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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
AMONG
NETWORKS ASSOCIATES, INC.,
NA COMBINATION COMPANY, INC.,
AND THE SHAREHOLDERS OF ANYWARE SEGURIDAD INFORMATICA, S.A.
JULY 30, 1998
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TABLE OF CONTENTS
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ARTICLE I........................................................................................1
1. Definitions.......................................................................1
ARTICLE II.......................................................................................5
2. Purchase and Sale of Company Shares...............................................5
(a) Basic Transaction..........................................................5
(b) Purchase Price; Registration of Shares.....................................5
(c) The Closing................................................................5
(d) Deliveries at the Closing; Transfer of Title...............................5
(e) Escrow Deposit.............................................................6
ARTICLE III......................................................................................7
3. Representations and Warranties Concerning the Transaction.........................7
(a) Representations and Warranties of the Sellers..............................7
(b) Representations and Warranties NAI and Buyer...............................8
ARTICLE IV.......................................................................................9
4. Representations and Warranties Concerning the Company and the Sellers.............9
(a) Organization, Qualification, and Corporate Power..........................10
(b) Capitalization............................................................10
(c) Noncontravention..........................................................10
(d) Brokers? Fees.............................................................11
(e) Title to Assets...........................................................11
(f) Subsidiaries; Investments.................................................11
(g) Financial Statements......................................................11
(h) Events Subsequent to Most Recent Fiscal Year End..........................11
(i) Undisclosed Liabilities...................................................13
(j) Legal Compliance..........................................................13
(k) Tax Matters...............................................................14
(l) Real Property.............................................................15
(m) Intellectual Property.....................................................16
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(n) Tangible Assets...........................................................18
(o) Inventory.................................................................18
(p) Contracts.................................................................18
(q) Notes and Accounts Receivable.............................................19
(r) Powers of Attorney........................................................19
(s) Insurance.................................................................19
(t) Litigation................................................................20
(u) Product Warranty..........................................................20
(v) Product Liability.........................................................21
(w) Employees.................................................................21
(x) Employee Benefits.........................................................21
(y) Guaranties................................................................22
(z) Environmental, Health, and Safety Matters.................................22
(aa) Certain Business Relationships with the Company...........................22
(bb) Disclosure................................................................22
(cc) Bank Accounts.............................................................22
(dd) Materiality...............................................................23
(ee) Solvency..................................................................23
(ff) Predecessor Status........................................................23
(gg) Minute Books..............................................................23
(hh) Sellers Disclosure Schedule...............................................23
(ii) Source Code...............................................................23
ARTICLE V.......................................................................................24
5. Post-Closing Covenants...........................................................24
(a) General24
(b) Litigation Support........................................................24
(c) Transition................................................................24
(d) Confidentiality...........................................................24
ARTICLE VI......................................................................................25
6. Conditions to Obligation to Close................................................25
(a) Conditions to Obligation of NAI and Buyer.................................25
(b) Conditions to Obligation of the Sellers...................................26
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ARTICLE VII.....................................................................................27
7. Remedies for Breaches of This Agreement..........................................27
(a) Survival of Representations and Warranties................................27
(b) Indemnification Provisions................................................27
(c) Escrow Arrangements.......................................................27
(d) Limitation on Liability...................................................33
(e) Valuation of Escrowed NAI Common Stock....................................33
ARTICLE VIII....................................................................................33
8. Miscellaneous....................................................................33
(a) Press Releases and Public Announcements...................................33
(b) Entire Agreement..........................................................34
(c) Succession and Assignment?s Parties in Interest...........................34
(d) Counterparts..............................................................34
(e) Headings..................................................................34
(f) Notices34
(g) Governing Law.............................................................36
(h) Amendments and Waivers....................................................36
(i) Severability..............................................................36
(j) Expenses..................................................................36
(k) Construction..............................................................36
(l) Incorporation of Exhibits and Schedules...................................36
(m) Arbitration...............................................................36
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Exhibit A--Financial Statements
Exhibit B-1--Form of Registration Rights Agreement
Exhibit B-2--Form of Investor Representation Certificate
Exhibit B-3--Form of General Release
Exhibit B-4--Form of Affiliate Agreement
Exhibit B-5--Form of Noncompetition and Waiver of Labor Rights Agreement
Exhibit B-6--Form of Transfer Deed
Exhibit B-7--Intellectual Property Transfer Document
Sellers Disclosure Schedule
NAI Disclosure Schedule
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STOCK PURCHASE AGREEMENT
This Agreement is entered into as of July 30, 1998, by and among Networks
Associates, Inc., a Delaware corporation ("NAI"), NA Combination Company, Inc.
("BUYER"), Xx. Xxxxxx Xxxxxxx Xxxxxx ("XX. XXXXXXX"), Spanish citizen, with
domicile at Xxxxx xx Xxxxxx, 00, Xxxxxx, and Identification Card Number
5.202.903-B and Xx. Xxxxxx Xxxxx Xxxxxx ("XX. XXXXX"), Spanish citizen, with
domicile at Xxxxxx Xxxxxxxxx, 00, 00000 Xxxx Xxxxxx (Madrid) and Identification
Card Number 4.573,576-A, (each a "SELLER" and collectively, the "SELLERS"). NAI
and Buyer, collectively a "PARTY," and the Sellers, collectively a "PARTY," and
together with NAI and Buyer the "PARTIES."
RECITALS
A. The Sellers in the aggregate own 10,000 ordinary shares of Anyware
Seguridad Informatica, S.A., a corporation organized and existing under the laws
of Spain ("ASI" or the "COMPANY"), constituting one hundred percent (100%) of
the outstanding Company's share capital.
B. This Agreement contemplates a transaction in which Buyer will
purchase (the "PURCHASE") from the Sellers, and the Sellers will sell to Buyer,
all of the ordinary shares of the Company held by the Sellers (the "PURCHASED
SHARES") in exchange for the Purchase Price (as set forth herein) to be paid to
the Sellers by Buyer.
C. The Parties agree that a specified portion of the Purchase Price
paid by NAI shall be placed in escrow, the release of which shall be contingent
on certain events and conditions.
D. NAI and the Sellers desire to make certain representations and
warranties and other agreements in connection with the Purchase.
E. NAI and Buyer desire that ASI become the wholly-owned subsidiary of
Buyer and that to further such action NAI shall deliver to Buyer that number of
shares of NAI Common Stock representing the Purchase Price.
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.
ARTICLE I
1. Definitions.
"AFFILIATE" shall mean with respect to any Person, (a) any other Person at
the time directly or indirectly controlling, controlled by or under direct or
indirect common control with such Person, (b) any Person of which such person at
the time owns or has the right to acquire, directly or indirectly, twenty
percent (20%) or more of any class of the capital stock or beneficial interest,
(c) any other Person which at the time owns, or has the right to acquire,
directly or indirectly, twenty percent (20%) or more of any class of capital
stock or beneficial interest of such Person, (d) any executive officer or
director of such
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person, (e) with respect to any partnership, joint venture or
similar entity, any general partner thereof and (f) any individual's immediate
family or family trust.
"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.
"CLOSING" has the meaning set forth in Section 2(c) below.
"CLOSING DATE" has the meaning set forth in Section 2(c) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL DOCUMENTS" shall mean Exhibit B-1 to B-7.
"COMPANY" has the meaning set forth in the preface above.
"COMPANY SHARE" means any ordinary share of the Company, each with a face
value of 1.000 PTAS.
"CONFIDENTIAL INFORMATION" means any information concerning the businesses
and affairs of NAI, Buyer, the Company and the Sellers that is not already
generally available to the public.
"DETERMINED PRICE" shall mean $48.875 per share of NAI Common Stock.
"EMPLOYEE BENEFIT PLAN" means any (a) deferred compensation or retirement
plan or arrangement, (b) defined contribution retirement plan or arrangement,
(c) defined benefit retirement plan or arrangement, or (d) material fringe
benefit or other retirement, bonus, or incentive plan or program.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all national,
provincial, regional, federal, state, local and foreign statutes, regulations,
ordinances and other provisions having the force or effect of law, all judicial
and administrative orders and determinations, all contractual obligations and
all common law concerning public health and safety, worker health and safety,
and pollution or protection of the environment.
"FINANCIAL STATEMENT" has the meaning set forth in Section 4(g) below.
"GAAP" means Spanish generally accepted accounting principles as in effect
from time to time.
