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Exhibit 2.1
EXECUTION COPY
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT, dated as of October 23, 1997 (the
"Agreement"), by and among XXXXX X. XXXX, a resident of Lancashire, England
("Xxxx"), XXXXXX X. XXXX, a resident of Cheshire, England ("Bird"), XXX P.C.
XXXXXXXX, a resident of Warrington, England ("Xxxxxxxx"), and X.X. XXXXXXX, a
resident of Surrey, England ("Xxxxxxx"), and LANCASHIRE ENTERPRISES VENTURE
FUND, a limited partnership formed under the laws of England and Wales
("Lancashire") (Gray, Bird, Xxxxxxxx and Xxxxxxx are sometimes referred to
herein as the "Management Sellers," and the Management Sellers and Lancashire
are sometimes referred to herein collectively as the "Sellers" and individually
as a "Seller") and HARBINGER CORPORATION, a Georgia corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Sellers own all the issued and outstanding ordinary shares and
cumulative participating preferred ordinary shares (collectively, the "Ordinary
Shares"), and 8% cumulative redeemable preference shares (the "Preference
Shares" and together with the Ordinary Shares, the "Shares"), of API Systems
Limited, a company formed under the laws of England and Wales (Reg. No. 2942785)
("Company"), being all of the outstanding share capital of Company;
WHEREAS, Company is engaged in the business of provision of information
technology worldwide (the "Business");
WHEREAS, Buyer desires to purchase from Sellers and Sellers desire to
sell to Buyer, all of the issued and outstanding Shares upon the terms and
subject to conditions set forth herein (the "Transaction"); and
WHEREAS, the parties desire that the Transaction be accounted for under
the pooling-of-interests method of accounting;
NOW THEREFORE, in consideration of the foregoing, the mutual covenants,
agreements, representation and warranties contained in this Agreement and other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
ARTICLE 1.
SALE OF SHARE CAPITAL; CLOSING
Section 1.1. Purchase and Sale. On the basis of the representations,
warranties, covenants and agreements set forth herein, Buyer hereby purchases
from Sellers and Sellers hereby sell, convey and assign to Buyer all of the
Shares, which Shares constitute all of the issued and outstanding share capital
of Company.
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Section 1.2. Purchase Price. In consideration of the sale of the
Shares, and the representations, warranties, covenants and agreements of Sellers
set forth herein, Buyer is paying and will issue to Sellers that number of
shares of the common stock, par value $.0001 per share, of Buyer ("Buyer's
Common Stock"), equal to U.S. $11,725,250 divided by the Average Closing Price.
For purposes of this Agreement, the "Average Closing Price" shall be the
arithmetic average of the closing price per share of Buyer's Common Stock in
U.S. dollars, as reported on the Nasdaq National Market, for each of the twenty
(20) consecutive trading days ending on the trading day immediately prior to the
Closing Date (as hereinafter defined). The shares of Buyer's Common Stock issued
to the Sellers pursuant to this Section 1.2 shall be referred to as the
"Harbinger Shares." Subject to Section 1.3 below, Buyer shall deliver to Sellers
at Closing certificates representing the Harbinger Shares in the amounts and
proportions indicated on Exhibit A hereto, registered in such names and in such
denominations as designated thereon.
Section 1.3. Deposit of Shares in Escrow. Upon issuance of the
certificates representing the Harbinger Shares, Management Sellers shall deliver
into escrow stock certificates representing 10% of the total number of Harbinger
Shares issued to Management Sellers pursuant to the terms of an Escrow Agreement
in the form Exhibit B hereto. The Escrow Agreement sets forth the conditions
under which the Escrow Shares shall be delivered to Sellers or Buyer.
Section 1.4. Closing. The Closing of the purchase and sale of the
Shares (the "Closing") is being held contemporaneously with the execution and
delivery of this Agreement at the offices of the Company, Quay West, Trafford
Xxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxx, Xxxxxxx X00 0XX, at 11:00 a.m., local time,
on the date hereof, or such other place and such other time as the parties shall
agree. The date of the Closing is referred to as the "Closing Date."
Section 1.5. Further Assurances. Sellers from time to time after the
Closing, at Buyer's request, will execute and acknowledge and deliver to Buyer
such other instruments of conveyance and transfer and will take such other
actions and execute and deliver such other documents, certifications and further
assurances as Buyer may reasonably request in order to vest more effectively in
Buyer, or to put Buyer more fully in possession of, any of the Shares. Each of
the parties hereto will cooperate with the other and execute and deliver to the
other such other instruments and documents and take such other actions as may be
reasonably requested from time to time by any party hereto as necessary to carry
out, evidence and confirm the intended purposes of this Agreement.
Section 1.6. Fractional Shares. No scrip or fractional shares of
Buyer's Common Stock shall be issued in the Transaction. All fractional shares
of Buyer's Common Stock to which a Seller immediately prior to the Closing would
otherwise be entitled pursuant to this Agreement shall be aggregated. If a
fractional share results from such aggregation, a Seller shall be entitled to
receive from Buyer an amount in cash in lieu of such fractional share, based on
the Average Closing Price.
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Section 1.7 Waiver of Preemption. Each of the Sellers hereby
irrevocably waives all and any rights of preemption which he may have under the
Articles of Association of the Company or otherwise.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF
COMPANY AND MANAGEMENT SELLERS
With such exceptions as are set forth in a letter (the "Seller
Disclosure Letter") signed and delivered by Sellers to Buyer immediately prior
to the execution hereof and attached hereto as Exhibit C, each Management Seller
hereby severally represents and warrants to Buyer as follows:
Section 2.1. Organization. Each of Company and the Company Subsidiaries
(as defined in Section 2.5 below) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Company and each of the Company Subsidiaries is duly qualified to transact
business, and is in good standing, as a foreign corporation in each jurisdiction
where the character of its activities requires such qualification, except where
the failure to so qualify would not have a Company Material Adverse Effect (as
defined below). A "Company Material Adverse Effect" means any event, condition
or change which materially and adversely affects or could reasonably be expected
to materially and adversely affect the assets, liabilities, financial results of
operations, financial condition, business or prospects of Company or any Company
Subsidiary. Company has made available to Buyer accurate and complete copies of
the Memorandum and Articles of Incorporation or other governing documents, as
currently in effect, of Company and each of the Company Subsidiaries, and has
made available to Buyer the minute books and stock records of each thereof. The
Seller Disclosure Letter contains a true and correct list of the jurisdictions
in which Company or any of the Company Subsidiaries is qualified to do business
as a foreign corporation. The Company and the Company Subsidiaries have each
complied in all material respects with their respective Memorandum and Articles
of Association.
Section 2.2. Authorization. This Agreement has been duly executed and
delivered by each of the Sellers and constitutes the legal, valid and binding
agreement of each of the Sellers, enforceable against them in accordance with
its terms, subject to applicable bankruptcy, insolvency and other similar laws
affecting the enforceability of creditors' rights generally, general equitable
principles and the discretion of courts in granting equitable remedies.
