited consolidated balance sheets and
statements of income, changes in stockholders' equity, and cash flow (the "Most
Recent Financial Statements") as of and for the nine (9) months ended September
30, 1996 for the Company and its Subsidiaries. The Financial Statements
(including the notes thereto, which correctly and completely set forth all
matters which they must contain under Section 255 HGB (Haftungsverhaltnisse)),
have been prepared for the Company and its Subsidiaries in accordance with
German generally accepted accounting principles, applied on a consistent basis
throughout the periods covered thereby, and present fairly the financial
condition of the Company and its Subsidiaries as of such dates and the results
of operations of the Company and its Subsidiaries for such periods, are correct
and complete, and are consistent with the books and records of the Company and
its Subsidiaries; provided, however, that the Most Recent Financial Statements
are subject to normal year-end adjustments (which will not be material
individually or in the aggregate) and lack footnotes and other presentation
items. The Converted Financial Statements (including the notes thereto), which
are delivered to Buyer pursuant to Section 5(j), shall, when delivered, have
been prepared in accordance with GAAP, consistently applied, shall be true,
correct and complete and present the financial condition and results of
operations of the Company fairly in all material respects in the presentation
format specified by the Buyer.
(i) Events Subsequent to Most Recent Financial Statements. Since the
date of the Most Recent Financial Statements, there has not been any material
adverse change in the business, assets, financial condition, operations or
results of operations of any of the Company and its Subsidiaries. Without
limiting the generality of the foregoing, since that date:
(i) none of the Company and its Subsidiaries has sold, leased,
transferred, or assigned any assets, tangible or intangible having an
aggregate value in excess of $10,000, other than for a fair
consideration in the Ordinary Course of Business;
(ii) none of the Company and its Subsidiaries has entered into
any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more than
$35,000 or outside the Ordinary Course of Business;
(iii) no party (including any of the Company and its
Subsidiaries) has accelerated, terminated, modified, or canceled any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than
$25,000 to which any of the Company and its Subsidiaries is a party or
by which any of them is bound;
(iv) none of the Company and its Subsidiaries has imposed or
permitted to be imposed any Security Interest upon any of its assets,
tangible or intangible;
(v) none of the Company and its Subsidiaries has made any
capital expenditure (or series of related capital expenditures) either
involving more than $25,000 or outside the Ordinary
17
Course of Business;
(vi) none of the Company and its Subsidiaries has made any
capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person;
(vii) none of the Company and its Subsidiaries has issued any
note, bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease
obligation (or series of related such transactions) involving more than
$25,000;
(viii) none of the Company and its Subsidiaries has delayed or
postponed the payment of accounts payable or other monetary obligations
outside the Ordinary Course of Business;
(ix) none of the Company and its Subsidiaries has canceled,
compromised, waived, or released any right or claim (or series of
related rights and claims), either involving more than $25,000 or
outside the Ordinary Course of Business, or offered any incentive or
inducement to customers to prepay any accounts receivable;
(x) none of the Company and its Subsidiaries has entered into,
terminated or received notice of termination with respect to any
distribution, reseller or sales representation agreement, relating to
the Software (other than End User Licenses);
(xi) none of the Company and its Subsidiaries has entered into
any agreement or contract with any Person with respect to (A) the
acquisition, licensing, maintenance or use of any Intellectual Property
(other than End-User Licenses, maintenance agreements or renewals and
purchases of licenses of packages software products), or (B) any joint
venture, partnership or other collaborative relationship;
(xii) there has been no change made or authorized in the
Organizational Documents of any of the Company and its Subsidiaries;
(xiii) none of the Company and its Subsidiaries has issued,
sold, or otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including
upon conversion, exchange, or exercise) any of the capital stock of the
Company or any of its Subsidiaries;
(xiv) none of the Company and its Subsidiaries has declared,
set aside, or paid any dividend or made any distribution with respect
to its capital stock (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of its capital stock;
(xv) none of the Company and its Subsidiaries has experienced
any damage, destruction, or loss (whether or not covered by insurance)
to its property having a value (in each instance) of more than $10,000;
(xvi) none of the Company and its Subsidiaries has made any
loan to or repaid any loan from, any of the Sellers or their respective
Affiliates, or entered into any other transaction with, or made any
payments or other distributions to, any of the Sellers or their
respective Affiliates, except for compensation in the Ordinary Course
of Business;
18
(xvii) none of the Company and its Subsidiaries has made any
loan to, entered into any other transaction with, or made any payments
or other contributions to, any of its directors, officers and employees
outside the Ordinary Course of Business;
(xviii) none of the Company and its Subsidiaries has entered
into any employment contract, collective bargaining agreement or other
agreement or obligation to any of its employees, written or oral, or
modified the terms of any existing such contract, agreement or
obligation outside the Ordinary Course of Business or involving total
compensation in excess of $100,000;
(xix) none of the Company and its Subsidiaries has granted any
increase in the compensation of any of its employees outside the
Ordinary Course of Business or any increase in the compensation of its
directors or officers;
(xx) none of the Company and its Subsidiaries has adopted,
amended, modified, or terminated any Employee Benefit Plan;
(xxi) none of the Company and its Subsidiaries has made any
other change in employment terms for any of its directors or officers;
(xxii) none of the Company and its Subsidiaries has made or
pledged to make any charitable or other capital contribution outside
the Ordinary Course of Business;
(xxiii) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving any of the Company and its
Subsidiaries; and
(xxiv) none of the Company and its Subsidiaries has agreed or
otherwise committed to do any of the foregoing.
(j) Undisclosed Liabilities. None of the Company and its Subsidiaries
has any Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability), except for (i) Liabilities set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto),
(ii) Liabilities which have arisen after the date of the Most Recent Financial
Statements in the Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of any Legal
Requirement), and (iii) those Liabilities which are described in Section 4(j) of
the Disclosure Schedule.
(k) Legal Compliance.
(i) Except as set forth in Section 4(k) of the Disclosure
Schedule:
(A) Each of the Company and its Subsidiaries is and
has been in full compliance with each Legal Requirement that
is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets,
except where the failure to be in compliance has not had and
is not expected to have a material adverse effect on the
Company and its Subsidiaries' business, taken as a whole;
19
(B) no event has occurred or Basis exists that may
constitute or result in (with or without notice or lapse of
time) a violation by the Company or any of its Subsidiaries,
or a failure on the part of any of the Company or its
Subsidiaries to comply with, any Legal Requirement, except
where the violation or failure to be in compliance is not
expected to have a material adverse effect on the Company and
its Subsidiaries' business, taken as a whole;
(C) There is no contract or obligation, agreement,
arrangement or concerted practice to which the Company or any
of its Subsidiaries is a party, and there are no practices in
which the Company or any of its Subsidiaries is engaged, which
are void, illegal, unenforceable, registrable or notifiable
under any anti-trust or similar legislation in the European
Union (or in any of its member states) or in the United
States. Neither the Company nor any Subsidiary has registered
any agreements or arrangements under any anti-trust rules or
filed any notification or application for exemption with the
Commission of the European Union; and
(D) the Company and each of its Subsidiaries have not
received any notice or other communication (whether oral or
written) from any Governmental Body or any other Person
regarding, and the Sellers have no Knowledge of, any actual,
alleged, possible, or potential violation of, or failure to
comply with, any Legal Requirement, or any obligation on the
part of the Company or any of its Subsidiaries to undertake,
or to bear all or any portion of the cost of, any remedial
action of any nature.
(ii) Each authorization of a Governmental Body that is
required to be held by the Company or its Subsidiaries that is material
to the business of the Company and its Subsidiaries, taken as a whole
(the "Company Governmental Authorizations"), is listed in Section 4(k)
of the Disclosure Schedule and is in full force and effect. Except as
set forth in Section 4(k) of the Disclosure Schedule, the Company and
each of its Subsidiaries are in material compliance with each Company
Governmental Authorization.
(l) Tax Matters.
(i) Each of the Company and its Subsidiaries has timely filed
all Tax Returns that it was required to file. All such Tax Returns were
correct and complete in all material respects. All Taxes owed by any of
the Company and its Subsidiaries (whether or not shown on any Tax
Return) have been paid. None of the Company and its Subsidiaries
currently is the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where any of the Company and its Subsidiaries does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of
any of the Company and its Subsidiaries that arose in connection with
any failure (or alleged failure) to pay any Tax.
(ii) Each of the Company and its Subsidiaries has withheld and
timely paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(iii) There is no dispute, claim or notice of deficiency
concerning any Tax Liability of any of the Company and its Subsidiaries
either (A) claimed or raised by any Tax authority in writing
20
or (B) as to which any of the Sellers and the directors and officers
(and employees responsible for Tax matters) of the Company and its
Subsidiaries has Knowledge. There are no pending, or to the Knowledge
of any of the Sellers and the directors and officers (and employees
responsible for Tax matters) of the Company and its Subsidiaries,
threatened, and there are no circumstances of which the Company or any
of its Subsidiaries has Knowledge which may give rise to, any
proceedings, investigations, audits or assessments with respect to the
Company or any of its Subsidiaries involving Taxes.
(iv) The Company's income, sales and property Tax returns were
assessed by the competent German tax authorities ("Finanzamter")
through the fiscal year ended December 31, 1991, and have not otherwise
been subject to audit or assessment in any jurisdiction. The Sellers
have listed in Section 4(l) of the Disclosure Schedule and delivered to
the Buyer correct and complete copies of all Tax Returns, assessments,
examination reports, correspondence, elections and consents between the
Company or any of its Subsidiaries and any Tax authority, and
statements of deficiencies assessed against or agreed to by any of the
Company and its Subsidiaries, for taxable periods ended on or after
December 31, 1991.
(v) None of the Company and its Subsidiaries has waived any
statute of limitations in respect of Taxes, agreed to any extension of
time with respect to a Tax assessment or deficiency, applied for any
ruling from any Tax authority with respect to Taxes or entered into any
closing agreement or other settlement with any Tax authority.
(vi) Each of the Company and its Subsidiaries has disclosed on
its United States federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal
income Tax within the meaning of Code Sec. 6662. None of the Company
and its Subsidiaries is a party to any Tax allocation or sharing
agreement.
(vii) Section 4(l) of the Disclosure Schedule sets forth the
following information with respect to each of the Company and its
Subsidiaries as of the most recent practicable date, unless otherwise
specified: (A) the basis of the Company or Subsidiary in its assets;
(B) the basis of the Company in the stock of each Subsidiary (or the
amount of any Excess Loss Account); (C) the amount of any net operating
loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to the Company
or Subsidiary; and (D) the amount of any deferred gain or loss
allocable to the Company or Subsidiary arising out of any Deferred
Intercompany Transaction.
(viii) The unpaid Taxes of the Company and its Subsidiaries
(A) did not, as of the date of the Most Recent Financial Statements,
exceed the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book
and Tax income) set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and (B) do not exceed that reserve
as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns.
(ix) Except as discussed in Section 4(l) of the Disclosure
Schedule, all transactions between or among the Company and any of its
Subsidiaries have involved consideration that would have been charged
or paid, or profits that would have been earned, in comparable
transactions between unrelated parties in the Ordinary Course of
Business. None of the Company and its Subsidiaries has applied for or
entered into an advance pricing agreement with any Tax Authority. In
21
addition, the Company and its Subsidiaries have maintained adequate
documentation of U.S. transfer pricing as required by Section 6662 of
the Code.
(m) Real Property. The Company and its Subsidiaries do not own and have
never owned any real property, and the U.S. Subsidiary of the Company is not a
U.S. real property holding company. Section 4(m) of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to any of the
Company and its Subsidiaries. The Sellers have delivered to the Buyer correct
and complete copies of the leases and subleases listed in Section 4(m) of the
Disclosure Schedule (as amended to date). With respect to each lease and
sublease listed in Section 4(m) of the Disclosure Schedule:
(i) the lease or sublease is in full force and effect and will
continue to be in full force and effect on identical terms following
the consummation of the transactions contemplated hereby;
(ii) the Company or its Subsidiary, as the case may be, is not
in breach or default, and no event has occurred which, with notice or
lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(iv) the Company or its Subsidiary, as the case may be, has
not assigned, transferred, conveyed, mortgaged, deeded in trust,
encumbered or granted a Security Interest in the leasehold or
subleasehold; and
(v) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities.