"GENERAL ESCROW AMOUNT" shall mean a number of shares of NAI Common Stock
which has an aggregate value (valued at the Determined Price, as defined herein)
of $1,065,426 (USD) and placed in escrow on the Closing Date in accordance with
the provisions of Article 2(e) and Article VII of this Agreement.
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"GENERAL ESCROW FUND" has the meaning set forth in Article VII.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all 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), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"KNOWLEDGE" means actual knowledge after due investigation.
"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.
"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(g) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in Section 4(g)
below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section 4(g)
below.
"NAI" has the meaning set forth in the preface above.
"NAI COMMON STOCK" shall mean the common stock, par value $0.01 (USD) per
share, of NAI.
"NAI DISCLOSURE SCHEDULE" has the meaning set forth in Section 3(b) below.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" has the meaning set forth in the preface above.
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"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, limited liability
company, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"PROPORTIONATE ESCROW INTEREST" applicable to each Seller shall mean 50%
multiplied by the General Escrow Amount or Special Escrow Amount, as applicable.
"PURCHASE" has the meaning set forth in the preface above.
"PURCHASE PRICE" has the meaning set forth in Section 2(b) below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the 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 for Taxes not yet due and payable, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"SELLER(S)" has the meaning set forth in the preface above.
"SELLERS DISCLOSURE SCHEDULE" has the meaning set forth in Section 4
below.
"SPECIAL ESCROW AMOUNT" shall mean a number of shares of NAI Common Stock
(valued at the Determined Price, as defined below) which has an aggregate value
of $1,500,000 (USD) and placed in escrow on the Closing Date in accordance with
the provisions of Article 2(e) and Article VII of this Agreement.
"SPECIAL ESCROW FUND" has the meaning set forth in Article VI.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"TAX" means any national, provincial, regional, federal, state, local, or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
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.
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"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.
ARTICLE II
2. Purchase and Sale of Company Shares.
(a) Basic Transaction. On and subject to the terms and conditions
of this Agreement, Buyer agrees to purchase (the "PURCHASE") from each of the
Sellers, and each of the Sellers agrees to sell to Buyer, all Company Shares
owned by him, in the amount set forth in Schedule I hereto, for the
consideration specified below in this Article II, which Company Shares shall in
the aggregate comprise the Purchased Shares. Solely with respect to this
Agreement and the transactions contemplated hereby, NAI (i) assumes all
responsibilities, obligations, and liabilities of Buyer as if NAI were in fact
Buyer and (ii) will cause Buyer to perform its obligations hereunder.
(b) Purchase Price; Registration of Shares. Subject to Section
2(e) and Article VII, NAI hereby delivers to the Sellers at the Closing the
number of shares of NAI Common Stock equal to (i) $10,654,255 (USD) divided by
(ii) the Determined Price (the "PURCHASE PRICE") allocated among the Sellers as
set forth in Schedule I hereto. The shares of NAI Common Stock paid in respect
of the Purchase Price shall be registered under the United States Securities Act
of 1933, as amended, in accordance with the provisions of the Registration
Rights Agreement attached hereto as Exhibit B-1.
(c) The Closing. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of X Xxxxxxxx X
Xxxxxxxxx, Xxxx 00, Xxxxxx, Xxxxx or such other place as NAI and Sellers
mutually determine, upon 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 NAI and the Sellers may mutually
determine (the "CLOSING DATE).
(d) Deliveries at the Closing; Transfer of Title. At the Closing,
(i) the Sellers will deliver to NAI the various certificates, instruments, and
documents referred to in Section 6(a) below, (ii) NAI will deliver to the
Sellers the various certificates, instruments, and documents referred to in
Section 6(b) below, (iii) each of the Sellers will deliver to Buyer stock
certificates representing the number of his Company Shares set forth in Schedule
I hereto, endorsed in blank or accompanied by duly executed assignment
documents, and (iv) NAI will deliver to the Sellers the number of shares of NAI
Common Stock as set forth in Section 2(b) above. The full and unrestricted
ownership and title to the Shares shall pass from the Sellers to Buyer upon the
execution of this Agreement by each Party. To that extent, the Sellers shall
sign before the notary public and then deliver the Transfer Deed in the form
attached as Exhibit B-6, as well as all other documents, if any, required for
the valid and effective transfer and registration of the title to the Shares in
the name of Buyer. It is understood that the Transfer Deed is signed only in
order to implement the present transaction according to art. 17 of the Spanish
Foreign Investment Act and that for whatever not provided in the Transfer Deed
and the provisions of this Agreement, the provisions of this Agreement shall
prevail. In addition, subject to Article II and
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Article VII hereof, the full unencumbered ownership and title to the shares of
NAI Common Stock to be issued pursuant to this Agreement shall pass to Sellers
upon the execution of this Agreement by each Party.
(e) Escrow Deposit. At the Closing, from the Purchase Price
otherwise payable pursuant to this Article II, NAI shall deposit on behalf of
Sellers each of the General Escrow Amount and the Special Escrow Amount into
separate escrow accounts pursuant to Article VII hereof. The portion of such
escrowed amounts contributed on behalf of each Seller shall be in proportion to
such Seller's Proportionate Escrow Interest.
(f) Purchase Price Adjustment. The Purchase Price will be subject
to adjustment as follows:
(i) Closing Balance Sheet. As soon as practicable following
the Closing, the Company will, at the expense of NAI and Buyer, prepare and
cause to be audited by Coopers & Xxxxxxx L.L.P., or its successor, if any,
independent accountants, and the Company will deliver to NAI and each of the
Sellers, a balance sheet of the Company as of the Closing Date (the "CLOSING
BALANCE SHEET"). The Closing Balance Sheet will be prepared in accordance with
GAAP consistent with the basis of accounting and procedures and methods employed
by the Company in its Financial Statements, as defined in Section 4(g) below.
During the conduct of the audit, the Company will cooperate in all respects with
the independent auditors for the purposes of completing the Closing Balance
Sheet. In addition, the Company and the independent auditors shall be available
for periodic inquiry by NAI, the Sellers and the Company, and the independent
auditors will answer such questions as NAI or the Sellers may have and provide
such additional schedules and materials as NAI or the Sellers may reasonably
request in order to permit a meaningful review of the Closing Balance Sheet.
(ii) Definition. "TANGIBLE NET WORTH" will mean the aggregate
of all tangible assets (net of all reserves and excluding all intangible assets,
including without limitation, all goodwill and capitalized software), less all
liabilities of any kind (including without limitation accounts payable,
royalties payable, warranty reserves, accrued bonuses, accrued vacation,
employee expense obligations, deferred revenue, litigation reserves and debt and
other liabilities) determined in accordance with GAAP and the considerations
specified in Section 4(g) of the Sellers Disclosure Schedule. For purposes of
determining Tangible Net Worth, all reserves in respect of bad debts or doubtful
accounts shall be excluded from (i.e., will not reduce) Tangible Net Worth.
(iii) Disputes. At any time within 30 days following the
delivery of the Closing Balance Sheet to NAI and each of the Sellers (the
"REVIEW PERIOD"), NAI or both Sellers may dispute any amounts reflected or not
reflected on the Closing Balance Sheet to the extent the net effect of all such
disputed amounts in the aggregate would affect the Tangible Net Worth amount,
but only on the basis that such amounts were not arrived at in accordance with
Section 2(f)(i); each of NAI and both Sellers will notify the other in writing
of each such disputed item, and will specify the amount thereof in dispute, not
later than the expiration of the Review Period. If NAI and the Sellers are able
to resolve all the disputed items, then the Closing Balance Sheet agreed upon by
NAI and the Sellers will be final, binding and conclusive on the parties hereto.