Section 2.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the transactions
contemplated by this Agreement and the fulfillment of and compliance with the
terms and conditions of this Agreement do not and will not, with the passing of
time or the giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material benefit under, or
permit the acceleration of any obligation under, (i) any term or provision of
the Memorandum and Articles of Incorporation or other governing documents of
Company or any of
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the Company Subsidiaries, (ii) any Company Material Contract (as defined in
Section 2.10 hereof), (iii) any judgment, decree or order of any court or
governmental authority or agency to which any of the Sellers, Company or any of
the Company Subsidiaries is a party or by which any of the Sellers, Company or
any of the Company Subsidiaries or any of their respective properties is bound,
or (iv) any statute, law, regulation or rule applicable to any of the Sellers,
Company or any of the Company Subsidiaries, so as, in the case of Company or the
Company Subsidiaries, to have in the case of subsections (ii) through (iv)
above, a Company Material Adverse Effect. Except for compliance with the
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and applicable United Kingdom securities laws, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any governmental agency or public or regulatory unit, agency, body or
authority with respect to Company or any of the Company Subsidiaries is required
in connection with the execution, delivery or performance of this Agreement by
Seller or the consummation of the transactions contemplated by this Agreement by
Sellers, the failure to obtain which would have a Company Material Adverse
Effect.
Section 2.4. Capitalization. The authorized share capital of Company
consists of 70,000 ordinary shares, 30,000 cumulative participating preferred
ordinary shares, and 170,000 8% cumulative redeemable preference shares. At the
date of this Agreement, there were issued and outstanding 70,000 ordinary
shares, 30,000 cumulative participating preferred ordinary shares and 85,000 8%
cumulative redeemable preference shares. At the date of this Agreement, there
were no other shares of share capital of Company authorized. Each share of
Company Shares outstanding at the date of this Agreement is duly authorized,
validly issued, fully paid and nonassessable free of preemptive rights, and is
owned by Sellers. Each Seller owns of record and beneficially the number of
shares of Company Shares issued and outstanding as set opposite the name of such
Seller in the Seller Disclosure Letter, and the Seller Disclosure Letter sets
forth for each Seller the percentage of Company Shares owned by such Seller
(referred to elsewhere herein as such Seller's "Percentage Interest"); such
Seller owns all rights, title and interest in and to such shares, free and clear
of all liens (including those for estate or inheritance taxes), claims, pledges,
options, rights of refusal or similar rights or other transfer restrictions or
adverse claims and charges of any nature whatsoever (including any arising from
existing or threatened litigation, but excluding transfer restrictions that may
arise from applicable securities laws); and such Seller's transfer of his shares
to Buyer pursuant to this Agreement will pass to Buyer all rights, title and
interest to and in such shares free of any lien or any adverse interest, claim
or charge whatsoever. The shares owned by each Seller were obtained by such
Seller in transactions in full compliance with applicable securities laws, and
each Seller has the exclusive right to vote the shares. Except as set forth
above or in the Seller Disclosure Letter, there are no shares of share capital
of Company outstanding, and there are no subscriptions, options, convertible
securities, calls, puts, rights, warrants or other agreements, claims or
commitments of any nature whatsoever obligating Company to purchase, redeem,
issue, transfer, deliver or sell, or cause to be purchased, redeemed, issued,
transferred, delivered or sold, additional shares of the share capital or other
securities of Company or obligating Company to grant, extend or enter into any
such agreement or commitment. No prior offer, issue, redemption, call, purchase,
sale, transfer, negotiation or other transaction of any nature with respect to
the share capital or equity interests of Company, or any corporation or
organization which has been merged into Company,
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has given or may give rise to any valid claim or action by any person which is
enforceable against Company or any of its affiliates and, to the best knowledge
of the Management Sellers, no fact or circumstance exists which could give rise
to any such right, claim or action on behalf of any person.
Section 2.5. Subsidiaries. The Seller Disclosure Letter sets forth a
true and complete list of all (i) corporations or other entities of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are, directly or indirectly, owned by Company, and (ii) partnerships or limited
liability companies in which Company or a Company Subsidiary (as defined below)
is (A) a general or limited partner or member or other owner and (B) entitled to
receive more than 50% of the assets of any such partnership or such limited
liability company on such partnership's or limited liability company's
dissolution (collectively, the "Company Subsidiaries"), the jurisdiction in
which each Company Subsidiary is incorporated or organized and all shares of
share capital or of the ownership interests authorized, issued and outstanding
of each Company Subsidiary. The outstanding shares of share capital or other
equity interest of each Company Subsidiary have been duly authorized and are
validly issued, fully paid and nonassessable. All shares of share capital or
other equity interest of each Company Subsidiary owned by Company or any Company
Subsidiary are set forth in the Seller Disclosure Letter and are owned by
Company, directly or indirectly, free and clear of all liens, encumbrances,
equities or claims. The Seller Disclosure Letter also sets forth a true and
complete list of all corporations, partnerships, limited liability companies,
and other entities in which Company or a Company Subsidiary owns an equity
interest having a value in excess of U.S. $10,000, other than the Company
Subsidiaries or any mutual funds or publicly traded companies. All shares of
share capital or other equity interest of each such entity are set forth in the
Seller Disclosure Letter and are owned by Company or a Company Subsidiary, as
applicable, free and clear of all liens, encumbrances, equities or claims.
Section 2.6. Financial Statements. Sellers have made available to Buyer
(i) the audited consolidated profit and loss account of Company and its
subsidiaries (to the extent that any such subsidiary existed as of such date)
and balance sheets and consolidated balance sheets as of December 31, 1996 and
1995 and the related audited consolidated profit and loss account for the
respective fiscal years then ended, including the notes thereto, examined by and
accompanied by the report of Xxxxxx Xxxxxxxx & Xxxxx, chartered accountants
("Company Accountants"), and (ii) the audited consolidated profit and loss
account of Company and its subsidiaries (to the extent that any such subsidiary
existed as of such date) and balance sheet and consolidated balance sheet (the
"Interim Balance Sheet") as of September 30, 1997 and the related audited
consolidated profit and loss account for the nine month period then ended,
including the notes thereto, examined by and accompanied by the report of KPMG
Peat Marwick LLP, chartered accountants. All of the foregoing financial
statements are collectively referred to as the "Company Financial Statements."
The Company Financial Statements have been prepared from, and are in accordance
with, the books and records of Company and its combined subsidiaries and, as
applicable, give a true and fair view and present fairly the financial position,
results of operations and changes in stockholders' equity of Company and its
combined subsidiaries as of the dates and for the periods indicated, in each
case in conformity with applicable Accounting
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Standards, consistently and reasonably applied throughout the periods covered
thereby. As of the Closing Date, Company shall have no liability or obligation
of any nature whatsoever, whether accrued, absolute, contingent or otherwise,
other than (x) current liabilities and obligations that arise or have arisen in
the ordinary course of business which are recurring in nature and not overdue on
their terms, (y) liabilities and obligations reflected in and adequately
provided for on the Interim Balance Sheet and (z) liabilities and obligations
arising in the ordinary course of business of Company which alone or in the
aggregate would not have a Company Material Adverse Effect. The Interim Balance
Sheet contains all of the assets of the Company necessary to run the Business in
the same manner after the Closing Date as before September 30, 1997. The Seller
Disclosure Letter sets forth a true and complete list of all loss contingencies
(within the meaning of Statement of Financial Accounting Standards No. 5),
except those classified as "remote" (a "Loss Contingency") of Company exceeding
U.S. $10,000 in the case of any single Loss Contingency or U.S. $100,000 in the
case of all Loss Contingencies.