(n) Intellectual Property; Software.
(i) Exhibit A contains a complete and accurate list and
description of the Software, all of which is owned by the Company. Also
included in Exhibit A is a separate list of all software products,
other than the Software, which the Company (or any of its Subsidiaries)
sells, licenses or otherwise distributes. Except as set forth in
Section 4(n) of the Disclosure Schedule, and subject to copyrights of
third parties in Embedded Products as disclosed in Section 4(n), and
subject to copyrights of Software Authors where the Company has
received a perpetual exclusive license of the copyrighted Software, the
Company is the exclusive owner of all rights to the Software (including
the exclusive right to make, copy, sell, exploit, modify, and provide
to others the use of the Software and all derivative works thereof)
free and clear of any Security Interests. The Company and its
Subsidiaries are in actual and sole possession of the complete source
code of the Software (excluding any Embedded Products) and all related
documentation except for any source code and related documentation that
are in possession of an escrow agent pursuant to an agreement listed in
Section 4(n) of the Disclosure Schedule, and have not disclosed such
source code or documentation to any third party, except for disclosure
to employees and agents of the Company and its Subsidiaries pursuant to
agreements sufficient to protect the Company's and its Subsidiaries'
Intellectual Property rights therein. Each Software Author made his or
her contribution to the Software within the scope of employment with
the Company (or its Subsidiaries), as a "work made for hire," was
directed by the Company or its Subsidiaries to work on the Software
(and in the case of Software Authors in Germany, his or her
contribution has resulted in a statutory license of the Company or any
of its
22
Subsidiaries in any Software pursuant to Section 69b of the German
Copyright Act) or as an independent contractor pursuant to a written
agreement in which all work product and the Intellectual Property
rights therein, including copyrights, were perpetually and exclusively
licensed to the Company (or its Subsidiaries).
(ii) Except as set forth in Section 4(n) of the Disclosure
Schedule:
(A) there are no material defects in the Software,
and there are no material errors in any related documentation,
which defects or errors would in any material respect affect
the Buyer's or any licensee's use of the Software or the
functioning of the Software in accordance with the
specifications for the Software published by the Company and
its Subsidiaries (excluding any "bugs" arising or discovered
in the normal course of business which as a whole are not
material to the overall function of the Software); the
Software has all the features described in the related user
manual or advertisements and materials made available to the
Company's and its Subsidiaries' customers and the Software
does not, to the Knowledge of the Company or the Sellers,
contain any "back door," "time bomb," "Trojan horse," "worm,"
"drop dead device," "virus" (as these terms are commonly used
in the computer software industry), or other software routines
or hardware components designed to permit unauthorized access,
to disable or erase software, hardware, or data or to perform
any other similar type of functions;
(B) except with respect to Embedded Products and
End-User Licensees and the rights of distributors listed in
Section 4(n) of the Disclosure Schedule pursuant to the
agreements listed therein, no Person, entity or Government
Body other than the Company or its Subsidiaries has any
interest of any kind or nature in or with respect to the
Software, including the right to use, make, copy, sell,
exploit, modify and provide to others the use of, the Software
and all derivative works thereof, and no Government Body
funding (other than funds provided to the Company by the
Investor) or Government Body, university or college facilities
were used in the development of the Software, and the Software
was not developed pursuant to a contract with any Person
(except for Software Authors hired by the Company or its
Subsidiaries), and the Company and the Sellers have no
Knowledge of any Basis or agreement that would preclude the
Buyer from making any change to the Software or combining it
with other software in any lawful manner;
(C) the Company and the Sellers have no Knowledge
that any third party is violating or has violated any of the
Company's or its Subsidiaries' proprietary rights in the
Software; no third party has any right to compensation from
the Company or its Subsidiaries by reason of, the use,
exploitation, or sale of the Software; there are no
restrictions on the ability of the Company (or its
Subsidiaries, or any of their respective successors or
assignees) to use, sell or otherwise exploit the Software, and
such use, sale or exploitation does not obligate the Company
or its Subsidiaries (or any successor or assign of the Company
or its Subsidiaries, including the Buyer) to pay any royalty,
fee, or other compensation to any Person; and the Company and
the Sellers have not received any notice and do not have any
Knowledge of any complaint, assertion, threat, or allegation
inconsistent with the preceding statements in this paragraph.
(iii) The Company has provided access to the Buyer to all
records of the Company and its Subsidiaries with respect to Software
fixes (including fixes currently in progress), problem lists,
23
maintenance of the Software, and customer complaints. All material
warranty claims within the last three (3) years (including any pending
claims) relating to the Software are described in Section 4(n) of the
Disclosure Schedule.
(iv) Section 4(n) of the Disclosure Schedule contains a
complete list of all third party software which is a component of or
incorporated in or specifically required to develop, use, modify or
support any of the Company's or its Subsidiaries' products ("Embedded
Products"), any license, sublicense or agreement relating thereto and a
list of any restrictions on the Company's or its Subsidiaries' right to
use, incorporate or distribute the Embedded Products. The Company and
its Subsidiaries are not in violation of any license, sublicense or
agreement with respect to an Embedded Product.
(v) Section 4(n) of the Disclosure Schedule lists, by owner,
the Intellectual Property, other than the Software, owned by the
Company and its Subsidiaries (excluding any licenses of packaged
"off-the-shelf" software products). Except as set forth in Section 4(n)
of the Disclosure Schedule, the Company and its Subsidiaries have good,
sole and marketable title to all Intellectual Property rights described
in Section 4(n), free and clear of any Security Interests (other than
Security Interests of the vendors of Intellectual Property purchased by
the Company and paid for on an installment basis), and the Company and
Sellers are not aware of any claims that such Intellectual Property
rights are being challenged in any way.
(vi) Except as set forth in Exhibit A or Section 4(n) of the
Disclosure Schedule:
(A) the Company and its Subsidiaries have no
copyrights, registrations or pending applications for
registration of copyrights;
(B) no Person has any right of renewal, reversion, or
termination with respect to any copyrights owned by the
Company or its Subsidiaries or any rights under such
copyrights;
(C) the Company and its Subsidiaries have no common
law or registered trademarks, trade names, service marks or
pending applications to register trademarks, trade names, or
service marks, related to the Software or any other products
or services sold or licensed by it or which it otherwise uses
in the conduct of its business;
(D) the Company and its Subsidiaries do not own any
patents or applications for patents that relate to or affect
the Software, any other products sold or licensed to End-Users
by them or any Intellectual Property rights owned by them; and
(E) there are, and have been, no options, licenses or
agreements of any kind relating to any of the Intellectual
Property owned by the Company or its Subsidiaries or to the
use, manufacture, sale or other exploitation of products or
services based on or embodied in such Intellectual Property.
(vii) The Company and its Subsidiaries have taken commercially
reasonably security measures to protect the secrecy, confidentiality,
and value of the portions of Intellectual Property owned by them which
constitute trade secrets (the "Trade Secrets"), and any other persons
who have knowledge of or access to information relating to such Trade
Secrets have been put on notice and, if
24
appropriate, have entered into agreements that the Trade Secrets are
proprietary to the Company (or its Subsidiaries) and are not to be
divulged (except as authorized by the Company or its Subsidiaries) or
misused. The Trade Secrets are not part of the public domain, and, to
the Company's and the Sellers' knowledge, have not been used, divulged,
or appropriated for the benefit of any Persons other than the Company
or its Subsidiaries (except with the Company's consent).
(viii) None of the Company and its Subsidiaries has infringed
or misappropriated, and none is infringing or misappropriating any
Intellectual Property of another Person and there is no claim pending,
or to the Knowledge of the Company and the Sellers, threatened, against
the Company or a Subsidiary with respect to any alleged infringement or
misappropriation of any Intellectual Property owned by another Person.
The Company and the Sellers have no Knowledge that any Person is
infringing or misappropriating any Intellectual Property of the Company
or its Subsidiaries.
(ix) Section 4(n) of the Disclosure Schedule sets forth an
action plan and time line to provide product improvements to the
Company's principal product specified therein (the "Product Action
Plan").
(o) Tangible Assets. Section 4(o) of the Disclosure Schedule sets forth
a complete and current list of all depreciable machinery, equipment, and other
tangible assets owned or leased by the Company or one of its Subsidiaries (and a
depreciation schedule therefor) as of the Most Recent Balance Sheet Date. Each
tangible asset listed in Section 4(o) of the Disclosure Schedule has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and to the Knowledge of
Sellers is free from material defects.
(p) Contracts; No Defaults; Key Customers.
(i) Section 4(p) of the Disclosure Schedule lists the
following contracts and other agreements to which any of the Company
and its Subsidiaries is currently a party with ongoing duties or
obligations, arranged according to the following categories:
(A) each contract that involves executory performance
of services or delivery of Software, goods or materials by the
Company (or a Subsidiary) of an amount or value in excess of
$35,000 (excluding standard form maintenance contracts under
which the Company (or a Subsidiary) receives less than $25,000
per year in gross revenue);
(B) each contract that involves executory performance
of services or delivery of goods or materials to the Company
(or a Subsidiary) of any amount or value in excess of $35,000
and not terminable by the Company (or the Subsidiary) on
thirty (30) days prior notice without liability;
(C) each contract relating to the borrowing of money,
the guaranty of another Person's borrowing of money, or the
creation of a Security Interest in the assets of the Company
(or any of its Subsidiaries);
(D) each contract not in the Ordinary Course of
Business involving expenditures or receipts of the Company (or
any of its Subsidiaries) in excess of $25,000 and providing
for an express undertaking by the Company (or any of its
Subsidiaries) to be
25
responsible for consequential damages;
(E) each lease, rental or occupancy agreement,
installment and conditional sale agreement with respect to any
real or personal property (other than End-User Licenses) which
involves in excess of $25,000;
(F) each distribution, reseller or sales
representative agreement in which the Company (or any of its
Subsidiaries) authorizes any other Person to use, sell,
distribute, or license any of the Software or other
Intellectual Property of the Company (or its Subsidiaries)
(excluding standard object code end-user licenses in the form
included in Section 4(n) of the Disclosure Schedule granted by
the Company (or any of its Subsidiaries) to end-users in the
Ordinary Course of Business ("End Users") that permit the use
of Software without a right to modify, distribute or
sublicense the same ("End-User Licenses"));
(G) each maintenance or support agreement (other than
as contained in End User Licenses), trial agreement, beta test
agreement, customized software agreement (other than End User
Licenses which provide for routine customization services),
consulting, development or escrow agreement, or other contract
currently in force with respect to the Software, or other
Intellectual Property of the Company (or any of its
Subsidiaries);
(H) each contract with employees, officers, and
directors, and contracts with any labor union or other
employee representative of a group of employees relating to
wages, hours, and other conditions of employment;
(I) other than standard indemnity provisions in
standard End-User Licenses, each agreement providing for the
Company (or any Subsidiary) to indemnify any Person;
(J) each contract of which a Seller or the Company
has Knowledge to which any employee of the Company (or any of
its Subsidiaries) is bound that in any manner purports to (A)
restrict such employee's freedom to engage in any line of
business or activity on behalf of the Company or a Subsidiary
or to compete with any other Person, or (B) assign to any
other Person such employee's rights to any copyright,
software, invention, improvement, or discovery developed while
employed by the Company or a Subsidiary;
(K) each agreement pursuant to which the Company (or
any of its Subsidiaries) licenses software or other
Intellectual Property from another Person, including those
with respect to Embedded Products but excluding packaged
commercially available software programs generally available
to the public;
(L) each joint venture, partnership, and other
contract (however named) involving a sharing of profits,
losses, costs, or liabilities by the Company (or any of its
Subsidiaries) with any other Person;
(M) each contract containing covenants that in any
way purport to restrict the Company's (or any of its
Subsidiaries') business activity or limit the freedom of the
Company (or any Subsidiary) to engage in any line of business
or to compete with any Person;
26
(N) each contract for capital expenditures in excess
of $25,000;
(O) each written warranty, and or other similar
undertaking with respect to contractual performance extended
by the Company (or a Subsidiary) other than those contained in
End-User Licenses and maintenance contracts;
(P) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing;
and
(Q) any other material contract of the Company and
its Subsidiaries.