If NAI and the Sellers are unable to resolve any disputed
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item and are therefore unable to agree as to the Closing Balance Sheet and the
resultant Tangible Net Worth amount within 20 days following the expiration of
the Review Period, then within 10 days thereafter either NAI or both Sellers may
elect that the items remaining in dispute be submitted for resolution to a "Big
Five" accounting firm in Spain (excluding NAI's and Company's independent
accountants and the member of which who will be primarily responsible for
resolving such disputes will have had substantial auditing experience and
substantial experience in arbitration or other dispute resolution proceedings
concerning accounting issues) selected by mutual agreement of NAI and the
Sellers (or failing such agreement, appointed by the American Arbitration
Association) (the "ACCOUNTANTS"). The Accountants will, within 30 days after
submission, determine, based solely on presentations by NAI and the Sellers (and
their representatives) and not by independent review, and render a written
report to the parties upon, such remaining disputed items and the resultant
calculation of the Closing Balance Sheet and the Tangible Net Worth amount in
accordance with the provisions hereof, and such report and the resultant Closing
Balance Sheet will be final, binding and conclusive on the parties hereto. In
resolving any disputed item, the Accountants may not assign a value to such item
greater than the greatest value for such item claimed by either party or less
than the smallest value for such item claimed by either party. The fees and
disbursements of the Accountants (and of the American Arbitration Association,
if any) (a) will be paid out of the General Escrow Fund established under
Article VII if the Tangible Net Worth amount finally determined pursuant to this
Section 2(f)(i) shall be more than $25,000 (USD) below the Tangible Net Worth
amount reflected on the Closing Balance Sheet originally submitted pursuant to
Section 2(f)(i) hereof, or (b) will be borne by NAI if the Tangible Net Worth
amount finally determined pursuant to this Section 2(f)(i) is less than $25,000
(USD) below the Tangible Net Worth amount reflected on the Closing Balance Sheet
originally submitted pursuant to Section 2(f)(i) hereof. NAI and the Sellers
hereby agree to cooperate and work in good faith and as expeditiously as
reasonably possible to resolve any and all Closing Balance Sheet disputes.
(iv) Adjustment. In the event that the Tangible Net Worth of
the Company as of the Closing Date as reported in the Closing Balance Sheet is
less than PTAS 226,250,000 (or the equivalent amount of US dollars determined
according to the representative rate of exchange on the second full trading day
immediately prior to the closing of the Purchase as published in the Spanish
Official State Gazette), then the Purchase Price shall be reduced (based on the
Determined Price), and the amounts payable to the Sellers shall be reduced, to
the extent of such deficiency. NAI shall provide written notice of such
deficiency to the Escrow Agent pursuant to the provisions of Article VII, and
the deficiency shall be payable to the NAI from the General Escrow Account as an
escrow claim thereunder (pursuant to the procedure set forth in such Article
VII, except that no objection may be made by Sellers to a claim submitted
following the resolution of a dispute pursuant to Section 2(f)(iii)).
ARTICLE III
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the
Sellers severally (but not jointly) represents and warrants to NAI and Buyer
that 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
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Agreement throughout this Section 3(a)) with respect to himself, except as set
forth in the Sellers Disclosure Schedule attached hereto.)
(i) Authorization of Transaction. Each Seller has full power
and authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of each Seller, enforceable in accordance with its
terms and conditions. None of the Sellers need give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(ii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which any Seller is
subject 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 under any
agreement, contract, lease, license, instrument, or other arrangement to
which any Seller is a party or by which he is bound or to which any of his
assets is subject.
(iii) Brokers' Fees. None of the Sellers has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement or the
Collateral Documents for which NAI or Buyer could become liable or
obligated.
(iv) Company Shares. Each Seller holds of record and owns
beneficially the number of Company Shares set forth next to his name on
Schedule I, free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. None of the Sellers is a party
to any option, warrant, purchase right, or other contract or commitment
that could require any Seller to sell, transfer, or otherwise dispose of
any capital stock of the Company (other than this Agreement). None of the
Sellers is a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of the
Company. Each Seller is solvent.
(b) Representations and Warranties of NAI and Buyer. Each of NAI
and Buyer represents and warrants to each of 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 NAI and Buyer. Each of NAI and Buyer is
a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation.
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(ii) Authorization of Transaction. Each of NAI and 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
obligations of NAI and Buyer, enforceable in accordance with its terms and
conditions. Except as set forth in Section 3 of the Disclosure Schedule
delivered by NAI to the Sellers (the "NAI DISCLOSURE SCHEDULE"), NAI and
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 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 violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which NAI or Buyer is
subject or any provision of its charter or bylaws.
(iv) NAI Common Stock. The shares of NAI Common Stock to be
issued to the Sellers pursuant to this Agreement, when issued in
accordance with the terms and provisions of this Agreement, will be duly
authorized, validly issued, fully paid and non-assessable and will not be
subject to any preemptive or other statutory right of stockholders and
will be issued in compliance with applicable United States Federal and
state securities laws and Spanish securities laws. The shares of NAI
Common Stock to be issued to the Sellers pursuant to this Agreement, shall
become available for sale in the public market in connection with sales
made on Form S-3 pursuant to the Registration Rights Agreement of even
date herewith attached hereto as Exhibit B-1.
(v) Brokers' Fees. Neither NAI nor Buyer has any Liability
or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement or
the Collateral Documents for which any Seller could become liable or
obligated.
ARTICLE IV
4. Representations and Warranties Concerning the Company and the
Sellers. The Sellers jointly and severally represent and warrant to NAI and
Buyer that 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), except as
set forth in the disclosure schedule delivered by the Sellers to NAI on the date
hereof and initialed by the Parties (the "SELLERS DISCLOSURE SCHEDULE"). Nothing
in the Sellers Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein, however, unless the
Sellers Disclosure Schedule identifies the exception with particularity and
describes the relevant facts in 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 Sellers
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15
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 4.
(a) Organization, Qualification, and Corporate Power. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of Spain. The Company is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required. The Company has full corporate power and authority and all licenses,
permits and authorizations necessary to carry on the businesses in which it is
engaged and in which it presently proposes to engage and to own and use the
properties owned and used by it. Section 4(a) of the Sellers Disclosure Schedule
lists the directors and officers of the Company. The Sellers have delivered to
NAI correct and complete copies of the charter and bylaws of the Company (as
amended to date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Company are correct and complete. The Company is not in default under or in
violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the
Company consists of 10,000 Company Shares, of which 10,000 Company Shares are
issued and outstanding and no Company Shares are held in treasury. All of the
issued and outstanding Company Shares have been duly authorized, are validly
issued, fully paid, and nonassessable. The Purchased Shares are held of record
by the respective Sellers as set forth in Section 4(b) of the Sellers Disclosure
Schedule. There are no outstanding or authorized options, warrants, purchase
rights, rights of first refusal, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the
Company to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to any of the voting of the capital stock of the
Company.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement and the Collateral Documents, nor the consummation of the
transactions contemplated hereby or thereby, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
the Company is subject or any provision of the charter or bylaws of the Company
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 under any agreement, contract, lease,
license, instrument, or other arrangement to which the Company 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). Except as set forth
in Section 4(c) of the Sellers Disclosure Schedule, the Company is not required
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement.
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16
(d) Brokers' Fees. The Company has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement or the Collateral Documents.
(e) Title to Assets. The Company has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by it, located
on its 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.
(f) Subsidiaries; Investments. The Company has no direct or
indirect equity participation in any corporation, partnership, trust, or other
business association (including any such entity or association that would be a
Subsidiary of the Company).
(g) Financial Statements. Attached hereto as Exhibit A are the
following financial statements (collectively the "FINANCIAL STATEMENTS"): (i)
unaudited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the years ended December 31, 1996 and 1997
(with December 31, 1997 being the "MOST RECENT FISCAL YEAR END") for the
Company; and (ii) unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow (the "MOST RECENT FINANCIAL STATEMENTS") as
of and for the month ended April 30, 1998 (the "MOST RECENT FISCAL MONTH END")
for the Company. Except as set forth in Section 4(g) of the Sellers Disclosure
Schedule, the Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of the Company
as of such dates and the results of operations of the Company for such periods,
are correct and complete and are consistent with the books and records of the
Company (which books and records are correct and complete).