Section 2.7. Absence of Certain Changes.
(a) Since September 30, 1997, there has not been (i) any
change in the assets, liabilities, results of operations, financial condition,
business or prospects of Company and the Company Subsidiaries, taken as a whole,
that has had a Company Material Adverse Effect, (ii) any damage, destruction,
loss or casualty to property or assets of Company or any of the Company
Subsidiaries, whether or not covered by insurance, which property or
assets are material to the operations or business of Company and the Company
Subsidiaries, taken as a whole, that has had a Company Material Adverse Effect,
(iii) any declaration, setting aside or payment of any dividend or distribution
(whether in cash, stock or property) in respect of the share capital of Company,
any redemption or other acquisition by Company of any of the share capital of
Company or any of the Company Subsidiaries or any split, combination or
reclassification of shares of share capital declared or made by Company or (iv)
any agreement to do any of the foregoing. Notwithstanding anything contained in
this Agreement to the contrary, Sellers make no representations or warranties as
to the future income or profitability of Company.
(b) Since September 30, 1997, there have not been (i) any
losses suffered which, in the aggregate, have resulted in a Company Material
Adverse Effect, (ii) except as would not have a Company Material Adverse Effect,
any assets mortgaged, pledged or made subject to any lien, charge or other
encumbrance, (iii) any material liability or obligation (absolute, accrued or
contingent) incurred or any material bad debt, contingency or other reserve
increase suffered, except, in each such case, in the ordinary course of business
and consistent with past practice, (iv) any material claims, liabilities or
obligations (absolute, accrued or contingent) paid, discharged or satisfied,
other than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of claims, liabilities and
obligations reflected or reserved against in the Company Financial Statements or
incurred in the ordinary course of business and consistent with past practice,
(v) any material guaranteed checks, notes or accounts receivable written off as
uncollectible, except write-offs in the ordinary course of business and
consistent with past practice, (vi) any write down (under Statement of
Financial
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Accounting Standards No. 121 or other applicable accounting standards or
otherwise) of the value of any material asset or investment on Company's books
or records, except for depreciation and amortization taken in the ordinary
course of business and consistent with past practice, (vii) any cancellation of
any material debts or waiver of any material claims or rights of substantial
value, or sale, transfer or other disposition of any material properties or
assets (real, personal or mixed, tangible or intangible) of substantial value,
except, in each such case, in transactions in the ordinary course of business
and consistent with past practice, which, in the aggregate, have resulted in a
Company Material Adverse Effect, (viii) any single capital expenditure or
commitment in excess of U.S. $10,000, or aggregate capital expenditures and
commitments in excess of U.S. $25,000 (on a consolidated basis, (ix) any
obligations to pay royalties or license fees in excess of $10,000, (x) any Loss
Contingency or Loss Contingencies of Company which, in the aggregate, have
resulted in a Company Material Adverse Effect, (xi) any material transactions
entered into other than in the ordinary course of business, (xii) any agreements
to do any of the foregoing, or (xiii) any other events, developments or
conditions (including any suit, action, claim, proceeding or investigation) of
any character that have had or are reasonably likely to have a Company Material
Adverse Effect.
Section 2.8. Legal Proceedings. There are no suits, actions, claims,
proceedings or investigations pending, or, to the best knowledge of Sellers,
threatened against, relating to or involving Company or any of the Company
Subsidiaries (or any of its officers or directors) or Sellers before any court,
arbitrator or administrative or governmental body. Neither Company nor any of
the Company Subsidiaries is subject to any judgment, decree, injunction, rule or
order of any court, and, to the best knowledge of Sellers, neither Company nor
any of the Company Subsidiaries is subject to any governmental restriction
applicable to Company or any of the Company Subsidiaries, which is reasonably
likely (i) to have a Company Material Adverse Effect or (ii) to cause a material
limitation on Buyer's ability to operate the business of Company and the Company
Subsidiaries after the Closing.
Section 2.9. Compliance with Law. Each of Company and the Company
Subsidiaries has all material authorizations, approvals, licenses and orders of
and from all governmental and regulatory officers and bodies necessary to carry
on its business as it is currently being conducted, to own or hold under lease
the properties and assets it owns or holds under lease and to perform all of its
obligations under the agreements to which it is a party, and each of Company and
the Company Subsidiaries has been and is in compliance with all applicable laws,
regulations and administrative orders of any country, state or municipality or
of any subdivision of any thereof to which its business and its employment of
labor or its use or occupancy of properties or any part thereof are subject, the
failure to obtain or the violation of which would have a Company Material
Adverse Effect.
Section 2.10. Material Contracts. The Seller Disclosure Letter
contains a list correct in all material respects of the following (the "Company
Material Contracts"):
(a) all bonds, debentures, notes, mortgages, indentures or
guarantees securing indebtedness in excess of U.S. $10,000 individually to which
Company or any of the Company
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Subsidiaries is a party or by which any of their properties or assets (real,
personal or mixed, tangible or intangible) are bound;
(b) all outstanding loans and credit commitments to
Company or any of the Company Subsidiaries covering indebtedness in excess of
U.S. $10,000 individually;
(c) all contracts or agreements which limit or restrict in a
substantial manner (i) Company or the Company Subsidiaries or any of the Sellers
from engaging in any business in any jurisdiction or (ii) others from competing
with Company or the Company Subsidiaries in any jurisdiction, except for
employment contracts between Company or a Company Subsidiary and a current or
former employee of Company or a Company Subsidiary;
(d) all contracts or agreements requiring Company to register
its share capital or securities under any applicable securities law;
(e) all agreements or documentation evidencing currently
outstanding loans or advances in excess of U.S. $10,000 individually made by
Company or any of the Company Subsidiaries to or on behalf of its clients, other
than accounts receivables incurred in the ordinary course of business, and
identification of all bank accounts; and
(f) all existing contracts and commitments (other than (i)
those of the type described in subparagraphs (a), (b), (c), (d) or (e) of this
Section 2.10), (ii) agreements, contracts or commitments pursuant to which
Company or any of the Company Subsidiaries provides goods or services to its
clients, (iii) the Company Benefit Plans (as defined in Section 2.14 hereof) and
(iv) any leases with respect to real or personal property) to which Company or
any of the Company Subsidiaries is a party or by which their properties or
assets may be bound involving an annual commitment or annual payment by any
party thereto of more than U.S. $10,000 individually or which by its terms
requires performance thereunder by Company for more than two years following the
Closing Date. All title deeds, agreements and other documents to which the
Company is a party or under which the Company derives benefit and all other
documents owned by or which ought to be in the possession of the Company are in
its possession and are properly stamped.