(ii) The Sellers have delivered to the Buyer a correct and
complete copy of each written agreement (as amended to date) listed in
Section 4(p) of the Disclosure Schedule and a written summary setting
forth the terms and conditions of each oral agreement referred to in
Section 4(p) of the Disclosure Schedule. With respect to each such
agreement: (A) to the Knowledge of the Company there are no oral
amendments or modifications to the agreement, and the written terms
thereof accurately set forth the agreement between the parties thereto;
(B) neither the Company nor any of its Subsidiaries, nor to the
Knowledge of the Sellers and the Company, any other party, is in
material breach or default, and no Basis exists which with or without
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration under the agreement, or
permit the release of any of the Company's or any of its Subsidiaries'
Software or assets currently held in escrow; and (C) no party has
repudiated any provision of the agreement.
(iii) There are no renegotiations of, attempts to renegotiate
or outstanding rights to renegotiate any material amounts paid or
payable to the Company or any of its Subsidiaries under current or
completed contracts with any Person having the contractual or statutory
right to demand or require such renegotiation and no such Person has
made written demand for such renegotiation.
(iv) Section 4(p) of the Disclosure Schedule contains a list
of all current End User Licenses (i.e., End User Licenses subject to a
current maintenance agreement or in the initial warranty period).
Except as noted on Section 4(p) of the Disclosure Schedule, (I) none of
the current End User Licenses that falls within the top twenty percent
(20%) of customers holding current End User Licenses from the Company
and its Subsidiaries, on a consolidated basis (based upon total
revenues from such customers from the date of initial license through
the date of the Most Recent Financial Statements), and (II) none of the
non-current End User Licenses (i.e., End User Licenses not subject to a
current maintenance agreement or in the initial warranty period) that
falls within the top ten percent (10%) of customers holding non-current
End User Licenses from the Company and its Subsidiaries, on a
consolidated basis (based upon total revenues from such customers from
the date of initial license through the date of the Most Recent
Financial Statements), contains any of the following terms: (A) any
term for acceptance of any Software that fails to specify a period of
time or date for acceptance or standards applicable thereto; (B) any
provision granting the customer a right to a whole or partial refund of
fees previously paid upon the non-acceptance or failure of any Software
to perform as warranted; (C) any provision obligating the Company (or a
Subsidiary) to indemnify a customer against consequential damages; (D)
any commitment by the Company (or a Subsidiary) to provide a hardware
upgrade in response to or as a remedy for a breach of any
software-related response-time warranty unless the End User party to
the contract in which the commitment is made is required to pay the
cost of such upgrade and such costs are specified or
27
described in such contract; (E) any license for use by more than a
single entity of any Software unless the End User that is a party to
the contract has agreed to pay a fee or fees with respect to each
entity's use thereof; (F) any commitment or warranty made or given by
the Customer (or a Subsidiary) to design or modify any Software so as
to comply with the regulations of any Governmental Body; or (G) any
restrictions on the ability of the Company (or its Subsidiaries) to
increase the fees for maintenance of any Software applicable to a
period beyond the period specified in the contract during which the End
User that is a party to the such contract is obligated to pay
maintenance fees. Except as expressly set forth in Section 4(p) of the
Disclosure Schedule, there are no provisions in any current End User
License that differ from the standard forms thereof provided to Buyer
that would materially and adversely affect the enforceability thereof,
or the potential liability of the Company for warranty or similar
claims. Except as expressly set forth in Section 4(p) of the Disclosure
Schedule, there are no oral agreements or side letters with End Users
that vary the terms of the End User Licenses.
(v) Section 4(p) also contains a list of the top twenty-five
(25) clients or customers (licensees) of the Company and its
Subsidiaries (determined by revenues generated by the Company and its
Subsidiaries during the period commencing on January 1, 1994 and ending
on the Most Recent Balance Sheet Date) (the "Clients"). Except as set
forth in Section 4(p) of the Disclosure Schedule, the Company has not
received notice that any of the Clients intends to discontinue use of
the Software or terminate the maintenance services of the Company (or
its Subsidiaries) or in any other manner materially alter their
relationship with the Company (or its Subsidiaries).
(vi) The Commitment Schedule to be provided by Sellers under
Section 7(a)(xviii) shall be complete and accurate in all material
respects.
(q) Notes and Accounts Receivable. All notes and accounts receivable of
the Company and its Subsidiaries that are reflected on the Most Recent Balance
Sheet or on the accounting records of the Company as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. Unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the Most Recent Balance
Sheet or on the accounting records of the Company as of the Closing Date (which
reserves are adequate and calculated consistent with past practice (subject to
GAAP adjustments) and GAAP, and, in the case of the reserve as of the Closing
Date, will not represent a greater percentage of the accounts receivable as of
the Closing Date than the reserve reflected in the Most Recent Balance Sheet
represented of the accounts receivable reflected therein and will not represent
a material adverse change in composition of such accounts receivable in terms of
aging). Except as set forth in Section 4(q) of the Disclosure Schedule, there is
no contest, claim, or asserted right of set-off other than returns in the
ordinary course of business in any agreement with any maker of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Section 4(q) of the Disclosure Schedule contains a complete and accurate list of
all Accounts Receivable as of the Most Recent Balance Sheet Date, which list
sets forth the aging of such Accounts Receivable. Section 4(q) of the Disclosure
Schedule sets forth fees and disbursements accrued but not yet billed by the
Company (or its Subsidiaries) as of the Most Recent Balance Sheet Date ("Accrued
Fees"). Except as set forth in Section 4(q) of the Disclosure Schedule, to the
knowledge of the Company and the Sellers, all of the Accrued Fees are billable
and collectible by the Company (or its Subsidiaries) net of an amount equal to
the standard reserve percentage for such accounts in the Company's books and
records.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any
28
of the Company and its Subsidiaries.
(s) Insurance. Section 4(s) of the Disclosure Schedule sets forth a
schedule of all insurance policies maintained by the Company and its
Subsidiaries, during the past five (5) years, copies of which have been provided
or made available to the Buyer, together with a description of the claims and
settlement history of the Company and its Subsidiaries. With respect to each
such insurance policy: (A) the policy is legal, valid, binding, enforceable, and
in full force and effect; (B) the policy will continue to be legal, valid,
binding and enforceable in accordance with its terms, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither any of the Company and its Subsidiaries nor to
the Knowledge of the Sellers and the Company, any other party to the policy is
in breach or default (including with respect to the payment of premiums or the
giving of notices), and no Basis exists which, with or without notice or the
lapse of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof.
(t) Litigation. Section 4(t) of the Disclosure Schedule sets forth each
instance in which any of the Company and its Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or to the Knowledge of any of the Sellers and the directors and officers
(and employees responsible for litigation matters) of the Company and its
Subsidiaries, is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any Governmental Body or before any arbitrator. None of
the Sellers and the directors and officers (and employees with responsibility
for litigation matters) of the Company and its Subsidiaries has any Knowledge of
any Basis for any other such action, suit, proceeding, hearing, or investigation
against any of the Company and its Subsidiaries. Neither the Company nor any of
its Subsidiaries is in violation of any outstanding injunction, judgment, order,
decree, ruling, or charge to which it is a party.
(u) Product Warranty. Each product and service manufactured, sold,
leased, or delivered by any of the Company and its Subsidiaries has been in
material conformity with all applicable contractual commitments and all express
and implied warranties, and none of the Company and its Subsidiaries has any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) for replacement or repair thereof or
other damages in connection therewith, subject only to the reserve for warranty
claims set forth on the face of the Most Recent Balance Sheet (rather than in
any notes thereto) as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of the Company and its
Subsidiaries.
(v) Product Liability. None of the Company and its Subsidiaries has any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) arising out of any injury to
individuals or property, software, hardware or data, as a result of the
ownership, possession, or use of any product or service manufactured, sold,
leased, or delivered by any of the Company and its Subsidiaries, subject only to
the reserve for product liability claims set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Company and its Subsidiaries.
(w) Employees. None of the Company and its Subsidiaries is a party to
or bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair
29
labor practices, or other collective bargaining disputes. None of the Company
and its Subsidiaries has or has had a workers' council, nor has the Company or
any Subsidiary received a notice or request to establish a workers' council.
None of the Company and its Subsidiaries has committed any unfair labor
practice. None of the Sellers and the directors and officers (and employees with
responsibility for employment matters) of the Company and its Subsidiaries has
any Knowledge of any organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of any of the Company
or its Subsidiaries. Section 4(w) of the Disclosure Schedule contains a complete
and accurate list of the following information for each employee of the Company
and each of its Subsidiaries, including each employee on leave of absence or
layoff status: name; hire date; job title; current compensation paid or payable
and any change in compensation since the Most Recent Balance Sheet Date;
vacation accrued; eligibility for additional benefits or compensation; and
service credited for purposes of vesting and eligibility to participate under
any Employee Benefit Plan.
(x) Employee Benefits.
(i) Section 4(x) of the Disclosure Schedule lists each current
Employee Benefit Plan that any of the Company or its Subsidiaries
maintains or to which any of the Company or its Subsidiaries
contributes (and any terminated Employee Benefit Plan under which the
Company or a Subsidiary has continuing obligations or Liabilities).
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form in all
material respects, and has been operated and administered in
all material respects in compliance, with applicable
requirements of ERISA, the Code, and other applicable Legal
Requirements.
(B) All reports and descriptions have been filed or
distributed appropriately with respect to each such Employee
Benefit Plan in compliance with all Legal Requirements.
(C) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan and all contributions for any period ending on or before
the Closing Date which are not yet due have been paid to each
such Employee Benefit Plan or accrued in accordance with the
past custom and practice of the Company and its Subsidiaries
and reflected in the Most Recent Balance Sheet.
(D) The Sellers have delivered to the Buyer correct
and complete copies of the plan documents and summary plan
descriptions, the most recent determination letter(s) received
from the Internal Revenue Service, the most recent report(s),
and all related trust agreements, insurance contracts, and
other funding agreements which implement each such Employee
Benefit Plan.
(E) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to any such
Employee Benefit Plan or any fiduciary thereof (other than
routine claims for benefits) is pending or, to the Knowledge
of any of the Sellers and the directors and officers (and
employees with responsibility for employee benefits matters)
of the Company and its Subsidiaries, threatened. None of the
Sellers and the directors and officers (and employees with
responsibility for employee benefits matters) of the Company
and its Subsidiaries has
30
any Knowledge of any Basis for any such action, suit,
proceeding, hearing, or investigation.
(ii) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i)
entitle any employee or director of the Company or any of its
Subsidiaries to any payment (including severance, unemployment
compensation, golden parachute, bonus or otherwise), directly or
indirectly; (ii) accelerate the time of payment or vesting or trigger
any payment of compensation or benefits under, increase any amount
payable or trigger any other material obligation pursuant to, any
Employee Benefit Plan; or (iii) result in any breach or violation of,
or any default under, any Employee Benefit Plan.
(y) Guaranties. None of the Company and its Subsidiaries is a guarantor
or otherwise is liable for any Liability or obligation (including indebtedness)
of any other Person.
(z) Environment, Health, and Safety. Each of the Company and its
Subsidiaries has complied in all material respects with all Environmental,
Health, and Safety Laws. No action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced (or to
the Knowledge of Sellers and the Company threatened) against any of them
alleging any failure so to comply and none of the Company and its Subsidiaries
has any Liability for damage to any site, location, or body of water (surface or
subsurface), for any illness of or personal injury to any employee or other
individual, or for any other reason under any Environmental, Health, and Safety
Law.
(aa) Certain Business Relationships with the Company and Its
Subsidiaries. Except as set forth in the Disclosure Schedule, the Sellers and
the directors and officers of the Company and its Subsidiaries do not have any
ownership interest in any of the assets used by the Company or its Subsidiaries
in its business and, to the Company's and the Sellers' Knowledge, do not own any
interest in any Person that has (i) had material business dealings or a material
financial interest in any transaction with the Company or its Subsidiaries,
except for ownership of less than ten percent (10%) of the outstanding capital
stock of such Person that is publicly traded on any recognized exchange or in
the over-the-counter market, or (ii) engaged in direct competition with the
Company, or its Subsidiaries, with respect to any line of products or services
of the Company, or its Subsidiaries (a "Competing Business"), in any market
currently served by the Company or its Subsidiaries, except for less than ten
percent (10%) of the outstanding capital stock of any Competing Business that is
publicly traded on any recognized exchange or in the over-the-counter market.