(h) Events Subsequent to Most Recent Fiscal Year End. Except as
set forth in Section 5(h) of the Sellers Disclosure Schedule (indicating by
relevant subparagraph), since the Most Recent Fiscal Year End, there has not
been any material adverse change in the business, financial condition,
operations, results of operations, or future prospects of the Company. Without
limiting the generality of the foregoing, since that date:
(i) the Company has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Company has not entered into any agreement,
contract, lease, or license (or series of related agreements, contracts,
leases, and licenses) either involving more than $10,000 (USD) or outside
the Ordinary Course of Business;
(iii) no party (including the Company) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license (or series of related agreements, contracts,
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leases, and licenses) involving more than $10,000 (USD) to which the
Company is a party or by which it is bound;
(iv) the Company has not imposed or has not had imposed upon
it any Security Interest upon any of its assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or
series of related capital expenditures) either involving more than $10,000
(USD) or outside the Ordinary Course of Business;
(vi) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and acquisitions)
either involving more than $10,000 (USD) or outside the Ordinary Course of
Business;
(vii) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$10,000 (USD) singly or $25,000 (USD) in the aggregate;
(viii) the Company has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $10,000 (USD) or outside the Ordinary Course of
Business;
(x) the Company has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the
charter or bylaws of the Company;
(xii) the Company has not 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 its capital stock;
(xiii) the Company has not 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;
(xiv) the Company has not experienced any damage, destruction,
or loss (whether or not covered by insurance) to its property;
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(xv) the Company has not made any loan to, or entered into
any other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xvi) the Company has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
(xvii) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xviii) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers,
and employees (or taken any such action with respect to any other Employee
Benefit Plan);
(xix) the Company has not made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xx) the Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(xxi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Company; and
(xxii) the Company has not committed to any of the foregoing.
(i) Undisclosed Liabilities. The Company has no Liabilities (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) and (ii)
Liabilities which have arisen after the Most Recent Fiscal Month End 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 law).
(j) Legal Compliance. The Company has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of national, provincial,
federal, state, regional, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply. Section 4(j) of the Sellers Disclosure
Schedule accurately lists each consent, license, permit, grant or other
authorization issued to the Company by a Governmental Entity (i) pursuant to
which the Company currently operates or holds any interest in any of its
properties or (ii) which is required for the operation
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of its business or the holding of any such interest (herein collectively called
"COMPANY AUTHORIZATIONS"), which Company Authorizations are in full force and
effect and constitute all Company Authorizations required to permit the Company
to operate or conduct its business or hold any interest in its properties or
assets.
(k) Tax Matters.
(i) The Company has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed or incurred by the Company (whether or not shown
on any Tax Return) at the time of Closing have been paid or are properly
accrued. The Company is not currently 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 the Company 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 the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and 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) No Seller and to the best of the Sellers' knowledge, no
director or officer (or employee responsible for Tax matters) of the
Company expects any authority to assess any additional Taxes for any
period for which Tax Returns have been filed. There is no dispute or claim
concerning any Tax Liability of the Company either (A) claimed or raised
by any authority in writing or (B) as to which any of the Sellers and the
directors and officers (and employees responsible for Tax matters) of the
Company has Knowledge based upon personal contact with any agent of such
authority. Section 4(k) of the Sellers Disclosure Schedule lists all
national, provincial, federal, state, regional, local, and foreign income
Tax Returns filed with respect to the Company for taxable periods with
respect to which the applicable statute of limitations has not expired
(including as a result of any action by the applicable Tax authority)
indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. The Sellers have
delivered to NAI correct and complete copies of all Tax Returns,
examination reports, and statements of deficiencies assessed against or
agreed to by the Company with respect to the foregoing taxable periods.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The unpaid Taxes of the Company (A) did not, as of the
Most Recent Fiscal Month End, 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 Financial Statements (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 in filing its Tax Returns.
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(l) Real Property.
(i) Except as set forth in Section 4(l) of the Sellers
Disclosure Schedule, the Company does not own or has not agreed or is not
otherwise committed to purchase any real property.
(ii) Section 4(l)(ii) of the Sellers Disclosure Schedule
lists and describes briefly all real property leased to the Company. No
properties are subleased to the Company. The Sellers have delivered to NAI
correct and complete copies of the leases (as amended to date) listed in
Section 4(l)(ii) of the Sellers Disclosure Schedule. With respect to each
lease listed in Section 4(l)(ii) of the Sellers Disclosure Schedule:
(A) the lease is legal, valid, binding, enforceable,
and in full force and effect;
(B) the lease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated
hereby;
(C) no party to the lease is 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;
(D) no party to the lease has repudiated any provision
thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease;
(F) the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in
the leasehold;
(G) to Seller's Knowledge, all facilities leased
thereunder have received all approvals of governmental authorities
(including licenses and permits) required in connection with the
operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations;
(H) to Seller's Knowledge, all facilities leased
thereunder are supplied with utilities and other services necessary
for the operation of said facilities; and
(I) to Seller's Knowledge, the owner of the facility
leased has good and marketable title to the parcel of real property,
free and clear of any Security Interest, easement, covenant, or
other restriction, except for installments of special easements not
yet delinquent and recorded easements, covenants, and other
restrictions which do not impair the current use, occupancy, or
value, or the marketability of title, of the property subject
thereto.
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21
(m) Intellectual Property.
(i) The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the business of the Company as presently
conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Company immediately prior to
the Closing hereunder will be owned or available for use by the Company on
identical terms and conditions immediately subsequent to the Closing
hereunder. The Company has taken all necessary action to maintain and
protect each item of Intellectual Property that it owns or uses.
(ii) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Sellers and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of the Company has ever received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that any of the
Company must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of any of the Sellers and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of the Company, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of any of the Company.
(iii) Section 4(m)(iii) of the Sellers Disclosure Schedule
identifies each patent or registration which has been issued to the
Company with respect to any of its Intellectual Property, identifies each
pending patent application or application for registration which the
Company has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which the Company
has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Sellers have delivered to NAI
correct and complete copies of all such patents, registrations,
applications, licenses, agreements, and permissions (as amended to date)
and have made available to NAI correct and complete copies of all other
written documentation evidencing ownership and prosecution (if applicable)
of each such item. Section 4(m)(iii) of the Sellers Disclosure Schedule
also identifies each trade name or unregistered trademark used by the
Company in connection with its business. With respect to each item of
Intellectual Property required to be identified in Section 4(m)(iii) of
the Sellers Disclosure Schedule:
(A) the Company possesses all right, title, and
interest in and to the item, free and clear of any Security
Interest, license, or other restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is
threatened which challenges the legality, validity, enforceability,
use, or ownership of the item; and
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22
(D) the Company has never agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iv) Section 4(m)(iv) of the Sellers Disclosure Schedule
identifies each item of Intellectual Property that any third party owns
and that the Company uses pursuant to license, sublicense, agreement, or
permission. The Sellers have delivered to NAI correct and complete copies
of all such licenses, sublicenses, agreements, and permissions (as amended
to date). With respect to each item of Intellectual Property required to
be identified in Section 4(m)(iv) of the Sellers Disclosure Schedule:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full
force and effect;
(B) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of
the transactions contemplated hereby (including the assignments and
assumptions referred to in Section 2 above);
(C) no party to the license, sublicense, agreement, or
permission is 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;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in subsections (A) through
(D) above are true and correct with respect to the underlying
license;
(F) the underlying item of Intellectual Property is
not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is
threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property; and
(H) the Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement, or
permission.
(v) To the Knowledge of any of the Sellers and the directors
and officers (and employees with responsibility for Intellectual Property
matters) of the Company, the Company will not interfere with, infringe
upon, misappropriate, or otherwise come into conflict with, any
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Intellectual Property rights of third parties as a result of the continued
operation of its business as presently conducted and as presently proposed
to be conducted.
(vi) As of the Closing Date, all Intellectual Property which
has been, is or will be used by the Company or its predecessors in the
conduct of its businesses has been validly transferred to the Company free
and clear of all Security Interests or other claims.
(n) Tangible Assets. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of its
business as presently conducted. Each such tangible asset is free from defects
(patent and latent) and Security Interests, has been maintained in accordance
with normal industry practice, is in good operating condition and repair
(subject to normal wear and tear), and is suitable for the purposes for which it
presently is used and presently is proposed to be used.
(o) Inventory. The inventory of the Company consists of purchased
goods and finished goods, all of which are merchantable and fit for the purpose
for which they were procured and none of which is slow-moving, obsolete,
damaged, or defective, subject only to the reserve for inventory write down 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.
(p) Contracts. Section 4(p) of the Sellers Disclosure Schedule
lists the following contracts and other agreements to which any of the Company
is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $10,000 (USD) per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year,
result in a material loss to the Company, or involve consideration in
excess of $10,000 (USD);
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$10,000 (USD) or under which it has imposed a Security Interest on any of
its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with any of the Sellers and their
Affiliates (other than the Company);
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24
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $25,000 (USD) or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business; or
(xi) any agreement under which the consequences of a default
or termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of the Company.