True and complete copies of all Company Material Contracts, including
all amendments thereto, have been made available to Buyer. The Company Material
Contracts are valid and enforceable in accordance with their respective terms
with respect to Company and, to the knowledge of Sellers, valid and enforceable
in accordance with their respective terms with respect to any other party
thereto, in each case to the extent material to the business and operations of
Company and the Company Subsidiaries taken as a whole and subject to applicable
bankruptcy, insolvency and other similar laws affecting the enforceability of
creditors' rights generally, general equitable principles and the discretion of
courts in granting equitable remedies. Except for events or occurrences, the
consequences of which, individually or in the aggregate, would not have a
Company Material Adverse Effect, there is not under any of the Company Material
Contracts any existing breach, default or event of default by Company or any of
the Company Subsidiaries or event that with notice or lapse of time or both
would constitute a breach, default or event of default by Company or any of the
Company Subsidiaries, nor do the
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Sellers know of, and neither Company nor any of the Company Subsidiaries has
received notice of, or made a claim with respect to, any breach or default by
any other party thereto. Company is not a party to or subject to (i) any joint
venture contract or arrangement or any other agreement which has involved or is
expected to involve a sharing of profits, (ii) any original equipment
manufacturer ("OEM"), reseller, distribution or equivalent agreement, volume
purchase agreement, corporate end user license, sales or service agreement or
other agreement or contract pursuant to which Company has granted or received
most favored nation pricing provisions or exclusive marketing, reproduction,
publishing, licensing or distribution rights related to any product, group of
products or territory, or (iii) any agreement or contract containing a covenant
or provision purporting to limit Company's freedom to compete or transact
business in any line of business or in any geographic area. Neither Company nor
any Company Subsidiary has any liabilities under that certain Factoring
Agreement with International Factors Limited dated September 29, 1994 or any
related guarantee thereof.
Section 2.11. Company Client Contracts. The Seller Disclosure Letter
sets forth a true and complete list of all agreements, contracts or commitments
pursuant to which Company or any of the Company Subsidiaries provides goods or
services to its clients (i) which produced annual payments in the year ending
December 31, 1996 of at least U.S. $15,000 to Company or a Company Subsidiary or
(ii) from which Seller reasonably expects Company to produce annual payments in
excess of U.S. $15,000 in 1997 (the "Company Client Contracts"). Except as set
forth in the Seller Disclosure Letter, the execution, delivery and performance
of this Agreement by Sellers and the consummation of the transactions
contemplated hereby will not, with the passing of time or the giving of notice
or both, violate or constitute a default or give rise to a termination right
under any Company Client Contract. True and complete copies of all written
Company Client Contracts, including all amendments thereto, have been made
available to Buyer. The Company Client Contracts are valid and enforceable in
accordance with their respective terms with respect to Company or the Company
Subsidiaries, as applicable, and, to the knowledge of Sellers, are valid and
enforceable in accordance with their respective terms with respect to any other
party thereto, in each case except as would not have a Company Material Adverse
Effect. There is no existing breach, default or event of default by Company or
any of the Company Subsidiaries, or event that solely as a result of notice or
lapse of time or both would constitute a breach, default or event of default by
Company or any of the Company Subsidiaries under the Company Client Contracts
the consequences of which, individually or in the aggregate, would have a
Company Material Adverse Effect. To the best knowledge of Sellers, neither
Company nor any of the Company Subsidiaries has received notice of, or made a
claim with respect to, any breach or default by any other party.
Section 2.12. Tax Returns; Taxes. Each of Company and the Company
Subsidiaries has duly filed all tax returns, information returns and
governmental reports of every nature required by any Governmental Authority (as
hereinafter defined) required to be filed by it (including employment and
withholding tax returns) (collectively, "Governmental Returns") and has duly
paid or made adequate provision for the payment of all taxes which are due and
payable pursuant to such returns or pursuant to any assessment with respect to
taxes in such jurisdictions, whether or not in connection with such returns,
except as set forth in the Seller Disclosure Letter. The liability for taxes
reflected in the Interim Balance Sheet is sufficient for the payment of all
unpaid
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taxes, whether or not disputed, that are accrued or applicable for the period
ended December 31, 1996 and for all years and periods ended prior thereto. Since
the period ended December 31, 1996 neither Company nor any Company Subsidiary
has entered into any transaction which has given rise or will give rise to a
liability to tax upon it (or which would have done so or would or might do so
but for the availability of any relief, allowance, deduction or credit) other
than corporation tax on actual income (and not chargeable gains or deemed
income) of the Company or a Company Subsidiary arising from transactions entered
into in the ordinary course of business. All deficiencies asserted as a result
of any examinations by any Governmental Authority have been paid, fully settled
or adequately provided for in the Interim Balance Sheet. There are no pending
claims asserted for taxes of Company or any Company Subsidiary or outstanding
agreements or waivers extending the statutory period of limitation applicable to
any tax return of Company or any Company Subsidiary for any period. Company and
each of the Company Subsidiaries have made all estimated income tax deposits and
all other required tax payments or deposits and has complied for all prior
periods in all material respects with the tax withholding provisions of all
applicable laws. Company and each of the Company Subsidiaries have made
available to Buyer true, complete and correct copies of their income tax returns
filed with any Governmental Authority for the last three taxable years and made
available such other tax returns requested by Buyer. For purposes of this
Agreement, the term "tax" shall include all forms of taxation, duties, imposts,
levies and rates whenever imposed and whether of the United Kingdom or elsewhere
and in particular (but without prejudice to the generality of the foregoing)
includes income tax, withholding taxes, corporation tax, capital gains tax,
inheritance tax, value added tax, customs duties, excise duties, betterment
levy, development land tax, stamp duty, stamp duty reserve tax, capital duty,
general and water rates, community charge, national insurance contributions,
social security or other similar contributions and generally any other taxes,
duties, imposts, levies or other amounts (whether of a like nature or not) and
any interest, penalty or fine in connection therewith. The term "Governmental
Authority" shall mean any and all foreign, federal, state or local government,
governmental institutions, public authorities and governmental entities of any
nature whatsoever, and any subdivisions or instrumentalities thereof, including,
but not limited to, departments, boards, bureaus, commissions, agencies, courts,
administrations and panels, and any divisions or instrumentalities thereof,
whether permanent or ad hoc and whether or hereafter constituted and/or
existing. Neither the Company nor any Company Subsidiary has since December 31,
1996, knowingly engaged in or been a party to any scheme or arrangement of which
the main purpose or one of the main purposes was the avoidance of or a reduction
in liability to taxes.