Except as set forth in Section 4(aa) of the Disclosure Schedule, no Seller or
director of the Company or its Subsidiaries or any of their respective
Affiliates is a party to any contract with, or has any claim or right against
the Company or its Subsidiaries. Effective upon the Closing, there shall be no
legal relationship or obligation between the Sellers or their Affiliates, on the
one hand, and the Company or its Subsidiaries, on the other hand, except for
relationships and obligations expressly set forth in this Agreement.
(bb) Certain Payments. Neither the Company, any of its Subsidiaries,
nor, to the Company's or the Sellers' Knowledge, any director, officer, agent,
or employee of the Company or its Subsidiaries or any other Person associated
with or acting for or on behalf of the Company or its Subsidiaries, has directly
or indirectly made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to pay for favorable
treatment for business secured, (ii) to obtain special concessions or for
special concessions already obtained, for or in respect of the Company or any of
its Subsidiaries or an Affiliate of the Company or any of its Subsidiaries, or
(iii) in violation of any Legal Requirements.
(cc) Bank Accounts. Section 4(cc) of the Disclosure Schedule contains a
complete and accurate
31
list of each bank or other depository institution at which the Company and its
Subsidiaries have an account or safe deposit box, the number of each such
account or box, and the names of all persons authorized to draw on such accounts
or to have access to such boxes.
(dd) Disclosure. No representation or warranty of the Company or the
Sellers in this Agreement and no statement in the Disclosure Schedule omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading. No notice
given pursuant to Section 5 when taken together with the disclosure described in
the preceding sentence will contain any untrue statement or omit to state a
material fact necessary to make the statements therein or in this Agreement, in
light of the circumstances in which they were made, not misleading. The Company
and the Sellers have no Knowledge of any fact that has specific application to
the Company or its Subsidiaries (other than general economic or industry
conditions) and that materially and adversely affects the assets or the
business, prospects, financial condition, or results of operations of the
Company and its Subsidiaries, taken as a whole, that has not been set forth in
this Agreement or the Disclosure Schedule, and have informed the Buyer of all
matters relevant for the assertion of the financial and business situation
("Vermogens- und Ertragslage") of the Company and its Subsidiaries.
5. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its best efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 7 below).
(b) Notices and Consents. The Sellers will cause each of the Company
and its Subsidiaries to give any notices to third parties, and will cause each
of the Company and its Subsidiaries to use its best efforts to obtain any
third-party authorizations, consents and approvals, that the Buyer reasonably
may request in connection with the matters referred to in Section 4(d) above.
Each of the Parties will (and the Sellers will cause each of the Company and its
Subsidiaries to) give any notices to, make any filings with, and use its best
efforts to obtain any authorizations, consents, and approvals of Governmental
Bodies in connection with the matters referred to in Section 3(a)(ii)-(iii),
Section 3(b)(ii)-(iii), and Section 4(d) above. Without limiting the generality
of the foregoing, each of the Parties will file (and the Sellers will cause each
of the Company and its Subsidiaries to file) any material that all of them may
be required to file with the German Cartel Office.
(c) Operation of Business. The Sellers will not cause or permit any of
the Company and its Subsidiaries to engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, the Sellers will: (A) not cause or
permit any of the Company and its Subsidiaries to engage in any practice, take
any action, or enter into any transaction of the sort described in Section 4(i)
above; (B) use their reasonable best efforts to maintain the properties of the
Company and its Subsidiaries in substantially the same working order and
condition as such properties are in as of the date of this Agreement, reasonable
wear and tear excepted; (C) use their reasonable best efforts to keep in force
at no less than their present limits all existing policies of insurance or
comparable replacements thereof insuring the Company, the Subsidiaries and their
respective properties; and (D) not change the amortization or capitalization
policies for Software or otherwise make any changes in the accounting policies
of the Company and the Subsidiaries except to conform to German generally
accepted
32
accounting policies, with respect to the Company's statutory accounts, to United
Kingdom generally accepted accounting practice. with respect to any United
Kingdom Subsidiary's statutory accounts, or to GAAP.
(d) Preservation of Business. The Sellers will use best efforts to
cause each of the Company and its Subsidiaries to keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
(e) Full Access; Due Diligence. Each of the Sellers will permit, and
the Sellers will cause each of the Company and its Subsidiaries to permit,
representatives of the Buyer to have adequate access at all reasonable times
upon not less than 48 hours prior notice, to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of
or pertaining to each of the Company and its Subsidiaries solely for purposes of
carrying out Buyer's due diligence procedures in accordance with this Agreement.
The Sellers shall, and shall cause the Company to, use best efforts to cooperate
with and assist the Buyer's due diligence investigation. The Buyer shall use its
best efforts to complete its due diligence investigation as expeditiously as
reasonably practicable and shall cause its employees and agents to perform such
due diligence investigation in a manner that limits to the extent reasonably
practicable any disruption to the business and operations of the Company and its
Subsidiaries.
(f) Notice of Developments. The Sellers will give prompt written notice
to the Buyer of any material adverse development causing a breach of any of the
representations and warranties in Section 4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of its own representations and warranties in Section 3 above. Any
disclosure by any Party pursuant to this Section 5(f) prior to Closing, if
accepted in writing by the other Parties, shall be deemed to amend or supplement
Annex I, Annex II, or the Disclosure Schedule and to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity.
(i) Until the Termination Date the Sellers will not and will
cause the Company not to, directly or indirectly, through any
representative or otherwise, solicit or entertain offers from,
negotiate with or in any manner encourage, discuss, accept, or consider
any proposal of any other person relating to the acquisition of the
Company Shares or the Company, any of its Subsidiaries or their
respective assets or business, in whole or in part, whether directly or
indirectly, through purchase, merger, consolidation or otherwise (other
than sales of products and services in the Ordinary Course of
Business), including without limitation the proposed Xxxxxx Xxxxxxx
transaction considered by the Company prior to the execution of this
Agreement.
(ii) The Sellers will promptly notify the Buyer regarding any
contact between the Sellers, the Company, any of its Subsidiaries or
their respective representatives and any other person regarding any
such offer or proposal or any related inquiry.
(h) Bonuses of Individual Sellers. The Individual Sellers who are
Managing Directors of the Company shall be entitled to receive from the Company,
prior to the Closing, their bonuses with respect to fiscal year 1995 in the
amount of DM 60,000 each. Such Individual Sellers agree to forego and hereby
expressly waive their rights to receive (whether pursuant to their respective
employment agreements or otherwise) any bonuses from the Company or the
Subsidiaries with respect to fiscal year 1996.
33
(i) Product Action Plan. Sellers shall cause the Company and its
Subsidiaries to use best efforts to timely accomplish the goals of the Product
Action Plan scheduled for completion prior to the Closing.
(j) Conversion of Financial Statements to GAAP. Sellers agree to cause
the Company, and to cause the Company's independent accountants, to cooperate
with Buyer and its independent accountants to restate the Financial Statements
described in Section 4(h) in accordance with GAAP, consistently applied (the
"Converted Financial Statements"), with such adjustments as Buyer's independent
accountants shall deem necessary or advisable, and to deliver the following
Converted Financial Statements, conforming to the requirements of Form 8-K and
Regulation S-X promulgated by the SEC, to Buyer no later than November 22, 1996:
(A) audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1994, and December 31, 1995, (B) audited consolidated balance
sheets and statements of income, changes in stockholders' equity, and cash flow
as of and for the nine (9) months ended September 30, 1996, and (C) unaudited
consolidated balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the nine (9) months ended September 30,
1995, for the Company and its Subsidiaries.
(k) Delivery of Commitment Schedule. Sellers shall deliver to Buyer, no
later than 5:00 p.m. (Phoenix, Arizona time) on November 19, 1996, a detailed
schedule showing outstanding commitments by the Company and its Subsidiaries for
consulting or development work (the "Commitment Schedule"), including for each
such project: the identity of the customer; the date the project commenced and
the date it is due to be completed; a detailed description of the work to be
performed; a description of all oral and written agreements relating to the
project; a description of payments received to date as well as anticipated
future payments; revenue from the project booked to date and revenue remaining
to be booked; estimates of time and cost to complete the project; how the
project is staffed; and status of the project to date.
6. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the
Closing:
(a) General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 8 below).
The Sellers acknowledge and agree that from and after the Closing, the Buyer
will be entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to the Company and
its Subsidiaries.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of the Company and its Subsidiaries, each of
the other Parties will cooperate with him or it and his or its counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 8 below).
34
(c) Transition. None of the Sellers will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of any of the Company and its
Subsidiaries from maintaining the same business relationships with the Company
and its Subsidiaries after the Closing as it maintained with the Company and its
Subsidiaries prior to the Closing. Each of the Sellers will refer all customer
inquiries relating to the businesses of the Company and its Subsidiaries to the
Buyer from and after the Closing.
(d) Confidentiality. Each of the Sellers will treat and hold as such
all of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement (or in connection with
their employment by the Company), and deliver promptly to the Buyer or destroy,
at the request and option of the Buyer, all tangible embodiments (and all
copies) of the Confidential Information which are in such Seller's possession.
In the event that any of the Sellers is requested or required (by oral question
or request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, that Seller will notify the Buyer promptly of the
request or requirement so that the Buyer may seek an appropriate protective
order or waive compliance with the provisions of this Section 6(d). If, in the
absence of a protective order or the receipt of a waiver hereunder, any of the
Sellers is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal that Seller may disclose the Confidential
Information to the tribunal; provided, however, that the disclosing Seller shall
use its best efforts to obtain, at the request of the Buyer, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Buyer shall designate.
The foregoing provisions shall not apply to any Confidential Information which
is generally available to the public immediately prior to the time of
disclosure.
(e) Securities Exchange Act Reporting; Shelf Registration Statement.
The Buyer agrees that, for so long as any Seller or his or her Affiliate holds
shares of Buyer Common Stock acquired under this Agreement, the Buyer will
timely file all documents required to be filed by the Buyer under the Securities
Exchange Act and use its best efforts to remain a "reporting issuer" (as defined
in Regulation S) in order to enable the Sellers to resell such shares of Buyer
Common Stock in accordance with the requirements of Regulation S. If, for any
reason, the Sellers are unable at any time after the expiration of any
applicable lock-up period imposed by the Lock-Up and Pledge Agreement to avail
themselves of the provisions of Regulation S in order to sell such shares
(including, without limitation, the adoption of amendments to Regulation S that
restrict the ability of the Sellers to sell such shares), then the Buyer shall
(A) use its best efforts to file, as promptly as possible, a "shelf"
registration statement with respect to such shares to permit the resale of such
shares in accordance with Rule 415 under the Securities Act, (B) pay all costs
and expenses incident to such registration, (C) maintain such registration
statement in effect for a period of at least two years from the date on which it
is declared effective (or, if shorter, either the period during which the
Sellers own any such shares or the period until the Sellers satisfy the holding
period requirements pursuant to Rule 144(d) under the Securities Act) and (D)
within ten (10) business days after written request from a Seller holding shares
subject to such registration statement, update the registration statement to
include any information relating to or necessary for the distribution of such
shares.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
35
(i) the representations and warranties set forth in Section
3(a) and Section 4 above shall be true and correct in all material
respects at and as of the Closing Date;
(ii) the Sellers shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
(iii) the Sellers, the Company and its Subsidiaries shall have
procured all of the third party consents specified in Section 5(b)
above to be procured by them, including but not limited to obtaining
the appropriate waivers of change in control provisions from landlords
of real property leased by the Company in Chemnitz and Gemering,
Germany;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any Governmental Body or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, (C) affect
adversely the right of the Buyer to own the Company Shares and to
control the Company and its Subsidiaries, or (D) affect adversely the
right of any of the Company and its Subsidiaries to own its assets and
to operate its businesses (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(v) the Sellers shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above
in Section 7(a)(i)-(iv) is satisfied in all respects;
(vi) the Parties, the Company, and its Subsidiaries shall have
received all authorizations, consents, and approvals of Governmental
Bodies referred to in Section 3(a)(ii)-(iii), Section 3(b)(ii)-(iii),
and Section 4(d) above;
(vii) each of Xxxxxx Xxxxxxxxx and Xxxxxxxxx Xxxxxxx shall
have duly terminated their respective employment agreements with the
Company, without liability of the Company or the Buyer, and shall have
entered into a written employment agreement with the Company on terms
and conditions consistent with this Agreement and mutually satisfactory
to the Parties (each, an "Employment Agreement") and the same shall be
in full force and effect;
(viii) substantially all of the twenty (20) top key employees
of the Company (as mutually determined by the Parties prior to the
Closing) shall have entered into employment arrangements, satisfactory
to the Buyer, on terms and conditions substantially the same as those
terms, conditions, and compensation currently enjoyed by such key
employees;
(ix) each of the Individual Sellers shall have initially
pledged sixty-five percent (65%) of the Buyer Common Stock issued to
such Seller at the Closing to secure his or her indemnification
obligations under Section 8 pursuant to a separate agreement (the
"Lock-Up and Pledge Agreement") with the Buyer in form and substance as
set forth in Exhibit C, and the same shall be in full force and effect;
(x) Sellers shall have duly signed the Notarial Deed;
(xi) the Buyer shall have completed its due diligence
investigation, the results of which
36
shall be reasonably satisfactory to the Buyer and which investigation
shall not have disclosed any material adverse event, condition or facts
with respect to the Company, its business, assets, financial condition
or prospects not already fully reflected in the Financial Statements
and the Disclosure Schedule;
(xii) the Buyer's independent accountants shall have advised
the Buyer regarding the accounting treatment of the transactions
contemplated by this Agreement, which shall be satisfactory to the
Buyer in its discretion;
(xiii) the Buyer shall have received an affirmative fairness
opinion from Xxxxxxx, Xxxxxx & Xxxxxxxxx reasonably satisfactory to the
Buyer and its Board of Directors;
(xiv) the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the
Company and its Subsidiaries other than those whom the Buyer shall have
specified in writing to Sellers at least ten (10) business days prior
to the Closing Date;
(xv) the Buyer's Board of Directors shall have formally
approved and authorized the Closing of the transactions contemplated by
this Agreement;
(xvi) the Buyer shall have received opinions from German,
United Kingdom and United States counsel to the Sellers, in form and
substance reasonably satisfactory to Buyer, addressed to the Buyer, and
dated as of the Closing Date;
(xvii) the Buyer shall have received the Converted Financial
Statements at least ten days prior to the Closing Date;
(xviii) the Buyer shall have received from Sellers, no later
than 5:00 p.m. (Phoenix, Arizona time) on November 19, 1996, the
Commitment Schedule.