The Sellers have delivered to NAI a correct and complete copy of each written
agreement listed in Section 4(p) of the Sellers Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 4(p) of the Sellers Disclosure Schedule.
With respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (C) no
party is 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, under the agreement; and (D) no party has
repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts
receivable of the Company are reflected properly on their books and records, are
valid receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts 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.
(r) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company other than those identified in
Section 4(r) of the Sellers Disclosure Schedule.
(s) Insurance. Section 4(s) of the Sellers Disclosure Schedule
sets forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the Company has
been a party, a named insured, or otherwise the beneficiary of coverage at any
time within the past year:
(i) the name, address, and telephone number of the agent;
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(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
Section 5(s) of the Sellers Disclosure Schedule properly identifies each current
insurance policy. With respect to each such current 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, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) neither the Company nor 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 event has occurred which, with 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. The Company has been covered
during the past three (3) years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. Section 4(s) of the Sellers Disclosure Schedule describes any
self-insurance arrangements affecting the Company.
(t) Litigation. Section 4(t) of the Sellers Disclosure Schedule
sets forth each instance in which the Company (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party or 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 federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 4(t) of the Sellers Disclosure Schedule
could result in any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of the
Company. None of the Sellers and to the best of the Sellers' knowledge none of
the directors and officers (and employees with responsibility for litigation
matters) of the Company has any Basis to believe that any such action, suit,
proceeding, hearing, or investigation may be brought or threatened against the
Company.
(u) Product Warranty. Each product manufactured, sold, leased, or
delivered by the Company has been in conformity with all applicable contractual
commitments and all express and implied warranties, and the Company has no
Liability (and to the Knowledge of Sellers 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 product 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.
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Except as set forth in Section 4(u) of the Sellers Disclosure Schedule, no
product manufactured, sold, leased, or delivered by the Company is subject to
any guaranty, warranty, or other indemnity beyond the applicable standard terms
and conditions of sale or lease. Section 4(u) of the Sellers Disclosure Schedule
includes (i) copies of the standard terms and conditions of sale or lease for
the Company (containing applicable guaranty, warranty, and indemnity provisions)
and (ii) copies of all contracts which have nonstandard terms and conditions of
sale or lease with such nonstandard terms identified in reasonable detail.
(v) Product Liability. The Company has no Liability (and to the
Sellers' Knowledge 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 as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by the Company.
(w) Employees. Except as set forth in Section 4(w) of the Sellers
Disclosure Schedule, the Company is not a party to or bound by any collective
bargaining agreement, nor has any of them experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes. The
Company has not committed any unfair labor practice. None of the Sellers and to
the best of the Sellers' knowledge none of the directors and officers (and
employees with responsibility for employment matters) of the Company 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 the Company.
(x) Employee Benefits. Section 4(x) of the Sellers Disclosure
Schedule lists each Employee Benefit Plan that the Company maintains or to which
the Company contributes or has any obligation to contribute.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all respects with the applicable requirements of all
applicable laws.
(B) All required reports and descriptions have been
timely filed and distributed appropriately with respect to each such
Employee Benefit Plan.
(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. All premiums or other payments for all periods ending
on or before the Closing Date have been paid with respect to each
such Employee Benefit Plan.
(D) There have been no prohibited transactions with
respect to any such Employee Benefit Plan. No fiduciary has any
Liability for breach of fiduciary duty
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or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing, or investigation
with respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or threatened. None of the Sellers and the
directors and officers (and employees with responsibility for
employee benefits matters) of the Company has any Knowledge of any
Basis for any such action, suit, proceeding, hearing, or
investigation.
(y) Guaranties. The Company is not a guarantor or otherwise liable
for any Liability or obligation (including indebtedness) of any other Person.
(z) Environmental, Health, and Safety Matters.
(i) The Company has complied and is in compliance with all
Environmental, Health, and Safety Requirements.
(ii) The Company has not received any written or oral notice,
report or other information regarding any actual or alleged violation of
Environmental, Health, and Safety Requirements, or any liabilities or
potential liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise), including any investigatory, remedial or corrective
obligations, relating to any of them or its facilities arising under
Environmental, Health, and Safety Requirements.
(iii) No facts, events or conditions relating to the past or
present facilities, properties or operations of the Company will prevent,
hinder or limit continued compliance with Environmental, Health, and
Safety Requirements, give rise to any investigatory, remedial or
corrective obligations pursuant to Environmental, Health, and Safety
Requirements, or give rise to any other liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) pursuant to
Environmental, Health, and Safety Requirements, including without
limitation any relating to onsite or offsite releases or threatened
releases of hazardous materials, substances or wastes, personal injury,
property damage or natural resources damage.
(aa) Certain Business Relationships with the Company. Except as set
forth in Section 4(aa) of the Sellers Disclosure Schedule, none of the Sellers
and their Affiliates has been involved in any business arrangement or
relationship with the Company since June 30, 1993, and none of the Sellers and
their Affiliates owns any asset, tangible or intangible, which is used in the
business of any of the Company.
(bb) Disclosure. The representations and warranties contained in
this Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
(cc) Bank Accounts. Section 4(cc) of the Sellers Disclosure
Schedule contains a true, correct and complete list as of the date hereof of all
banks, trust companies, savings and loan
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associations and brokerage firms in which the Company has an account or safe
deposit box and the names of all persons authorized to draw thereon or with
access thereto.
(dd) Materiality. The matters and items excluded from the
representations and warranties set forth in this Article by operations of the
materiality exceptions and materiality qualifications contained in such
representations and warranties, in the aggregate for all such excluded matters
and items, are not and could not reasonably be expected to be adverse to the
Company.
(ee) Solvency. As of the execution and delivery of this Agreement,
the Company is, and, as of the Closing Date, will be solvent.
(ff) Predecessor Status. Set forth in Section 4(ff) of the Sellers
Disclosure Schedule is a listing of all predecessor companies of the Company and
the names of any entities from which, since June 30, 1993, the Company
previously acquired material properties or assets. The Company has never been a
subsidiary or division of another entity, nor part of an acquisition that was
later rescinded.
(gg) Minute Books. The minute books of the Company made available
to counsel for NAI are the only minute books of the Company and reference all
material transactions approved by the directors (or committees thereof) and
stockholders since the time of incorporation of the Company required to be
minuted in accordance with Spanish law.
(hh) Sellers Disclosure Schedule. The Sellers Disclosure Schedule
has been prepared and executed by the Sellers and dated and delivered on the
date of this Agreement. The Sellers shall endeavor to disclose in the Sellers
Disclosure Schedule each item of information in each separate section in which
such item may reasonably be required to be disclosed.
(ii) Source Code. The Sellers have caused the Company to appear
before a Spanish Notary Public and deposit with him or her one or more CD-Rom(s)
containing true and correct copies of the Company's source code together with
all relevant documentation and roadmaps, for each of its current products and
products under development (collectively, the "COMPANY SOURCE CODE") to be held
by such Spanish Notary Public pending the consummation of the Purchase. Such
deposit, made on behalf and for the exclusive benefit of the Company, shall be
conclusive evidence vis-a-vis third parties of the ownership by the Company of
all and any Intellectual Property Rights connected with the Company Source Code.
The Sellers have caused the Company to deliver to such Spanish Notary Public an
irrevocable of letter of instruction, in form and substance satisfactory to NAI,
instructing such Spanish Notary Public at his or her offices to provide NAI
access to the Company Source Code (as provided below) and to deliver the Company
Source Code to NAI or its designated representatives on the Closing Date. The
Sellers shall cause the Company to instruct such Spanish Notary Public to
provide NAI sufficient access to the Company Source Code to reasonably ensure
that the Company Source Code is what it purports to be.
Nothing in this Section 4(ii) shall entitle NAI to request or take the
originals or any copies of the Company Source Code or any part thereof prior to
the Closing Date.
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ARTICLE V
5. 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 vest Buyer with full right, title and
possession to the Purchased Shares or otherwise carry out the purposes of this
Agreement and the Collateral Documents (including the transfer to the Company of
any Intellectual Property used or purported to be used by the Company in the
conduct of its business prior to the Closing Date), 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 Article VII below). Further, the
officers and directors of the Company are fully authorized in the name of the
Company or otherwise to take, and will take, all such lawful and necessary
and/or desirable action so long as such action is consistent with this
Agreement.
(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 the Company, 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
Article VII below).