Section 2.13. Officers, Directors and Employees. The Seller Disclosure
Letter contains a true and complete list of all of the officers and directors
(including shadow or alternate directors) of Company and each Company
Subsidiary, specifying their office and annual rate of compensation, and a true
and complete list of all of the employees of Company and each Company Subsidiary
as of the date hereof with whom Company or a Company Subsidiary, as applicable,
has a written employment agreement or, to the best knowledge of Sellers, to whom
Company or a Company Subsidiary, as applicable, has made verbal commitments
involving material terms which are binding on it and that involve annual
compensation to such employees individually of at least U.S. $30,000 (including
any estimated bonuses payable thereto).
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Section 2.14. Employee Benefit Plans.
(a) Definition of Benefit Plans. For purposes of this Section
2.14, the term "Company Benefit Plan" means any plan, program, arrangement,
fund, policy, practice or contract which, through which or under which Company
or any Company Subsidiary provides benefits or compensation to or on behalf of
employees or former employees of Company or any Company Subsidiary, whether
formal or informal, whether or not written, including but not limited to the
following:
(i) Arrangements - any bonus, incentive
compensation, stock option, deferred compensation, commission
severance pay, golden parachute or other compensation plan or
rabbi trust ("Specified Arrangements");
(ii) Employee Benefit Plans - any employee benefit
plan, including, but not limited to, any defined benefit plan,
profit sharing plan, pension plan, savings or thrift plan, or
any plan, fund, program, arrangement or practice providing for
medical (including post-retirement medical), hospitalization,
accident, sickness, disability, or life insurance benefits
("Employee Benefit Plans"); and
(iii) Other Employee Fringe Benefits - any stock
purchase, vacation, scholarship, sick days, day care, prepaid
legal services, dependent care or other fringe benefits plans,
programs, arrangements, contracts or practices ("Fringe
Benefit Plans").
(b) Identification of Benefits Plans. Except for Company
Benefit Plans which have been terminated and with respect to which neither
Company nor any Company Subsidiary has any current financial, administrative or
other liability, obligation or responsibility, Company does not maintain, nor
has it at any time established or maintained, nor has it at any time been
obligated to make, or otherwise made, contributions to or under or otherwise
participated in any Company Benefit Plan.
(c) Compliance. Each Company Benefit Plan maintained by
Company or a Company Subsidiary has been maintained, by its terms and in
operation, in all material respects in accordance with all applicable laws,
rules or regulations of any Governmental Authority. Further, there has been no
failure to comply with applicable laws or other requirements concerning the
filing of reports, documents and notices with the any Governmental Authority or
the furnishing of such documents to participants or beneficiaries that could
subject any Company Benefit Plan, Company or any Company Subsidiary to any
material civil or criminal sanction.
(d) Post-Retirement Medical Benefits. Neither Company nor any
Company Subsidiary maintains, nor has at any time established or maintained, nor
has at any time been obligated to make, or made, contributions to or under any
plan which provides post-retirement medical or health benefits with respect to
employees of Company or any Company. There is no lien upon any property of
Company or any Company Subsidiary outstanding in favor of any
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Company Benefit Plan. No assets of Company or any Company Subsidiary have been
provided as security for any Company Benefit Plan.
(e) Documentation. Company has made available to Buyer a true
and complete copy of the following documents, if applicable, with respect to
each Company Benefit Plan identified in Seller Disclosure Letter: (i) all
documents, including any insurance contracts and trust agreements, setting forth
the terms of Company Benefit Plan, or if there are no such documents evidencing
Company Benefit Plan, a full description of Company Benefit Plan, (ii) any
summary of plan provisions provided to participants or beneficiaries for each
such Company Benefit Plan, (iii) any annual reports filed with any Governmental
Authority for the most recent three plan years and most recent financial
statements or periodic accounting or related plan assets with respect to each
Company Benefit Plan, (iv) the most recent favorable determination, notification
letter, opinion or ruling from any Governmental Authority for each Company
Benefit Plan, the assets of which are held in trust, to the effect that such
trust is exempt from federal income tax, and any outstanding request for a
determination letter and (v) each opinion or ruling from any Governmental
Authority with respect to any such Company Benefit Plan.
(f) Qualified Status. Each Company Benefit Plan that is
funded through a trust or insurance contract has satisfied in all material
respects, by its terms and in its operation, all applicable requirements for an
exemption from federal income taxation under applicable law. Except for the
plans identified as qualified plans in the Seller Disclosure Letter (the
"Qualified Plans") neither Company nor any Company Subsidiary maintains or
previously maintained a Company Benefit Plan which meets or was intended to meet
the requirements of exemption from taxation pursuant to applicable law. Except
as would not have a Company Material Adverse Effect, any determination, opinion
or notification letter issued by any Governmental Authority to the effect that
the Qualified Plans qualify under applicable law for exemption from taxation
remains in effect and has not been revoked. Each of the Qualified Plans
currently complies in form in all material respects with the requirements for
exemption from taxation under applicable law, other than changes required by
statutes, regulations and rulings for which amendments are not yet required.
Each of the Qualified Plans has been administered according to its terms (except
for those terms which are inconsistent with the changes required by statutes,
regulations, and rulings for which changes are not yet required to be made, in
which case the Qualified Plans have been administered in accordance with the
provisions of those statutes, regulations and rulings) and in accordance with
the requirements of applicable law. The Qualified Plans have been tested for
compliance with, and in all material respects have satisfied the requirements
applicable law for qualification for exemption from taxation, if applicable, for
each plan year within the time periods permitted by law.
(g) Legal Actions. Except as would not have a Company
Material Adverse Effect, there are no actions, audits, suits or claims known to
Company which are pending or, to the knowledge of Sellers, threatened against
any Company Benefit Plan, any fiduciary of any of the Company Benefit Plans with
respect to the Company Benefit Plans or against the assets of any of the Company
Benefit Plans, except claims for benefits made in the ordinary course of the
operation of such plans.
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(h) Funding. Company and each Company Subsidiary has made in
all material respects full and timely payment of all amounts required to be
contributed under the terms of each Company Benefit Plan and applicable law or
required to be paid as expenses under such Company Benefit Plan and no excise
taxes are assessable as a result of any nondeductible or other contributions
made or not made to a Company Benefit Plan. The assets of all Company Benefit
Plans which are required under applicable laws to be held in trust are in fact
held in trust, and the assets of each such Company Benefit Plan equal or exceed
the liabilities of each such plan. The liabilities of each other plan are in all
material respects properly and accurately reported on the financial statements
and records of Company. The assets of each Company Benefit Plan are reported at
their fair market value on the books and records of each plan.
(j) Liabilities. Neither Company nor any Company Subsidiary
is subject to any material liability, tax or penalty whatsoever to any person
whomsoever as a result of Company's or any Company Subsidiary's engaging in a
prohibited transaction under applicable law governing the Company Benefit Plan,
and Company has no knowledge of any circumstances which reasonably might result
in any material liability, tax or penalty whatsoever as a result or a breach of
fiduciary duty thereunder.