(xix) no material adverse change in the business, financial
condition or prospects of the Company and the Subsidiaries, taken as a
whole, shall have occurred from September 30, 1996 through the Closing
Date; and
(xx) all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section
3(b) above shall be true and correct in all material respects at and as
of the Closing Date;
37
(ii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) the Buyer shall have procured all of the third party
authorizations, consents and approvals specified in Section 5(b) above
to be procured by the Buyer;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any Governmental Body or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified above
in Section 7(b)(i)-(iv) is satisfied in all respects;
(vi) the Parties, the Company, and its Subsidiaries shall have
received all authorizations, consents, and approvals of Governmental
Bodies referred to in Section 3(a)(ii)-(iii), Section 3(b)(ii)-(iii),
and Section 4(d) above;
(vii) the Company shall have entered into an Employment
Agreement with each of Xxxxxx Xxxxxxxxx and Xxxxxxxxx Xxxxxxx, and the
same shall be in full force and effect;
(viii) no material adverse change in the business, financial
condition or prospects of the Buyer shall have occurred from September
30, 1996 through the Closing Date;
(ix) there shall not have occurred since the date of this
Agreement a halt or suspension in trading of the Buyer Common Shares on
The Nasdaq Stock Market (other than ordinary suspensions of not more
than one (1) day's duration to facilitate dissemination of material
information to the public or any other halt or suspension that shall
not materially and adversely effect the trading market or value of the
Buyer's Common Stock) or a halt or suspension generally of trading on
any national stock exchange or market in the United States.
(x) the Sellers shall have received from outside counsel to
the Buyer an opinion of counsel, in form and substance reasonably
satisfactory to the Sellers' Representative, addressed to the Sellers,
and dated as of the Closing Date; and
(xi) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
The Sellers may jointly waive any condition specified in this Section 7(b) if
they execute a writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT
(a) Survival of Representations and Warranties. All of the
representations and warranties of
38
the Sellers contained in Section 4(a)-(k) and Section 4(m)-(w) and 4(y)-(dd)
shall survive the Closing hereunder (even if the Buyer knew or had reason to
know of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of two (2) years thereafter. All
of the representations and warranties of the Buyer contained in Section 3(b)
shall survive the Closing hereunder (even if the Sellers knew or had reason to
know of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of two (2) years thereafter. All
of the other representations and warranties of the Parties contained in this
Agreement (including the representations and warranties of the Sellers contained
in Sections 3(a), 4(l) and 4(x) above) shall survive the Closing (even if the
damaged Party knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect until
expiration of any applicable statutes of limitations period, as in effect at the
Closing Date.
(b) Indemnification Provisions for Benefit of the Buyer. In the event
any of the Sellers breaches any of their representations, warranties, or
covenants contained herein, and, if there is an applicable survival period
pursuant to Section 8(a) above, provided that the Buyer makes a written claim
for indemnification against any of the Sellers pursuant to Section 10(h) below
within such survival period, then each of the Sellers agrees to indemnify the
Buyer from and against the entirety of any Losses the Buyer suffers through and
after the date of the claim for indemnification (including any Losses the Buyer
suffers after the end of any applicable survival period) resulting from, arising
out of, relating to, or caused by the breach. The obligations of each Individual
Seller to indemnify the Buyer pursuant to the provisions of this Section 8 shall
be secured for one year from the Closing Date by the pledge to the Buyer of
certain shares of Buyer Common Stock issued to such Individual Seller at the
Closing pursuant to the Lock-Up and Pledge Agreement.
(c) Indemnification Provisions for Benefit of the Sellers. In the event
the Buyer breaches any of its representations, warranties, or covenants
contained herein, and, if there is an applicable survival period pursuant to
Section 8(a) above, provided that the Sellers' Representative makes a written
claim on behalf of the Sellers for indemnification against the Buyer pursuant to
Section 10(h) below within such survival period, then the Buyer agrees to
indemnify each of the Sellers from and against the entirety of any Losses such
Seller may suffer through and after the date of the claim for indemnification
(including any Losses the Seller may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, or caused by the
breach.
(d) Limitations on Liability. The liability of the Investor for
indemnification shall be limited to the amount of the cash consideration
received by the Investor pursuant to Section 2(b). The liability of each
Individual Seller for indemnification shall be limited to an amount equal to
such Individual Seller's pro rata share, based on his or her respective
percentage ownership of Company Shares set forth in the Disclosure Schedule, of
an amount equal to (i) the market value of the Closing Shares held by such
Seller on the date such indemnity obligation is required to be satisfied
(including Closing Shares then subject to the Lock-Up and Pledge Agreement),
plus (ii) the market value on such date of any Closing Shares previously sold
other than in arms'-length transactions, plus (iii) the net sale proceeds
received by such Seller from the previous sale of Closing Shares in arms'-length
transactions, plus (iv) an amount equal to such Individual Seller's pro rata
portion of the cash value specified in Section 2(d) for the Contingent Payments,
if any, to the extent paid. Notwithstanding the foregoing provisions, however,
the Sellers will have indemnification liability under this Agreement only if and
to the extent that the aggregate amount of Losses suffered by the Buyer exceeds
an amount equal to $300,000 (excluding for purposes of calculating such $300,000
threshold those Losses ("De Minimis Losses") that result from a single,
unrepeated breach of a single representation, warranty, or covenant with respect
to which the total amount of Losses resulting from such breach is less than
$5,000) (the "Indemnity Threshold"); provided, that after the aggregate amount
of Losses suffered by the Buyer
39
exceeds the Indemnity Threshold, all Losses suffered by the Buyer in excess of
the Indemnity Threshold (including De Minimis Losses) shall be subject to
Sellers' indemnification obligations; and provided, further, that such Indemnity
Threshold shall not apply to any Seller's breach of the covenant set forth in
Section 2(a) or any of the representations and warranties set forth in Section
3(a). The liability of the Buyer to each Seller for indemnification shall be
limited to an amount equal to such Seller's pro rata portion of the cash value,
as of the Closing Date, of the purchase price paid to all of the Sellers for the
Company Shares plus the cash value specified in Section 2(d) for the Contingent
Payments.
(e) Matters Involving Third Parties
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this Section 8, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof
in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced. Any
notification made to or by the Sellers, whether as Indemnifying Party
or as Indemnified Party, shall be made to or by the Sellers'
Representative on behalf of the Sellers.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing within
thirty (30) days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Losses the
Indemnified Party suffers resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, and (D) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8(e)(ii)
above, (A) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third Party
Claim, (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not
to be withheld unreasonably), and (C) unless the Third Party Claim can
be settled solely for monetary damages, all of which will be paid by
the Indemnifying Party, the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party.
(iv) In the event any of the conditions specified in Section
8(e)(ii) above is or becomes unsatisfied, however, (A) the Indemnified
Party may defend against, and consent to the entry of any judgment or
enter into any settlement with respect to, the Third Party Claim in any
manner it reasonably may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying
Party in connection therewith), and (B) the Indemnifying Party will
remain responsible for any Losses the Indemnified Party suffers
resulting from, arising out of, relating to, or caused by the Third
Party Claim to the fullest extent provided in this Section 8. In the
40
event any of conditions (A), (B) or (D) as specified in Section
8(e)(ii) above is or becomes unsatisfied, and the Indemnified Party
successfully defends and suffers no Losses in connection with the Third
Party Claim, the Indemnifying Party shall pay one-half of the
Indemnified Party's reasonable attorneys' fees, costs and other
expenses incurred by the Indemnified Party in successfully defending
the Third Party Claim.
(f) Adjustments to Purchase Price. All indemnification payments under
this Section 8 shall be deemed adjustments to the purchase price.
(g) Other Indemnification Provisions. The indemnification provisions of
this Section 8 are the exclusive remedy of the Parties for breaches of
representations, warranties and covenants of the Parties hereunder. Each of the
Sellers hereby agrees that such Seller will not make any claim for
indemnification or other recovery against any of the Company and its
Subsidiaries by reason of the fact that such Seller was a director, officer,
shareholder, employee, agent or Affiliate of any such entity or was serving at
the request of any such entity as a partner, trustee, director, officer,
employee, or agent of another entity (whether such claim is for any type of
Losses or otherwise and whether such claim is pursuant to any statute,
Organizational Document, policy, agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim, or demand brought by the Buyer
against such Seller (whether any of the foregoing is pursuant to this Agreement,
applicable law or otherwise), and each of the Sellers hereby waives any and all
rights to any of the foregoing.
(h) Appointment of Sellers' Representative.
(i) In order to efficiently administer the defense and/or
settlement of any claims for which the Sellers may be required to
indemnify the Buyer pursuant to Section 2 and this Section 8, the
Sellers hereby designate Xxxxxxxxx Xxxxxxx as their representative (the
"Sellers' Representative").
(ii) The Sellers hereby authorize the Sellers' Representative
(A) to give and receive all notices required to be given under this
Agreement and (B) to take any and all additional action as is
contemplated to be taken by or on behalf of the Sellers by the terms of
this Section 8.
(iii) In the event that the Sellers' Representative dies,
becomes unable to perform his responsibilities hereunder or resigns
from such position, the remaining Sellers shall select another
representative to fill such vacancy and such substituted representative
shall be deemed to be the Sellers' Representative for all purposes of
this Agreement.
(iv) All decisions and actions by the Sellers' Representative,
including, without limitation the defense or settlement of any claims
for which the Sellers may be required to indemnify the Buyer pursuant
to this Section 8, shall be binding upon all of the Sellers, and no
Seller shall have the right to object, dissent, protest or otherwise
contest the same.