(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 the Company from maintaining
the same business relationships with the Company after the Closing as it
maintained with the Company prior to the Closing.
(d) Confidentiality. Each of the Sellers, NAI and Buyer 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 and the
Collateral Documents, and deliver promptly to the other Party or destroy, at the
request and option of the other Party, all tangible embodiments (and all copies)
of the Confidential Information which are in his or its possession. In the event
that any of the Parties 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, then the party receiving such request will notify the other Party
promptly of the request or requirement so that the other Party may seek an
appropriate protective order or waive compliance with the provisions of this
Section 5(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Parties is, on the advice of counsel, compelled to
disclose any Confidential
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Information to any tribunal or else stand liable for contempt, that Party may
disclose the Confidential Information to the tribunal; provided, however, that
the disclosing Party shall use his or its reasonable best efforts to obtain, at
the reasonable request of the other Party, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the other Party shall designate.
Notwithstanding the foregoing, (i) the obligation of the Sellers hereunder shall
relate to Confidential Information of the Company, NAI and Buyer and (ii) the
obligations of NAI and Buyer hereunder shall relate to Confidential Information
of the Sellers.
ARTICLE VI
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of NAI and Buyer. The obligations of
NAI and Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(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 Company shall have procured all of the third party
consents;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of
any national, provincial, federal, regional, state, local, or foreign
jurisdiction 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, or (D) affect adversely the
right of the Company to own its assets and to operate its business (and no
such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) the Sellers shall have delivered to NAI a certificate to
the effect that each of the conditions specified above in Section
6(a)(i)-(v) is satisfied in all respects;
(vi) the relevant parties shall have entered into Collateral
Documents in form and substance as set forth in EXHIBITS B-1 through B-6
attached hereto and the same shall be in full force and effect;
(vii) NAI and its counsel shall be satisfied with the status
of the Company's existing and previous arrangements pursuant to which such
entity distributes or distributed third party products or services;
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(viii) the Company and the other parties thereto shall have
executed the Intellectual Property Transfer Document in the form of
EXHIBIT B-7 and such document shall be in full force and effect and the
Company shall have terminated all royalty payment arrangements; and
(ix) 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 satisfactory in form
and substance to the NAI; and
(x) Sellers shall have delivered to NAI and its counsel a
public deed evidencing that Sellers have fully paid in all share capital
of the Company.
NAI and Buyer may waive any condition specified in this Section 6(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;
(ii) NAI and Buyer shall have performed and complied with all
of their covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of
any national, provincial, federal, state, local, or foreign jurisdiction
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);
(iv) NAI shall have delivered to the Sellers a certificate to
the effect that each of the conditions specified above in Section
6(b)(i)-(iii) is satisfied in all respects;
(v) the relevant parties shall have entered into the
Collateral Documents in form and substance as set forth in EXHIBITS B-1
through B-7 and each of the same shall be in full force and effect;
The Sellers may waive any condition specified in this Section 6(b) if they
execute a writing so stating at or prior to the Closing.
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ARTICLE VII
7. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the
covenants, representations and warranties of the Parties contained in this
Agreement shall survive the Closing hereunder (even if the damaged Party knew or
had reason to know of any misrepresentation or breach of warranty or covenant at
the time of Closing) and continue in full force and effect until March 31, 1999.
The foregoing shall not limit the provisions with respect to the Special Escrow
Fund.
(b) Indemnification Provisions. The indemnification provisions
contained herein are in addition to, and not in derogation of, any statutory,
equitable, or civil law remedy under Spanish law (including without limitation
any such remedy arising under Environmental, Health, and Safety Requirements)
any Party may have with respect to the Company, or the transactions contemplated
by this Agreement. Each of the Sellers hereby agrees that he or it will not make
any claim for indemnification against the Company by reason of the fact that he
or it was a director, officer, employee, or agent 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
judgments, damages, penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such claim is pursuant to any statute,
charter document, bylaw, agreement, or otherwise) with respect to any action,
suit, proceeding, complaint, claim, or demand brought by NAI or Buyer against
such Seller (whether such action, suit, proceeding, complaint, claim, or demand
is pursuant to this Agreement, applicable law, or otherwise).
(c) Escrow Arrangements.
(i) Escrow Funds.
(A) General. As provided in Section 2(f), at Closing,
on behalf of the Sellers, NAI shall deposit with Greater Bay Trust
Company, as Escrow Agent (the "ESCROW AGENT"), the General Escrow
Amount, which shall constitute a general escrow fund (the "GENERAL
ESCROW FUND") and the Special Escrow Amount, which shall constitute
a special escrow fund (the "SPECIAL ESCROW FUND") each to be
governed by the terms set forth herein (the General Escrow Fund and
the Special Escrow Fund together the "ESCROW FUNDS"). The portion of
the General Escrow Amount and the Special Escrow Amount contributed
by NAI on behalf of each Seller, as applicable, shall correspond to
such Seller's Proportionate Escrow Interest. Each Seller shall be
entitled to all voting rights with respect to any NAI Common Stock
held in escrow on his behalf.
(B) General Escrow Fund. The General Escrow Fund shall
be available to compensate NAI and its Subsidiaries for (i) any
claim, loss, expense, liability or other damage, including
reasonable attorneys' fees, costs of investigation and disbursements
in connection with any action, suit or proceeding, to the extent of
the amount of such claim, loss, expense, liability or other damage
(collectively "LOSSES") that NAI and its Subsidiaries or any of
their affiliates
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has incurred (or, in the case of an extension of the General Escrow
Period pursuant to Section 7(c)(ii), reasonably anticipates
incurring), by reason of the breach by the Sellers of any
representation, warranty, covenant or agreement of the Sellers
contained herein or in any Collateral Document or the Sellers
Disclosure Schedule; (ii) any accounts receivable that are
outstanding as of the Closing Date as determined in the Closing
Balance Sheet that are uncollected subsequent to the Closing Date;
and (iii) payment of any Losses otherwise agreed to be paid by
Sellers (including as set forth in the Sellers Disclosure Schedule);
provided, however, that (x) solely for purposes of determining
whether a breach of any representation or warranty or covenant has
occurred, and the amount of any Losses attributable to any such
breach, any qualification as to materiality set forth therein shall
not be given effect; and (y) claims for Losses incurred as a result
of a breach by a Seller of any of the representations set forth in
Section 3(a) shall be satisfied out of such Seller's Proportionate
Interest of the General Escrow Fund until such Proportionate Escrow
Interest is exhausted, and then shall be satisfied out of the
General Escrow Fund in accordance with this Agreement.
Notwithstanding the foregoing, with respect to Losses contemplated
in clause (i) above, NAI and its Subsidiaries shall not be entitled
to receive any disbursement or cause any amount to be retained in
the General Escrow Fund with respect to any Losses arising in
respect of any individual occurrence or circumstance unless the
amount of such Losses shall exceed $10,000 (USD), provided that in
the event that the aggregate amount of such Losses of NAI and its
Subsidiaries shall exceed $40,000 (USD) (without regard to the
foregoing $10,000 (USD) limitation), then NAI or its Subsidiaries
shall be entitled to recover from the General Escrow Fund all such
Losses (without regard to the individual $10,000 (USD) limitations).
(C) Special Escrow Fund. The Special Escrow Fund shall
be available to compensate NAI and its Subsidiaries for any Losses
("SPECIAL LOSSES") that NAI and its Subsidiaries or any of their
affiliates has incurred (or in the case of an extension of the
Special Escrow Period pursuant to Section 7(c)(ii), reasonably
anticipates incurring) by reason of the Special Tax Matters.
"SPECIAL TAX MATTERS" means the Company's Intellectual Property
license arrangements in place prior to the Closing Date and
terminated on the Closing Date pursuant to Section 6(a)(viii) in
connection with (i) both the royalty payments and the definitive
transfer of said Intellectual Property; (ii) the Value Added Tax, if
any, payable in connection with the Company's royalty payments; and
(iii) any withholding taxes or other personal income taxes as well
as any corporate tax impact thereof in connection with the amounts
paid to the Company's employees including but not limited to those
paid as out-of-pocket and travel expenses.