(k) No Acceleration of Liability Under Benefit Plans. The
consummation of the transactions contemplated hereby will not accelerate or
increase any liability under any Company Benefit Plan because of an acceleration
or increase of any of the rights or benefits to which employees of Company or
any Company affiliate may be entitled thereunder.
Section 2.15. Employment Taxes. All amounts for payment to the Inland
Revenue, Customs & Excise in respect of income tax deductible prior to Closing
under Schedule E by virtue of the P.A.Y.E. regulations for the time being in
force and all National Insurance Contributions (both employer's and employee's)
due in respect of Company's employees as at Closing will have been duly paid.
The total liability of Company for all Income Tax (P.A.Y.E.) and National
Insurance as at September 30, 1997 did not exceed (pound)16,000. All contracts
of service with Company's employees may be terminated by not more than three
months' notice without giving rise to any claim for damages or compensation
(other than a statutory redundancy payment or statutory compensation for unfair
dismissal). No moneys or benefits other than in respect of contractual
emoluments are payable to any of Company's employees and Company is not under
any present, future of contingent liability to pay compensation for loss of
office of employment to any ex-officer or ex-employee of Company and no payments
are due under the Employment Protection (Consolidation) Xxx 0000. Neither
Company nor any Company Subsidiary has any liabilities outstanding under the
Transfer of Undertakings (Protection of Employment) Regulations of 1981.
Section 2.16. Labor Relations. Company and each Company Subsidiary has
in relation to each of its employees (and so far as relevant to each of its
former employees) complied with: (i) all obligations imposed on it by all
statutes and regulations relevant to the relations between it and its employees
or any trade union and has maintained current adequate and suitable records
regarding the service of each of its employees; (ii) all collective agreements
and customs and practices for the time dealing with such relations or the
conditions of service of its employees;
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and (iii) all relevant orders and awards made under any relevant statute,
regulation or code of conduct and practice affecting the conditions of service
of its employees. Company is under no contractual or other obligation to make an
increase in the rates of remuneration of or to make any bonus or incentive or
other similar payments to any of its employees at any future date. Company is
not involved in any industrial or trade disputes or any dispute or negotiation
regarding a claim of material importance with any trade union or association of
trade unions or organization or body of employees. Company has complied with all
recommendations made by the Advisory Conciliation and Arbitration Service and
with all awards and declarations made by the Central Arbitration Committee. Each
of Company and the Company Subsidiaries is in compliance with all national and
local laws and regulations respecting employment and employment practices, terms
and conditions of employment, wages and hours, and is not engaged in any unfair
labor or unlawful employment practice. Except as would not result in a Company
Material Adverse Effect, individually or in the aggregate, there is no (i)
unlawful employment practice discrimination charge involving Company or any
Company Subsidiary pending before any Governmental Authority; (ii) unfair labor
practice charge or complaint against Company or any Company Subsidiary pending
before any Governmental Authority; (iii) labor strike, dispute, slowdown or
stoppage actually pending or, to the best knowledge of Sellers, threatened
against or involving or affecting Company or any Company Subsidiary; (iv)
grievance or arbitration proceeding pending against Company or any Company
Subsidiary and no written claim therefor exists; or (v) collective bargaining
agreement binding on Company or any Company Subsidiary.
Section 2.17. Insurance. Each of Company and the Company Subsidiaries
has provided to Buyer a true and complete list of its current insurance
coverages, including names of carriers, amounts of coverage and premiums
therefor. Sellers believe that each of Company and the Company Subsidiaries has
been and is insured with respect to its properties and the conduct of its
business in such amounts and against such risks as are reasonable in relation to
its business. Company is not in default under any of its insurance policies or
insurance policies under which it is covered, there are currently no claims
pending or asserted under any of these policies relating to the products or
services of Company, and Company has not been refused any insurance coverage.
Sellers have made available to Buyer true and complete copies of all insurance
policies covering each of Company and the Company Subsidiaries, their
properties, assets, employees or operations.
Section 2.18. Title to Properties and Related Matters.
(a) Each of Company and the Company Subsidiaries has good and
marketable title to or marketable leasehold interests in its properties
reflected in the Interim Balance Sheet or acquired after the date thereof but
before the Closing Date (other than properties sold or otherwise disposed of in
the ordinary course of business), and all of such properties are held free and
clear of all title defects, liens, encumbrances and restrictions, except, with
respect to all such properties, (a) mortgages and liens securing debt reflected
as liabilities on the Interim Balance Sheet and (b) (i) liens for current taxes
and assessments not in default, (ii) mechanics', carriers', workmen's,
repairmen's, statutory or common law liens either not delinquent or being
contested in good faith, and (iii) liens, mortgages, encumbrances, covenants,
rights of way, building or use
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restrictions, easements, exceptions, variances, reservations and other matters
or limitations of any kind, if any, which either individually or in the
aggregate do not have a Company Material Adverse Effect. Since December 31,
1996, neither Company nor any Company Subsidiary has granted any security
interests or other liens upon or factored the accounts receivable of Company or
any Company Subsidiary. There are no leasehold properties in respect of which
Company or any Company Subsidiary has a contingent liability as original or
intermediate tenant.
(b) The Seller Disclosure Letter sets forth a true and
complete list of all leases and agreements of Company or any Company Subsidiary
granting possession of or rights to real or personal property with a value of at
least U.S. $25,000, or in the case of real property, which provide for annual
lease payments in excess of U.S. $25,000 (the "Scheduled Leases"). All such
Scheduled Leases are in full force and effect and constitute the legal, valid,
binding and enforceable obligations of Company or a Company Subsidiary, as
applicable, and are legal, valid, binding and, to the knowledge of Sellers,
enforceable in accordance with their respective terms with respect to each other
party thereto, in each case to the extent material to the business and
operations of Company and the Company Subsidiaries taken as a whole and subject
in each case to applicable bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally, general equitable
principles and the discretion of courts in granting equitable remedies. Except
as would not have a Company Material Adverse Effect, each of Company and the
Company Subsidiaries has physical possession of all equipment and other assets
which are covered by Scheduled Leases. Except as would not have a Company
Material Adverse Effect, there are no existing defaults of Company or any
Company Subsidiary with respect to such Scheduled Leases or, to the best
knowledge of Sellers, of any of the other parties thereto (or events or
conditions which, with notice or lapse of time, or both, would constitute a
default).
Section 2.19. Environmental Matters. To the best knowledge of Sellers,
each of Company and the Company Subsidiaries is in compliance in all material
respects with all statutes, regulations and ordinances relating to the
protection of human health and the environment. There has been no release by
Company or any Company Subsidiary or, to the actual knowledge of Sellers, by any
other person of a hazardous substance into the environment at any property owned
or leased by Company or any Company Subsidiary (the "Premises") including,
without limitation, any such release in the soil or groundwater underlying the
Premises. To the actual knowledge of and without any independent investigation
by Sellers, there is no asbestos, polychlorinated biphenyls or underground
storage tanks located on the Premises and there have been no releases of
asbestos, polychlorinated biphenyls or materials stored in underground storage
tanks, including, without limitation, petroleum or petroleum-based materials.