(v) By their execution of this Agreement, the Sellers agree
that: (A) the Buyer shall be able to rely conclusively on the
instructions and decisions of the Sellers' Representative as to the
settlement of any claims for indemnification by the Buyer pursuant to
this Section 8 or any other actions required to be taken by the
Sellers' Representative under this Agreement, and no party hereunder
shall have any cause of action against the Buyer for any action taken
by the Buyer in reliance upon the instructions or decisions of the
Sellers' Representative; (B) all actions, decisions and instructions of
the Sellers' Representative shall be conclusive and binding upon all of
the Sellers
41
and no Seller shall have any cause of action against the Sellers'
Representative for any action taken, decision made or instruction given
by the Sellers' Representative under this Agreement, except for fraud
or willful breach of this Agreement by the Sellers' Representative; (C)
the provisions of this Subsection 8(h) are independent and severable,
are irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Seller may have in
connection with the transactions contemplated by this Agreement; (D)
the provisions of this Subsection 8(h) shall be binding upon the
executors, heirs, legal representatives and successors of each Seller,
and any references in this Agreement to a Seller or the Sellers shall
mean and include the successors to the Sellers' rights hereunder,
whether pursuant to testamentary disposition, the laws of descent and
distribution or otherwise.
(vi) All fees and expenses incurred by the Sellers'
Representative shall be paid by the Sellers in proportion to their
ownership of Company Shares.
9. TERMINATION
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Parties may terminate this Agreement by mutual written
consent of the Buyer and all the Sellers at any time prior to the
Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing (A) in the event
any of the Sellers has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, the
Buyer has notified the Sellers of the breach, and the breach has
continued without cure for a period of thirty (30) days after the
notice of breach or (B) if the Closing shall not have occurred on or
before December 4, 1996, by reason of the failure of any condition
precedent under Section 7(a) hereof (unless the failure results
primarily from the Buyer itself breaching any representation, warranty,
or covenant contained in this Agreement); and
(iii) the Sellers may terminate this Agreement by giving
written notice from all the Sellers to the Buyer at any time prior to
the Closing (A) in the event the Buyer has breached any material
representation, warranty, or covenant contained in this Agreement in
any material respect, any of the Sellers has notified the Buyer of the
breach, and the breach has continued without cure for a period of
thirty (30) days after the notice of breach or (B) if the Closing shall
not have occurred on or before December 4, 1996, by reason of the
failure of any condition precedent under Section 7(b) hereof (unless
the failure results primarily from any of the Sellers themselves
breaching any representation, warranty, or covenant contained in this
Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach of any representation,
warranty or covenant contained in this Agreement which breach was the stated
cause for termination of the Agreement).
10. MISCELLANEOUS.
(a) Nature of Certain Obligations
42
(i) The covenants of each of the Sellers in Section 2(a) above
concerning the sale of his or its Company Shares to the Buyer and the
representations and warranties of each of the Sellers in Section 3(a)
above concerning the transaction are several obligations. This means
that the particular Seller making the representation, warranty, or
covenant will be solely responsible to the extent provided in Section 8
above for any Losses the Buyer may suffer as a result of any breach
thereof.
(ii) The remainder of the representations, warranties, and
covenants in this Agreement are joint and several obligations. This
means that each Seller will be responsible to the extent provided in
Section 8 above for the entirety of any Losses the Buyer may suffer as
a result of any breach thereof.
(b) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of all
Parties; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or NASDAQ rules (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Parties and obtain their comments with respect to the specific terms of
such disclosure prior to making the disclosure). Following the Closing, each
Party shall be free to make separate statements and comments.
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, inducements, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof, including that certain letter of intent dated September
25, 1996.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of such
Party's rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Sellers; provided, however, that the Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers: Xxxxxxxxx Xxxxxxx
43
R&O Software-Technik GmbH Copy to:
Xxxxxxxxxx(xxxx)x 0, 00000 Xxxxxx Xxxxxxx Xxxxx Xxxxx
Xxxxxxx Xxxx and Xxxx
Veritas House, 125 Finsbury Pavement
If to the Buyer: Xxxxxx, XX0X INQ, U.K.
General Counsel
VIASOFT, INC.
0000 Xx. 00xx Xxxxxx, Xxxxx 000 Copy to:
Xxxxxxx, Xxxxxxx 00000, US.A. Xxxxxxx X. Xxxxxx
Xxxxxx Xxxxxxx, P.A.
0000 Xx. Xxxxxxx Xxx., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000, X.X.X.
If to the Process Agent:
CT Corporation Systems
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware and the United States
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of Delaware
and the United States.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. No waiver by any Party of any default, misrepresentation,
or breach of representation, warranty or covenant hereunder, whether intentional
or not, shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of representation, warranty or covenant hereunder
or affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. The Buyer shall pay its own expenses in connection with
the transactions contemplated hereby and, in addition, shall pay, at Closing, up
to $800,000 in reasonable expenses of the Investor and the Individual Sellers in
connection with the transactions contemplated hereby, upon receipt of reasonable
documentation of such expenses. In the event this Agreement is terminated for
any reason, the Company shall pay the reasonable fees and expenses of the
Buyer's and the Company's independent
44
accountants in preparing and assisting the preparation of the Financial
Statements. Except as expressly provided in this Section 10(l), each of the
Parties, the Company, and its Subsidiaries will bear its own costs and expenses
(including any amounts payable to any broker or finder and legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby. The Sellers represent, warrant and agree that none of the
Company and its Subsidiaries has borne or will bear any of the Sellers' costs
and expenses (including any of their legal fees and expenses, accounting fees
and expenses in connection with preparation of the Financial Statements, or the
fees and expenses of Broadview Associates) in connection with this Agreement or
any of the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to a party shall include such
party and its predecessors in interest. The word "including" shall mean
including without limitation. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant. Any reference to any Legal Requirement,
legal proceeding, concept or matter under the laws of the United States or a
State thereof shall where the context so requires or admits be deemed to include
a reference to the closest equivalent proceeding, concept or matter in any other
relevant jurisdiction.
(n) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof, in addition to any other remedy
to which they may be entitled, at law or in equity.
(p) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Wilmington, Delaware in
any action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Each
Party appoints the Delaware office of CT Corporation Systems (the "Process
Agent") as such Party's agent to receive on such Party's behalf any process
served in the action or proceeding. Any Party may make service on any other
Party by sending or delivering a copy of the process (i) to the Party to be
served at the address and in the manner provided for the giving of notices in
Section 10(h) above or (ii) to the Party to be served in care of the Process
Agent at the address and in the manner provided for the giving of notices in
Section 10(h) above. Nothing in this Section 10(p), however, shall affect the
right of any Party to serve legal process in any other manner permitted by law
or at equity. DUE TO THE COMPLEXITY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT A TRIAL BEFORE A
45
JUDGE IS MORE APPROPRIATE THAN A TRIAL BEFORE A JURY AND HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY SUIT INVOLVING THE ENFORCEMENT OF
THE PROVISIONS OF THIS AGREEMENT OR ANY OF THE DOCUMENTS CONTEMPLATED HEREBY,
AND GRANT THE JUDGE PRESIDING OVER ANY SUCH SUIT FULL POWER AND AUTHORITY TO
DETERMINE ALL QUESTIONS OF FACT. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced in any
court by suit on the judgment or in any other manner provided by law or at
equity.
* * * * *
46
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
VIASOFT, INC.
By:/s/ Xxxxxxx X. Xxxx
------------------------------------------------------
Title:Executive Vice President & Chief Technology Officer
---------------------------------------------------
LfA-Gesellschaft fur Vermogensverwaltung mbH (LfA-GV)
By: /s/ Xxxxxx /s/ Xxxxxx
-----------------------------------------------------
Title: Geschaftsfuhrer Geschaftsfuhrer
--------------------------------------------------
/s/ Xxxxxx Xxxxxxxxx
---------------------------------------------------------
Xxxxxx Xxxxxxxxx
/s/ Xxxx Xxxxxxxxx
---------------------------------------------------------
Xxxx Xxxxxxxxx
/s/ Xxxxxxxxx Xxxxxxx
---------------------------------------------------------
Xxxxxxxxx Xxxxxxx
/s/ Xxxxxxxxx Xxxxxxx
---------------------------------------------------------
Xxxxxxx Xxxxxxx (by Xxxxxxxxx Xxxxxxx
pursuant to power of attorney)
47
EXHIBIT A
SOFTWARE
List of Software
----------------
ARIS-Interface Interface to ARIS modeling tool
COBCHECK Source code scanner for loading COBOL definitions
GENCOB Data structure generator for COBOL definitions
GENPL1 Data structure generator for PL/1 definitions
openADW Interface to ADW
ORACBUS/ORACLEBUS Interface to Oracle dbms
PBBUS Interface to POWERBUILDER
ROCHADE-CLIENT ROCHADE repository client
ROCHADE-SERVER ROCHADE repository server
AUTOPILOT ROCHADE User Interface
ROCHADEgraphic Graphical Front End Visualization Tool
SCANASM/SCANASS Source code scanner for loading MVS/Assembler defs.
SCANBS2 Source code scanner for loading BS2000 Job Control
SCANCOPY Source code scanner for loading COBOL copybooks
SYBASEBUS/SYBUS Interface to SYBASE dbms
List of all other software products
-----------------------------------
Reischmann Components Description
ADWBUS Interface to ADW
BACHBUS Interface to Xxxxxxx Analyst/DBA
DB2BUS Interface to IBM DB2dbms
ERWINBUS Interface to LogicWorks XXxxx
IEFBUS Interface to TI IEF tool
IMSBUS Interface to IBM IMS dbms
ORACDBUS Interface to Oracle Designer/2000 tool
PREDBUS Interface to ADABAS/Predict dbms
ROCHBUS General Interface Engine
XXXXX Interface to Systems Architect
SEBUS Interface to LBMS Systems Engineer
TEAMBUS Interface to CADRE TeamWork
XLBUS Interface to InterSolv Excelerator 1.9
XL2BUS Interface to InterSolv Excelerator II
KPMG DEUTSCHE TREUHAND-GESELLSCHAFT
Aktiengesellschaft Wirtschaftsprufungsgesellaschaft
R & O Software-Technik GmbH
and Subsidiaries
Consolidated Financial Statements
December 31, 1995
(With Independent Auditor's Report Thereon)
KPMG DEUTSCHE TREUHAND-GESELLSCHAFT
Aktiengesellschaft Wirtschaftsprufungsgesellaschaft
Zweigniedertassung Munchen
Xxxxxxxxxxx(xxxx)x 0 Xxxxxxxx 00 00 00 Telefon (0 89) 92 82-00
D-81925 Munchen D-81905 Munchen Telefax (0 89) 00 00-00 00
Independent Auditors' Report
The Shareholders
R & O Software-Technik GmbH:
We have audited the accompanying consolidated balance sheet of R & O
Software-Technik GmbH and subsidiaries as of December 31, 1995 and the related
consolidated statement of earnings, accumulated deficit, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material aspects, the financial position of R & O
Software-Technik GmbH and subsidiaries as of December 31, 1995 and the results
of their operations and their cash flows for the year then ended, in conformity
with accounting principles generally accepted in the United States.
The accompanying consolidated balance sheet as of December 31, 1994 and the
related consolidated statements of earnings and accumulated deficit for the year
then ended were not audited by us and, accordingly, we do not express an opinion
on them.
April 15, 1996 /s/ KPMG DEUTSCHE TREUHAND-GESELLSCHAFT
R&O Software-Technik and Subsidiaries
Consolidated Balance Sheets
December 31, 1995 and 1994
1995 1994
------------ -------------
Assets (unaudited)
Current assets:
Cash $ 532,213 259,529
Accounts receivable, less allowance for doubtful accounts
of $ 210,260 in 1995 and $ 93,330 in 1994 6,899,077 3,435,617
Other current assets 274,215 356,562
Prepaid expenses 36,186 57,721
------------ -------------
Total current assets 7,741,691 4,109,429
------------ -------------
Property and equipment:
Computer equipment 2,329,758 1,738,301
Furniture and fixtures 411,841 294,080
Office equipment 364,686 238,660
Leasehold improvements 36,662 15,489
Other fixed assets 393,293 412,876
------------ -------------
3,536,240 2,699,406
Less accumulated depreciation and amortization (2,355,721) (1,754,360)
------------ -------------
Net property and equipment 1,180,519 945,046
------------ -------------
Other assets, at cost, less accumulated amortization
of $ 278,315 in 1995 and $ 213,527 in 1994 131,776 163,404
------------ -------------
$ 9,053,986 5,217,879
============ =============
Liabilities and Shareholder's Equity
Current liabilities:
Due to banks $ 4,254,624 2,051,898
Current installments of long-term debt (note 4) 163,009 163,614
Accounts payable 510,869 932,380
Income taxes payable (note 3) 72,874 128,516
Due to shareholders 369,533 416,903
Accrued expenses and liabilities 2,979,817 1,508,096
Deferred revenue 559,062 470,348
------------ -------------
Total current liabilities 8,909,788 5,671,755
Long-term debt, excluding current installments (note 4) 180,601 320,935
Pension obligations (note 6) 74,944 62,311
------------ -------------
Total liabilities 9,165,333 6,055,001
------------ -------------
Commitments and contingencies (note 2)
Stockholders' equity:
Common stock 32,283 32,283
Retained earnings (355,041) (986,047)
Foreign currency translation adjustment 211,411 116,642
------------ -------------
(111,347) (837,122)
------------ -------------
$ 9,053,986 5,217,879
============ =============
See accompanying notes to consolidated financial statements.