(ii) Escrow Periods; Distribution upon Termination of Escrow
Periods. Subject to the following requirements, the General Escrow Fund
shall remain in existence until March 31, 1999 (the "GENERAL ESCROW
PERIOD") and the Special Escrow Fund shall remain in existence until the
lapsing of the applicable statute of limitations in respect of relevant
Taxes attributable to the Special Tax Matters (the "SPECIAL ESCROW
PERIOD"), in each case, subject to extension as set forth below. At the
expiration of the General Escrow Period, the General Escrow Fund shall be
released from escrow to the Sellers, in an amount equal to the entire
initial General Escrow Fund less an amount equal to the sum of (i) all
amounts theretofore paid out of
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the General Escrow Fund to NAI and its Subsidiaries pursuant to this
Article VII, (ii) an amount equal to such portion of the General Escrow
Fund which, in the reasonable judgment of NAI, subject to the objection of
both Sellers (and the subsequent arbitration of the matter in the manner
provided in Section 7(c)(vii) hereof), is necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate theretofore
delivered to the Escrow Agent prior to the end of the General Escrow
Period (which amount shall remain in the General Escrow Fund (and which
shall cause the General Escrow Fund shall remain in existence) until such
claims have been resolved). At the expiration of the Special Escrow
Period, the Special Escrow Fund shall be released from escrow to the
Sellers, in an amount equal to the entire initial Special Escrow Fund less
an amount equal to the sum of (i) all amounts theretofore paid out of the
Special Escrow Fund to NAI and its Subsidiaries pursuant to this Article
VII, (ii) all amounts theretofore paid out of the Special Escrow Fund to
Sellers pursuant to Section 7(c)(iii) below and (iii) an amount equal to
such portion of the Special Escrow Fund which, in the reasonable judgment
of NAI, subject to the objection of both Sellers (and the subsequent
arbitration of the matter in the manner provided in Section 7(c)(vii)
hereof), is necessary to satisfy any unsatisfied claims specified in any
Officer's Certificate theretofore delivered to the Escrow Agent prior to
the end of the Special Escrow Period (which amount shall remain in the
Special Escrow Fund (and which shall cause the Special Escrow Fund shall
remain in existence) until such claims have been resolved). As soon as all
such claims have been resolved following the end of the General Escrow
Period and the Special Escrow Period, as applicable, the Escrow Agent
shall deliver to the eligible Sellers the remaining portion of the General
Escrow Fund and Special Escrow Fund, as applicable, not required to
satisfy such claims. Deliveries of escrowed amounts to the Sellers
pursuant to this Section shall be made according to each Seller's
Proportionate Escrow Interest as certified to the Escrow Agent by the
Sellers.
(iii) Interim Distributions from Special Escrow Fund. Promptly
following each of the dates set forth on Schedule 7(c)(iii), the Escrow
Agent shall cause to be paid to the eligible Sellers (in accordance with
their Proportionate Escrow Interest) an amount equal to the entire initial
Special Escrow Fund less an amount equal to the sum of (i) the minimum
Special Escrow Amount indicated on Schedule 7(c)(iii) in respect of such
indicated date and (ii) the aggregate amount of all unsatisfied good faith
claims by NAI and its Subsidiaries against the Special Escrow Fund
(subject to arbitration of the matter in the manner provided in Section
7(c)(vii)) not yet paid by the Escrow Agent prior to such date to the
extent and amount of any Tax dispute or challenge. Notwithstanding the
foregoing, (without duplication) no distribution shall be payable with
respect to any particular date if, the Company or the Sellers shall have
been notified of, any Tax investigation, dispute or challenge related to
the relevant Tax Period and related Special Tax Matters or any act by the
applicable tax authority which could serve to toll the expiration of the
applicable statute of limitations.
(iv) Protection of Escrow Funds. The Escrow Agent shall hold
and safeguard the Escrow Funds during the applicable escrow period, shall
treat such fund as a trust fund in accordance with the terms of this
Agreement and not as the property of NAI and shall hold and dispose of the
Escrow Funds only in accordance with the terms hereof.
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(v) Claims Upon Escrow Funds. Upon receipt by the Escrow
Agent at any time on or before the last day of the General Escrow Period
or Special Escrow Period, as applicable, of a certificate signed by any
officer of NAI (an 'OFFICER'S CERTIFICATE'): (A) stating that NAI or its
Subsidiaries has incurred and paid or properly accrued Losses or Special
Losses, as applicable (or reasonably anticipates that it may have to pay
or accrue Losses or Special Losses, as applicable), and (B) specifying in
reasonable detail the individual items of Losses or Special Losses, as
applicable, included in the amount so stated, the date each such item was
incurred and paid or properly accrued, or the basis for such anticipated
liability, and in the case of Losses the nature of the misrepresentation,
breach of warranty or claim to which such item is related, the Escrow
Agent shall, subject to the provisions of Section 7(c)(vi) and 7(c)(vii)
hereof, deliver, as promptly as practicable, to NAI or its Subsidiaries
out of the General Escrow Fund or Special Escrow Fund, as applicable, such
amounts held in the applicable Escrow Fund equal to such Losses or Special
Losses. NAI shall submit an Officer's Certificate only in good faith.
Claims in respect of Special Losses shall be made in accordance with the
additional provisions set forth in Section 7(c)(v) of the NAI Disclosure
Schedule. NAI or its Subsidiaries will only make claims against the
Special Escrow Fund based on any provisional or definitive Tax assessment
by the applicable Spanish Tax authorities. NAI and its Subsidiaries
further agrees not intentionally initiate or prompt such an investigation
or assessment.
(vi) Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, Escrow Agent or NAI shall
promptly notify each of the Sellers via facsimile pursuant to Section 8(f)
below and a duplicate copy of such certificate shall be delivered to each
of the Sellers, and for a period of twenty (20) days after such delivery
the Escrow Agent shall make no delivery to NAI or its Subsidiaries of any
General or Special Escrow Amount(s) specified in such Officer's
Certificate unless the Escrow Agent shall have received written
authorization from each of the Sellers to make such delivery. After the
expiration of such twenty (20) day period, the Escrow Agent shall make
delivery of an amount from the applicable Escrow Fund in accordance with
such Officer's Certificate and Section (c)(v) hereof, provided, that, no
such payment or delivery may be made if both Sellers shall object in a
written statement to the claim made in the Officer's Certificate, and such
statement shall have been delivered to the Escrow Agent prior to the
expiration of such twenty (20) day period. The Sellers will only submit an
objection in good faith.
(vii) Resolution of Conflicts; Arbitration.
(A) In case both Sellers shall so object in writing to
any claim or claims made in any Officer's Certificate, the Sellers
and NAI shall attempt, within sixty (60) days from such written
objection, in good faith to agree upon the rights of the respective
parties with respect to each of such claims. If the Sellers and NAI
should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum signed by NAI and the Sellers and distribute amounts from
the Escrow Funds in accordance with the terms thereof.
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(B) If no such agreement can be reached after good
faith negotiation, then after such sixty (60) day period either NAI
or both Sellers may demand arbitration of the matter unless the
amount of the damage or loss is at issue in pending litigation with
a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by
arbitration conducted by three arbitrators. NAI and both Sellers
shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator (who shall be affiliated
with a Big Five accounting firm or any successor thereto (other than
Price Waterhouse, Coopers & Xxxxxxx or Xxxxxx Xxxxxxxx)). Failing
agreement on the appointment of the third arbitrator, such third
arbitrator shall be appointed by the American Arbitration
Association. The arbitrators shall, within ten (10) business days
after the last day of any hearings on any motion, issue a definitive
ruling on such motion. The arbitrator shall also, within twenty (20)
business days from the last day of any hearings regarding the
issuance of any awards, issue a definitive ruling on the issuance of
any such award in such arbitration. The arbitrators shall also
establish procedures designed to reduce the cost and time for
discovery while allowing the parties an opportunity, adequate in the
sole judgement of the arbitrators, to discover relevant information
from the opposing parties about the subject matter of the dispute.
The arbitrators shall rule upon motions to compel or limit discovery
and shall have the authority to impose sanctions, including
attorneys fees and costs, to the extent as a court of competent law
or equity, should the arbitrators determine that discovery was
sought without substantial justification or that discovery was
refused or objected to without substantial justification. The
decision of a majority of the three arbitrators as to the validity
and amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in Article VII hereof, the Escrow Agent
shall be entitled to act in accordance with such decision and make
or withhold payments out of the Escrow Fund(s) in accordance
therewith. Such decision shall be written and shall be supported by
written findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrators.