Except as would not have a Company Material Adverse Effect, neither Company nor
any Company Subsidiary has received notice of any violation of any environmental
statute or regulation nor has it been advised of any claim or liability pursuant
to any environmental statute or regulation brought by any governmental agency or
private party (in each case, an "Environmental Notice").
Section 2.20. Patents, Trademarks, Trade Names. The Seller Disclosure
Letter sets forth a true and complete list of (i) all trademarks, trade names
(including all national and state
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registration pertaining thereto) and copyrights owned by Company or any Company
Subsidiary (collectively, the "Proprietary Intellectual Property") and (ii) all
patents, trademarks, trade names, copyrights, technology and processes used by
Company or any Company Subsidiary in their businesses which are material to
their businesses and are used pursuant to a license or other right granted by a
third party (collectively, the "Licensed Intellectual Property", and together
with the Proprietary Intellectual Property referred to as "Intellectual
Property"). A true and complete list of all such licenses and agreements with
respect to Licensed Intellectual Property is set forth in the Seller Disclosure
Letter. To the best knowledge of Sellers, each of the national, state and other
governmental registrations with any country pertaining to the Proprietary
Intellectual Property is valid and in full force and effect. Company or a
Company Subsidiary owns, or has the right to use pursuant to valid and effective
agreements, all Intellectual Property, and the consummation of the transactions
contemplated hereby will not materially adversely alter or impair any such
rights. No claims are pending against Company or a Company Subsidiary, and
Sellers are not aware of any factual basis for such a claim, by any person with
respect to the use of any Intellectual Property or challenging or questioning
the validity or effectiveness of any license or agreement relating to the same
that would be likely to result in a Company Material Adverse Effect; and to the
best of the Management Sellers' knowledge, information and belief, the current
use by Company or a Company Subsidiary of the Intellectual Property does not in
any material respect infringe upon the rights of any third party, including but
not limited to any copyright, patent, trade secret, trademark, service xxxx,
trade name, firm name, logo, trade dress, mask work, moral right, other
intellectual property right, right of privacy or right in personal data of any
person. The Seller Disclosure Letter sets forth a list of all jurisdictions in
which Company or a Company Subsidiary is operating under a trade name, and each
jurisdiction in which any such trade name is registered. Sellers are not aware
of any potentially interfering patent or patent application of any third party
which could reasonably be expected to interfere with the Company's intellectual
property rights.
Section 2.21. Company Computer Software and Hardware.
(a) The Seller Disclosure Letter sets forth a true and
complete list of: (i) all software and associated documentation owned by Company
material to the business of Company, other than custom-developed software
developed for and assigned to a Company customer (the "Company Proprietary
Software"); (ii) all software (other than the Company Proprietary Software and
"shrink-wrap" software) used in connection with the business of Company (the
"Company Licensed Software" and together with the Company Proprietary Software,
the "Company Software"). Company is in possession of all technical and
descriptive materials to run its business in accordance with its historical
practices, except as would not have a Company Material Adverse Effect. The
Company Proprietary Software consists of: (i) source and object code embodied in
magnetic media; and (ii) all development and procedural tools, documentation,
and manuals necessary to maintain, enhance, develop derivative works, support
and service the Company Proprietary Software, including licenses to use
compilers, assemblers, libraries and other aids. No parties other than Company
possess any current or contingent rights to any source code for the Company
Proprietary Software.
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(b) Company has a valid right, title and interest in and to
all intellectual property rights in the Company Proprietary Software, including
all copyrights (registered and unregistered), trade secrets, and proprietary and
confidential information rights therein. Company has developed the Company
Proprietary Software entirely through its own efforts for its own account or has
acquired prior to the date hereof valid right, title and interest in the Company
Proprietary Software and the Company Proprietary Software is free and clear of
all liens, claims and encumbrances. The Seller Disclosure Letter lists all
parties other than employees of Company who have created any portion of, or
otherwise have any rights in or to, the Company Software. Company has secured
from all parties who have created any portion of, or otherwise have any rights
in or to, the Company Proprietary Software valid and enforceable written
assignments of any such work or other rights to Company and has provided true
and complete copies of such assignments to Buyer. The use of the Company
Licensed Software and the use and distribution of the Company Proprietary
Software does not breach any terms of any contract between Company and any third
party. To the best knowledge of Seller, Company has been granted under the
license agreements relating to the Company Licensed Software (the "Company
License Agreements") valid and subsisting license rights with respect to all
software comprising the Company Licensed Software and such rights may be
exercised in any jurisdiction in which Company currently conducts its business
or could reasonably be expected to conduct its business in the future. Each of
Company and the Company Subsidiaries is in compliance with each of the terms and
conditions of each of the Company License Agreements except to the extent
failure to so comply, individually or in the aggregate, would not have a Company
Material Adverse Effect. To the best knowledge of Sellers, in the case of any
commercially available "shrink-wrap" software programs (such as Lotus 1-2-3),
Company has not made and is not using any unauthorized copies of any such
software programs and, to the best knowledge of Sellers, none of the employees,
agents or representatives of Company have made or are using any such
unauthorized copies, except as would not have a Company Material Adverse Effect.
(c) The Company Proprietary Software and, to the actual
knowledge of Sellers, the Company Licensed Software do not infringe the patent,
copyright, moral rights or trade secret rights or any other intellectual
property or legal right of any third party which may exist anywhere in the
world.
(d) Neither Company nor any of the Company Subsidiaries has
granted rights in the Company Software to any third party except for rights
granted to value added resellers, distributors or customers in the ordinary
course of business pursuant to contracts with customers.
(e) To the best knowledge of Sellers, the Company Software
and the related computer hardware used by Company in its operations (the
"Company Hardware") are adequate in all material respects, when taken together
with the other assets, resources and personnel of Company and the Company
Subsidiaries, to run the business of Company and the Company Subsidiaries in the
same manner as such business has operated since December 31, 1996, except as
would not result in a Company Material Adverse Effect. The Seller Disclosure
Letter contains a summary description of any problems experienced by Company in
the past twelve months with respect to the Company Software or Company Hardware
and the provision of services to
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Company clients which have arisen outside the ordinary course of business and
could result in a Company Material Adverse Effect.
(f) The Company Proprietary Software is "Millennium
Compliant" (defined below). For the purposes of this Agreement "Millennium
Compliant" means:
(i) the functions, calculations, and other computing
processes of the Company Proprietary Software (collectively,
"Processes") perform in a consistent manner regardless of the
date in time on which the Processes are actually performed and
regardless of the date input to the Company Proprietary
Software, whether before, on, or after January 1, 2000 and
whether or not the dates are affected by leap years;
(ii) the Company Proprietary Software accepts,
calculates, compares, sorts, extracts, sequences, and
otherwise processes date inputs and date values, and returns
and displays date values, in a consistent manner regardless of
the dates used, whether before, on, or after January 1, 2000;
(iii) the Company Proprietary Software will function
without interruptions caused by the date in time on which the
Processes are actually performed or by the date input to the
Company Proprietary Software, whether before, on, or after
January 1, 2000;
(iv) the Company Proprietary Software accepts and
responds to two-digit year-date input in a manner that
resolves any ambiguities as to the century in a defined,
predetermined, and appropriate manner; and
(v) the Company Proprietary Software stores and
displays date information in ways that are unambiguous as to
the determination of the century.