R&O Software-Technik GmbH and Subsidiaries
Consolidated Statements of Operations and Accumulated Deficit
Years ended December 31, 1995 and 1994
1995 1994
----------------- ---------------
(unaudited)
Revenue (note 5)
Software licenses, license royalties
and product-related services $ 19,481,969 14,378,104
----------------- ---------------
Operating expenses:
Cost of software licenses and product-related sales and services (4,494,013) (3,609,249)
General and administrative (14,128,090) (10,746,597)
----------------- ---------------
(18,622,103) (14,355,846)
----------------- ---------------
Operating profit 859,866 22,258
----------------- ---------------
Other income/expense:
Other income 135,342 180,164
Interest expense, net (227,230) (148,035)
----------------- ---------------
(91,888) 32,129
----------------- ---------------
Income before income taxes 767,978 54,387
Income taxes (136,972) 86,165
----------------- ---------------
Net income 631,006 140,552
Accumulated deficit, beginning of year -986,047 -1,126,599
----------------- ---------------
Accumulated deficit, end of year $ -355,041 -986,047
================= ===============
See accompanying notes to consolidated financial statements.
R&O Software-Technik GmbH and Subsidiaries
Consolidated Statement of Cash Flows
for the year ended December 31, 1995
1995
-------------
US-$
Cash flows from operating activities:
Net profit 631,006
Adjustments to reconcile net profit to net cash provided
by operating activities:
Depreciation and amortization 571,848
Gain on disposal of fixed assets -3,606
Changes in operating assets and liabilities:
Trade receivables, net -3,251,654
Other current assets 98,041
Prepaid expenses 29,696
Accounts payable -442,560
Income taxes payable -66,076
Accrued expenses and liabilities 1,374,808
Deferred revenue 88,714
-------------
Net cash provided by operating activities -969,783
-------------
Cash flows from investing activities:
Capital expenditures -732,471
Proceeds from sale of fixed assets 12,004
-------------
Net cash used in investing activities -720,467
-------------
Cash flows from financing activities:
Proceeds from net borrowings under line-of-credit agreements 2,008,563
Increase in pension liability 7,401
Decrease in long-term debt -162,736
Decrease of liabilities to shereholders -81,802
-------------
Net cash provided by financing activities 1,771,426
-------------
Effect of exchange rate changes on consolidation adjustments 181,071
Effect of exchange rate changes on cash 10,437
-------------
Increase in cash 272,684
Cash, beginning of year 259,529
-------------
Cash, end of year 532,213
=============
See accompanying notes to consolidated financial statements.
KPMG DEUTSCHE TREUHAND-GESELLSCHAFT
R&O Software-Technik GmbH
and Subsidiaries
Notes to Consolidated Financial Statements
(1) Description of Business and Summary of Significant Accounting Policies
(a) Description of Business
R&O Software Technik GmbH (the "Company") is engaged in the sale and
distribution of client/server middleware software products and related
consulting services. The Company has subsidiaries in the UK and in the United
States, with development activities both in Germany and the United States, and
sales activities throughout the world.
(b) Basis of Presentation
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
In 1994, the Parent Company changed its year end from October 31, 1994 to
December 31, 1994. For comparative purposes, the Company restated the 1994
financial results in order to provide a full-year, calendar basis consolidated
balance sheet and income statement ending December 31, 1994. This information
has not been audited.
(c) Principles of Consolidation
The consolidated financial statements include the financial statements of R&O
Software Technik GmbH, and its two wholly owned subsidiaries. All significant
intercompany balances and transactions have been estimated in consolidation.
R&O Holdings, Inc. is the U.S. based wholly owned subsidiary and R&O (UK)
Limited is the UK based wholly owned subsidiary of the Company.
(d) Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
-1-
(continued)
KPMG DEUTSCHE TREUHAND-GESELLSCHAFT
R&O Software-Technik GmbH
and Subsidiaries
Notes to Consolidated Financial Statements
(e) Revenue Recognition
The Company recognizes revenues from sales of software licenses upon
satisfaction of all of the following criteria: signing of the license agreement,
delivery and installation of the software and when no contractual terms remain
unsatisfied. The Company recognizes sublicense royalties upon delivery of the
software to the end user. Related revenues from post-contract customer support
agreements are recognized ratably over the terms of the agreements. Revenues
from consulting and training are recognized as the services are performed.
(f) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. R&O
Software-Technik GmbH, and its subsidiaries compute depreciation using
straight-line as well as accelerated methods over the estimated useful lives of
the assets ranging from three to ten years.
(g) Other Assets
Other assets mainly comprise computer software which is amortized on the
straight line basis over three to five years.
(h) Income Taxes
The Company accounts for income taxes under the asset and liability method of
accounting for income taxes. Under this method, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the year in which those temporary differences are expected to
be recovered or settled.
(i) Foreign Currencies
Foreign currency transactions are translated at rates which approximate those
prevailing at the date of the transaction. Foreign currency balances have been
translated into US-$ at rates of exchange in effect at balance sheet date.
Resulting gains or losses are taken to income. The
-2-
(continued)
KPMG DEUTSCHE TREUHAND-GESELLSCHAFT
R & O Software-Technik GmbH
and Subsidiaries
Notes to Consolidated Financial Statements
Company considers its functional currency being the Deutsche Xxxx. The
translation of the consolidated financial statements into US-$ was made in
accordance with FAS 52.
(2) Commitments and Contingencies
The Company leases office facilities, furniture and equipment under operating
leases with remaining terms of up to ten years. Future minimum lease payments
under noncancelable operating leases are as follows:
Year ending December 31:
1996 $ 813,077
1997 768,342
1998 687,850
1999 549,083
2000 512,880
2001 466,566
2002 423,595
2003 294,684
2004 222,704
2005 68,466
----------
Total minimum lease payments $4,807,247
==========
Rent expense under operating leases was $608,460 in 1995 and $457,140 in 1994.
A suit has been filed against R&O Holdings, Inc. whereby a customer is seeking a
refund of $150,000 paid pursuant to a contract. The Company is attempting to
negotiate a settlement with this customer. While it is not possible to predict
the outcome of this claim, management believes that the ultimate resolution of
the matter will not have a material adverse effect on the results of operations
or financial position of the Company.
(3) Income Taxes
Income tax expenses for the years ending December 31, 1995 and 1994 consist of:
-3-
(continued)
KPMG DEUTSCHE TREUHAND-GESELLSCHAFT
R&O Software-Technik GmbH
and Subsidiaries
Notes to Consolidated Financial Statements
Current Deferred Total
------- -------- -----
1995:
German federal income tax $136,972 --- 136,972
1994:
German federal income tax credit $(86,165) --- (86,165)
The tax effects of temporary differences that give rise to net deferred tax
assets at December 31, 1995 and 1994 are net operating losses and differences
due to the utilization by R&O Holdings, Inc. of the cash basis of accounting for
tax purposes. R&O Holdings, Inc. records a valuation allowance against its
deferred tax assets due to the uncertainty surrounding their realization. This
valuation allowance was $1,153,000 and $786,595 at December 31, 1995 and 1994,
respectively.
As of December 31, 1995, R&O Holdings, Inc. has net operating loss carryforwards
of $53,000 for income tax purposes. Should a greater than 50% change in
ownership occur during a three-year period, the utilization of the net operating
loss carryforward will be subject to limitations.
(4) Long-term Debt
Long-term debt at December 31, 1995 and 1994 consists of the following:
Interest
Rate p.a. 1995 1994
--------- ---- ----
IBM Deutschland Kreditbank 10.1-10.3% $177,369 250,818
Deutsche Bank AG 7.05% 8,358 30,269
Deutsche Band AG 9.45% 11,025 27,622
Deutsche Bank AG 7.5% 34,980 32,280
Deutsche Bank AG 6.8% 69,784 87,080
Lombard North Central Plc 16.675% 13,936 17,792
Master Finance 15.729% 14,932 20,453
Master Finance 15.729% 13,226 18,235
-------- ------
Total long-term debt 343,610 484,549
Less current installments 163,009 163,614
-------- -------
Long-term debt excluding current
installments $180,601 320,935
======== =======
The various debt agreements are secured by computer equipment and automobiles.
-4-
(continued)
KPMG DEUTSCHE TREUHAND-GESELLSCHAFT
R&O Software-Technik GmbH
and Subsidiaries
Notes to Consolidated Financial Statements
The aggregate maturities of long-term debt for each of the five years subsequent
to December 31, 1995 are as follows:
1996 $ 163,009
1997 135,397
1998 18,969
1999 3,498
2000 $ 3,498
(5) Significant Customers
Three customers accounted for approximately 41% of the revenues in 1995.
(Comparable figures for 1994 are not available.) Seven customers accounted for
approximately 60% of accounts receivable at December 31, 1995.
(6) Pensions and Other Retirement Benefits
R&O Software-Technik GmbH has non-contributory, unfunded, defined benefit
pension agreements covering the two Managing Directors. The pensions are
generally paid from the time the managing director retires (at the age of 65)
until death. The Company made annual contributions to the plan as follows: 1995,
$7,401; 1994, $1,416.
The Company did not provide a calculation of these pension commitments according
to SFAS No. 87. However, the effect, if any, on the financial statements,
results of operations and cash flows are considered as immaterial.
On January 1, 1994, R&O Holdings, Inc. & subsidiary adopted a 401(k) Plan ("the
Plan") which covers substantially all of its employees. The Plan allows
employees to defer a percentage of their annual salary. The Company matches 100%
of the first 2.5% of employee contributions. Vesting of the Company's
contributions occurs in 20% increments with 100% vesting after 6 years of
service. The Company is the trustee of the Plan and pays all services and
expenses. The Company incurred expenses of $31,000 in 1995, and $30,000 in 1994,
for matching contributions and expenses for the Plan.
-5-
(continued)
KPMG DEUTSCHE TREUHAND-GESELLSCHAFT
R & O Software-Technik GmbH
and Subsidiaries
Notes to Consolidated Financial Statements
(7) Cash Flow Information
The following amounts were paid in 1995:
Interest $ 229,251
Income taxes $ 72,927
-6-
STOCK LOCK-UP AND PLEDGE AGREEMENT
This STOCK LOCK-UP AND PLEDGE AGREEMENT (the "Agreement") is dated
_______________, 1996 (the "Effective Date"), and made by [Individual Seller #1]
("Pledgor"), in favor of VIASOFT, INC. (the "Buyer").
RECITALS:
A. Pledgor, [Individual Seller #2], [Individual Seller #3], [Individual
Seller #4], and LfA-Gesellschaft fur Vermogensverwaltung mbH (LfA-GV) (Pledgor
and the foregoing persons and entity are hereafter collectively referred to as
the "Sellers"), and the Buyer have entered into a Stock Purchase Agreement dated
November 11, 1996 (said agreement, as it may hereafter be amended or otherwise
modified from time to time, being the "Stock Purchase Agreement"), under the
terms of which Pledgor and the other Sellers have agreed to sell, and the Buyer
has agreed to purchase, all of the Pledgor's and the other Sellers' capital
stock of Rottger &Osterberg Software-Technik GmbH, a limited liability company
organized under the laws of Germany (the "Company").
B. In exchange for the capital stock of the Company held by Pledgor,
the Buyer has agreed to issue to Pledgor ________________ (_____) shares of the
Buyer's Common Stock, US $0.001 par value (the "Buyer Common Stock"), among
other consideration.