(C) In no event may punitive or exemplary damages be
awarded in any arbitration, and arbitration between the parities
shall be final and binding. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any
such arbitration shall be held in Madrid, Spain. Each party to any
arbitration pursuant to this Section 7(c)(vii) shall pay its own
expenses; the fees of each arbitrator and any administrative fee of
the sponsoring arbitration entity, if any, shall be borne equally by
NAI, on the one hand, and the Sellers, on the other.
(viii) Third-Party Claims. In the event NAI or its
Subsidiaries become aware of a third-party claim which NAI or its
Subsidiaries believe may result in a demand against the Escrow Funds, NAI
shall promptly notify each of the Sellers of such claim shall deliver to
each of the Sellers a copy of such claim, complaint or demand, and the
Sellers who have monies in
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the escrow shall be entitled, at their expense, to participate in any
defense of such claim. NAI shall consult with the Sellers prior to the
settlement of any such claim and discuss with the Sellers in good faith
any input regarding the claim and potential settlement the Sellers may
have prior to any settlement. After such consultation, NAI shall have the
right in its sole discretion to settle any such claim. The foregoing
provisions with respect to the Sellers' participation at their expense
shall in no event entitle the Sellers to initiate or conduct any
negotiations with respect to any third party claims (including any claims
with respect to Special Losses) without the physical presence and
participation of NAI's representatives. Notwithstanding any provision to
the contrary, in defending any Special Tax Matter, NAI agrees to retain,
and maintain for so long as such counsel performs to NAI's reasonable
satisfaction, Xxxx-Xxxxx as its Spanish tax counsel.
(ix) Escrow Agent's Duties.
(A) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and
as set forth in any additional written escrow instructions which the
Escrow Agent may receive after the date of this Agreement which are
signed by an officer of NAI and the Sellers, and may rely and shall
be protected in relying or refraining from acting on any instrument
reasonably believed to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall not
be liable for any act done or omitted hereunder as Escrow Agent
while acting in good faith and in the exercise of reasonable
judgment, and any act done or omitted pursuant to the written advice
of counsel shall be conclusive evidence of such good faith.
(B) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or
by any other person, excepting only orders or process of courts of
law, and is hereby expressly authorized to comply with and obey
orders, judgments or decrees of any court. In case the Escrow Agent
obeys or complies with any such order, judgment or decree of any
court, the Escrow Agent shall not be liable to any of the parties
hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
(C) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the
parties executing or delivering or purporting to execute or deliver
this Agreement or any documents or papers deposited or called for
hereunder.
(D) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with
respect to this Agreement or any documents deposited with the Escrow
Agent.
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(E) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to NAI and each of
the Sellers; provided, however, that no such resignation shall
become effective until the appointment of a successor escrow agent
which shall be accomplished as follows: NAI and the Sellers shall
use their best efforts to mutually agree upon a successor escrow
agent within thirty (30) days after receiving such notice. If the
parties fail to agree upon a successor escrow agent within such
time, NAI shall have the right to appoint a successor escrow agent
(which, in such case, shall be a financial institution with assets
of at least $1 billion (USD)). The successor escrow agent selected
in the preceding manner shall execute and deliver an instrument
accepting such appointment and it shall thereupon be deemed the
Escrow Agent hereunder and it shall without further acts be vested
with all the estates, properties, rights, powers, and duties of the
predecessor Escrow Agent as if originally named as Escrow Agent.
Thereafter, the predecessor Escrow Agent shall be discharged for any
further duties and liabilities under this Agreement.
(x) Fees. All fees of the Escrow Agent for performance of
its duties hereunder shall be paid by NAI. It is understood that the fees
and usual charges agreed upon for services of the Escrow Agent shall be
considered compensation for ordinary services as contemplated by the
Agreement.
(d) Limitation on Liability. Notwithstanding any other provision
of this Agreement to the contrary, absent fraud or bad faith, the liability of
each Seller with respect to any claim for a breach of any representation,
warranty, covenant or agreement contained in this Agreement, the Collateral
Documents or the Sellers Disclosure Schedule shall be limited to the amount of
the sum of the General Escrow Fund and the Special Escrow Fund with all claims
being made, as applicable, first against such Seller's Proportionate Escrow
Interest in the General Escrow Fund and Special Escrow Fund.
(e) Valuation of Escrowed NAI Common Stock. In accordance with the
requirements of pooling of interests accounting, for the purposes of satisfying
claims made against the General Escrow Fund and the Special Escrow Fund, shares
of NAI Common Stock held in such escrow shall be valued at the Determined Price.
ARTICLE VIII
8. Miscellaneous.
(a) 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 NAI
and the Sellers; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its best efforts to advise the other Parties
prior to making the disclosure) or immediately thereafter if prior advise is not
possible.
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(b) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements (including, but not limited to
the Letter of Intent dated May 27, 1998), or representations by or among the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
(c) Succession and Assignment's Parties in Interest. 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 his or its rights, interests, or
obligations hereunder without the prior written approval of NAI and the Sellers;
provided, however, that NAI or 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 NAI or Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder). Nothing in this Agreement,
express or implied, is intended to or shall confer upon any third-party Person
any right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
(d) 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.
(e) 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.
(f) 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:
Xxxxxx Xxxxxxx Xxxxxx
Xxxxx xx Xxxxxx
00 Xxxxxx Xxxxx
and
Xxxxxx Xxxxx Xxxxxx
Plaza Ciudad de Viena
6 Tres Cantos Madrid Spain
With a Copy to:
Garrigues & Xxxxxxxx
Xxxx Xxxxxxx, 00
-00-
00
00000 Xxxxxx Xxxxx
Attention: Xxxxxx X. Xxxxxx, Esq.; Xxxxx Xxxxxxxx, Esq.
Telephone: 00-00-000-00-00
Telecopier: 00-00-000-00-00
If to the Escrow Agent:
Greater Bay Trust Company
000 Xxxxxxx Xxxxxx
0xx Xxxxx
Xxxx Xxxx, XX 00000
Attention: Xxx Paivah
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
If to NAI or Buyer:
Networks Associates, Inc.
0000 Xxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Xxxxxxx X.X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier:
With a Copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Xxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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.
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(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of Spain without giving effect to
any choice or conflict of law provision or rule (whether of Spain or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than Spain.
(h) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by NAI
and each of the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(i) 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.
(j) Expenses. Each of the Parties and the Company will bear his or
its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Sellers agree that the Company has not borne and will not bear any of the
Sellers' costs and expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
(k) 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 any national, provincial,
federal, regional, state, local, or foreign statute or law shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. 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.
(l) Incorporation of Exhibits and Schedules. The Exhibits, and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(m) Arbitration.
(i) Without limitation, and except to the extent provided
for in Article VII with respect to the resolution of conflicts related to claims
upon the Escrow Funds in the event of any
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dispute arising in connection with this Agreement it shall be settled by
arbitration under the Rules of Arbitration of the International Chamber of
Commerce. Each Party shall appoint one arbitrator and the two so appointed shall
appoint a third who shall act as President of the arbitral tribunal: If either
Party fails to appoint an arbitrator within 30 days of its receipt of notice of
the other Party's nomination or the two arbitrators appointed by the parties
fail to appoint a third arbitrator within thirty days of the appointment of the
second arbitrator, then, at the request of either Party the default in
appointment shall be made good by an appointment under the procedure established
under Article VII of the abovementioned Rules. The proceedings shall be held in
the English language unless the parties to the dispute otherwise agree. The
arbitration shall take place in Madrid. The parties irrevocably submit
themselves to the award of the arbitrators under this provision in lieu of
judicial proceedings in any jurisdiction whatsoever .
(ii) The arbitral tribunal shall apply the laws of Spain. The
award made by the arbitrators shall be final and binding upon the parties to the
arbitration and may be enforced in any court of competent jurisdiction. Costs
shall follow the award.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
NETWORKS ASSOCIATES, INC.
a Delaware corporation
By:______________________________________
Its:_____________________________________
NA COMBINATION COMPANY, INC.
a Delaware corporation
By:______________________________________
Its:_____________________________________
SELLERS
XXXXXX XXXXXXX XXXXXX
_________________________________________
XXXXXX XXXXX XXXXXX
_________________________________________
Accepted and agreed as to the provisions of Article II and Article VII as they
relate to the duties and responsibilities of the Escrow Agent:
ESCROW AGENT
By:______________________________
Its:_____________________________