C. Pledgor has agreed to pledge a portion of the Buyer Common Stock to
secure the obligations of the Pledgor pursuant to the Stock Purchase Agreement,
and has also agreed that it is a condition precedent to the Buyer's purchase of
the Pledgor's and other Sellers' capital stock in the Company that the Pledgor
shall have executed and delivered this Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, Pledgor hereby agrees with the Buyer as follows:
SECTION 1. Pledge. Pledgor hereby pledges to the Buyer and grants to
the Buyer a security interest in ___________ (_________) shares of Buyer Common
Stock (the "Pledged Shares"), and the certificates representing the Pledged
Shares, and the additional collateral, if any, specified in Section 6(a)(ii)
below (collectively, the "Pledged Collateral").
SECTION 2. Security for Obligations. This Agreement secures the
satisfaction, payment and performance of the indemnification obligations of
Pledgor set forth in Section 8 of the Stock Purchase Agreement ("Obligations").
SECTION 3. Delivery of Pledged Collateral. All certificates
representing the Pledged Collateral shall be delivered to and held by or on
behalf of the Buyer pursuant hereto (until released in accordance with Section
7) and shall be duly executed in blank or accompanied by stock powers duly
executed in blank. If any Event of Default shall occur, the Buyer shall have the
right, at any time in its discretion and without notice to Pledgor, to transfer
to or to register in the name of the Buyer or any of its nominees any or all of
the Pledged Collateral (except for Pledged Collateral in excess of the amount of
the Pledgor's unsatisfied Obligation, as provided in Section 7). For purposes of
this Agreement, "Event of Default" means any default by Pledgor of its
Obligations, and the failure to cure the same within ten (10) days after written
notice of such default. If, following the occurrence of any Event of Default,
the Buyer transfers to itself or its nominee, or sells or otherwise executes
upon fewer than all of the Pledged Shares, it agrees that it will transfer, sell
or otherwise execute upon, on a pro rata basis, Pledged Shares and shares of
Buyer Common Stock held under similar agreements, dated the date hereof, between
the Buyer and the other Individual Sellers who are parties to the Purchase
Agreement (the "Other Pledge Agreements"). If the Buyer is unable to exercise
its rights under this Agreement or under any Other Pledge Agreement in full and,
as a result, is unable to transfer, sell or execute upon Pledged Shares held
hereunder or shares of Buyer Common Stock held under any Other Pledge Agreement
on a pro rata basis, it shall nevertheless transfer, sell or execute upon, as
nearly as possible on a pro rata basis, Pledged Shares held hereunder and shares
of Buyer Common Stock held under all Other Pledge Agreements under which it can
exercise its rights in full.
SECTION 4. Representations and Warranties. Pledgor represents and
warrants as follows:
(a) The pledge of the Pledged Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in the Pledged
Collateral, securing the payment of the Obligations.
(b) Pledgor is the legal and beneficial owner of the Pledged Shares
free and clear of any lien, security interest, option or other charge or
encumbrance except for the encumbrances and security interests created by the
Stock Purchase Agreement or this Agreement.
(c) No authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either
(i) for the pledge by Pledgor of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement by
Pledgor or (ii) for the exercise by the Buyer of the voting or other rights
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement (except as may be required in connection
with such disposition by laws affecting the offering and sale of securities
generally).
SECTION 5. Further Assurances. Pledgor agrees that at any time and from
time to time, at the expense of Pledgor, Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary, or that the Buyer may reasonably request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable the Buyer to exercise and enforce its rights and remedies hereunder
with respect to any Pledged Collateral.
SECTION 6. Voting Rights; Dividends; Etc. (a) So long as no Event of
Default shall
2
have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof for
any purpose;
(ii) Pledgor shall be entitled to receive and retain any and all
dividends, interest and other payments and distributions paid in respect of the
Pledged Collateral, provided, however, that any and all (A) capital stock, other
securities or property (other than cash) received, receivable or otherwise
distributed in respect of, or in exchange for, any Pledged Collateral, (B) such
distributions paid or payable in cash in respect of any Pledged Collateral in
connection with a partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in-surplus, and (C) cash
paid, payable or otherwise distributed in redemption of, or in exchange for, any
Pledged Collateral, shall be, and shall be forthwith delivered to the Buyer to
hold as, Pledged Collateral and shall, if received by Pledgor, be received in
trust for the benefit of the Buyer, be segregated from the other property or
funds of Pledgor, and be forthwith delivered to the Buyer as Pledged Collateral
in the same form as so received (with any necessary endorsement); and
(iii) the Buyer shall execute and deliver (or cause to be executed and
delivered) to Pledgor all such proxies and other instruments required for the
purpose of enabling Pledgor to exercise the voting and other rights which
Pledgor is entitled to exercise pursuant to paragraph (i) above and to receive
the distributions or payments which Pledgor is authorized to receive and retain
pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of
Default all rights of Pledgor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section 6(a)(i)
shall cease (except as respects any Pledged Collateral in excess of the amount
of the Pledgor's unsatisfied Obligation, as provided in Section 7), and all such
rights shall thereupon become vested in the Buyer who shall thereupon have the
sole right to exercise such voting and other consensual rights.
SECTION 7. Lock-Up of Pledged Collateral; Releases of the Pledged
Collateral From Lock-Up and Pledge. Pledgor agrees that it will not, without the
prior written consent of the Buyer, which consent may be withheld in the Buyer's
sole and complete discretion, (i) sell or otherwise dispose of, or grant any
option with respect to, any of the Pledged Collateral, or (ii) create or permit
to exist any lien, security interest, or other charge or encumbrance upon or
with respect to any of the Pledged Collateral, except for the security interest
under this Agreement and except as permitted under this Section 7. Upon the
six-month anniversary of the Effective Date of this Agreement, the Buyer shall
release from the security interest of this Agreement and the lock-up provisions
of this Section 7 three-thirteenths (3/13ths or 23.08 %) of the Pledged Shares,
subject to adjustment for any intervening stock splits, stock dividends,
recapitalization or similar event; provided, that if any uncured Event of
Default exists on such anniversary date, Buyer shall retain and not release a
number of Pledged Shares, the then current market value of which equals (to the
nearest share) the amount of the Pledgor's unsatisfied Obligation which is the
subject of
3
the Event of Default . Upon the twelve-month anniversary of the Effective Date
of this Agreement, the Buyer shall release the remaining Pledged Collateral from
the security interest of this Agreement and the lock-up provisions of this
Section 7; provided, that if any uncured Event of Default exists on such
anniversary date, Buyer shall retain and not release a number of Pledged Shares,
the then current market value of which equals (to the nearest share) the amount
of the Pledgor's unsatisfied Obligation which is the subject of the Event of
Default. For purposes of this Agreement, "then current market value" means the
average closing price on the NASDAQ Stock Market of shares of the Buyer's Common
Stock for the seven (7) trading days ending on the date of the Event of Default,
with no adjustment in the value of the Pledged Shares on account of any
fluctuations in the market price or the value of the Buyer's Common Stock
subsequent to such date. The Buyer shall pay to the Pledgor, in cash, the amount
by which any partial Pledged Share transferred to the Buyer or its assignee
exceeds the amount of the unsatisfied Obligation. Upon the release of Pledged
Shares and other Pledged Collateral pursuant to this Section 7, and in the event
less than all of any Pledged Collateral is sold or otherwise applied to satisfy
any uncured Events of Default, Buyer shall return to Pledgor the released
Pledged Shares and all other Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof, together with any certificates
or instruments representing or evidencing such Pledged Collateral.
SECTION 8. Buyer Appointed Attorney-in-Fact. Pledgor hereby appoints
the Buyer Pledgor's attorney-in-fact with full authority in the place and stead
of Pledgor and in the name of Pledgor or otherwise, from time to time in the
Buyer's discretion, to take any action and to execute any instrument which the
Buyer may deem necessary or advisable to accomplish the purposes of this
Agreement.
SECTION 9. [Intentionally Omitted]
SECTION 10. [Intentionally Omitted]
SECTION 11. Remedies upon Default. If any Event of Default shall have
occurred and be continuing:
(a) the Buyer may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to the Buyer, all the rights and remedies of a secured party under the Uniform
Commercial Code (the "Code") in effect in the State of Delaware at that time,
and the Buyer may also, without notice except as specified below, take
possession of and sell the Pledged Collateral or any part thereof in one or more
lots at public or private sale, at any exchange, broker's board or at any of the
Buyer's offices or elsewhere, for cash, on credit or for future delivery, and at
such price or prices and upon such other terms as are commercially reasonable.
The Buyer agrees to provide at least thirty (30) days' notice to Pledgor of the
time (which notice shall also include the place) of any public or private sale.
The Buyer shall not be obligated to make any sale of Pledged Collateral even if
notice of sale has been given. The Buyer may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, with additional notice to Pledgor at least five (5) days prior to
sale, be made at the time and place to which it was so adjourned.
4
(b) All cash proceeds received by the Buyer in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral may, in the discretion of the Buyer, be held by the Buyer and
thereafter be applied (after payment of any amounts payable to the Buyer
pursuant to Section 13) in whole or in part against, all or any part of the
Obligations in such order as the Buyer shall elect. Any surplus of such cash or
cash proceeds held by the Buyer and remaining after payment in full of all the
Obligations shall be paid over to Pledgor or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 12. Cooperation With Sale. If the Buyer shall determine to
exercise the Buyer's right to sell all or any of the Pledged Collateral pursuant
to Section 11, Pledgor agrees that, upon request of the Buyer, Pledgor will, at
its own expense do or cause to be done all such other acts and things as may be
reasonably necessary to make such sale of the Pledged Collateral or any part
thereof valid and binding and in compliance with applicable law, including, but
not limited to, all applicable federal and state securities laws (excluding any
public offering).
SECTION 13. Expenses. Pledgor will upon demand pay to the Buyer the
amount of any and all reasonable fees and expenses of the Buyer's counsel which
the Buyer may incur in connection with the failure by Pledgor to perform or
observe any of the provisions hereof.
SECTION 14. Security Interest Absolute. All rights of the Buyer and
security interests hereunder, and all obligations of Pledgor hereunder, shall be
absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Stock Purchase
Agreement, or any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment or performance
of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Stock Purchase
Agreement or this Agreement;
(iii) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, or any other obligation of, or security given by, any other obligor
with respect to, all or any of the Obligations; or
(iv) any other circumstances which might otherwise constitute a defense
available to, or a discharge of, Pledgor in respect of the Obligations or
Pledgor in respect of this Agreement.
SECTION 15. Amendments; Waiver; No Assignment. No amendment or waiver
of any provision of this Agreement nor consent to any departure by Pledgor here
from, shall in any event be effective unless the same shall be in writing and
signed by the Buyer and Pledgor, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. The rights and obligations of the parties hereunder may not be
transferred or assigned, whether by operation of law or otherwise.
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SECTION 16. Notices. Any notice, request or other communication to any
party hereunder shall be in writing, shall be effective on the date when
actually received after being sent by international air courier with guaranteed
two-day delivery to the addresses set forth below, or to such other addresses
which may be specified in writing to all parties hereto as follows:
If to Pledgor to:
__________________
__________________
__________________
__________________
If to the Buyer to:
__________________
__________________
__________________
__________________
SECTION 17. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Pledged Collateral and shall (i) remain in
full force and effect until all of the Pledged Collateral has been either
released from the pledge and lock-up provisions pursuant to Section 7 of this
Agreement and/or sold or otherwise applied to satisfy any uncured Events of
Default, (ii) be binding upon Pledgor, and its successors and assigns, and (iii)
inure to the benefit of the Buyer and its successors and assigns.
SECTION 18. Governing Law; Terms. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware. Unless
otherwise defined herein or in the Stock Purchase Agreement, terms defined in
Article 9 of the Uniform Commercial Code in the State of Delaware are used
herein as therein defined. All terms defined in the Stock Purchase Agreement and
not otherwise defined herein shall have the same meaning herein as therein.
IN WITNESS WHEREOF, Pledgor has duly executed and delivered this
Agreement as of the date first above written.
[Individual Seller #1] [Witness]
"Pledgor"
6
STATE OF ______________)
) ss.
County of _____________)
On this, the ____________________ day of December, 1996, before me, the
undersigned Notary Public, personally appeared _________________, known to me to
be the person whose name is subscribed to the within instrument and acknowledged
to me that he/she executed the same for the purposes therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
_____________________________________
Notary Public
My Commission Expires:
7