(g) The Seller Disclosure Letter includes a true and complete
list and summary of principal terms concerning support and maintenance
agreements relating to the Company Software, including without limitation the
identity of the parties entitled to receive such service or maintenance, the
term of such agreements and any other provisions relating to the termination of
such agreements.
Section 2.22. Transactions with Affiliates. No officer, director or
holder of 5% or more of the outstanding share capital of Company or any Company
Subsidiary, or any person or affiliated group with whom any such stockholder,
officer or director has any direct or indirect relation by blood, marriage or
adoption, or any entity in which any such person, owns (other than through a
publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 1% of the stock of
which is beneficially owned by all such persons) any beneficial interest in: (i)
any contract, arrangement or understanding or any related series of the same
involving aggregate consideration in excess of U.S. $10,000 with, or relating
to, the business or operations of Company or any Company Subsidiary; (ii) any
loan, arrangement, understanding, agreement or contract or any related series of
the same for or
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relating to indebtedness of Company or a Company Subsidiary in excess of U.S.
$10,000 in the aggregate; or (iii) any property or related group of properties
with an aggregate value of at least U.S. $10,000 (real, personal or mixed),
tangible or intangible, used or currently intended to be used in, the business
or operations of Company or any Company Subsidiary.
Section 2.23. Customers. The Seller Disclosure Letter includes a list
of the top ten customers of Company, plus any other customer or group of related
customers from whom payments were received which equaled or exceeded five
percent (5%) of Company's gross sales for the fiscal years ended 1995 and 1996,
or from whom payments are projected to equal or exceed such percentage for the
current fiscal year (the "Large Customers"). Except as set forth on the Seller
Disclosure Letter, Sellers have no knowledge that any of the Large Customers
intends to terminate or otherwise modify adversely its relationship with Company
or to materially decrease its purchases of goods or services from Company.
Company has maintained its customer lists and related information on a
confidential and proprietary basis and has not granted to any third party any
right to use such customer lists for any purpose unrelated to the business of
Company.
Section 2.24. Brokers, Finders and Investment Bankers. None of the
Sellers, Company or the Company Subsidiaries nor any of their officers,
directors or employees has employed any broker, finder or investment banker or
incurred any liability for any investment banking fees, financial advisory fees,
brokerage fees or finders' fees in connection with the transactions contemplated
hereby, other than Xxxxxx Xxxxxxxx & Xxxxx.
Section 2.25. Disclosure. No representation, warranty or covenant made
by Sellers in this Agreement, the Seller Disclosure Letter or the Exhibits
attached hereto contains an untrue statement of a material fact or omits to
state a material fact required to be stated herein or therein or necessary to
make the statements contained herein or therein not misleading.
Section 2.26. Requirements of Securities Laws.
(a) Offshore Transaction.
(i) At the time the discussions regarding the
acquisition of Harbinger Shares originated,
Seller was outside the United States;
(ii) Seller is not a citizen of the United States;
(iii) Seller is not a U.S. person nor is the Seller
acquiring the Harbinger Shares for the
benefit of a U.S. person. The term "U.S.
Person," as defined in Regulation S, means:
(A) any natural person resident in the United
States;
(B) any partnership or corporation organized or
incorporated under the laws of the United States;
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(C) any estate of which any executor or
administrator is a U.S. person, unless an executor or
administrator who is not a U.S. person has sole or
shared investment discretion with respect to the assets
of the estate and the estate is governed by foreign law;
(D) any trust of which any trustee is a U.S.
person, unless a professional fiduciary (trustee) who is
not a U.S. person has sole or shared investment
discretion with respect the assets of the trust and no
trust beneficiary (and no trust settlor if a revocable
trust) is a U.S. person;
(E) any agency or branch of a foreign entity
located in the United States;
(F) any non-discretionary account or similar
account (other than an estate or trust) held by a dealer
or other fiduciary for the benefit or account of a U.S.
person;
(G) any discretionary account or similar
account (other than an estate or trust) held by a dealer
or other fiduciary organized, incorporated or (if an
individual) resident in the United States; and
(H) any partnership or corporation if:
(1) organized or incorporated under
the laws of any foreign jurisdiction; and
(2) formed by a U.S. person
principally for the purpose of investing in
Harbinger Shares not registered under the
Securities Act, unless it is organized or
incorporated, and owned, by accredited
investors (as defined in Rule 501(a) under the
Securities Act) who are not natural persons,
estates or trusts;
With respect to any agencies or branches of U.S. persons
located outside the United States for valid business reasons and
engaged in the insurance or banking business, and subject to
substantive insurance or banking regulation (as applicable) in the
jurisdiction where located, the agency or branch is not considered to
be a U.S. person.
(b) Investment Representations. Seller is purchasing the
Harbinger Shares for Seller's own account and for investment purposes
and not with the view towards distribution. Seller does not have any
contract, understanding or arrangement with any person to sell,
transfer or grant participation to such person or any third person with
respect to the Harbinger Shares.
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(c) Restrictions on Harbinger Shares.
(i) Seller understands that the Harbinger Shares have
not been registered under the Securities Act, any state
securities law or the laws of any foreign jurisdiction;
(ii) Seller understands that the Harbinger Shares are
being offered and sold to Seller in reliance on the Regulation
S safe harbor from the registration requirements of the
Securities Act and on the exemptions contained in Section 4(2)
of the Securities Act and Rule 506 promulgated thereunder, and
that Buyer is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of Seller set forth herein in order to
determine the applicability of such safe harbor and exemptions
and the suitability of Seller to acquire the Harbinger Shares;
(iii) Seller represents and warrants to Buyer that
Seller is an "accredited investor" as that term is defined in
Rule 501(a) of the Securities Act. Sellers understand that,
except as set forth in the Registration Rights Agreement (as
defined in Section 6.1(j) hereof), Buyer is under no
obligation to file a registration statement under the
Securities Act covering the Harbinger Shares or to take any
other action to enable Sellers to transfer or otherwise
dispose of the Harbinger Shares. Sellers represent that they
have consulted with counsel in regard to the Securities Act
and that they are fully familiar with the circumstances under
which they are required to hold the Harbinger Shares and the
limitations upon the transfer or other disposition thereof;
(iv) Seller agrees that from the date hereof until
the forty-first (41st) day after the issuance to Seller of the
Harbinger Shares pursuant to Regulation S (the "Restrictive
Period"), the Seller, or any successor, or any Professional
(as defined in Section 2.26(c)(v) hereof) (except for sales of
any Harbinger Shares registered under the Securities Act or
otherwise exempt from such registration) (a) will not sell any
of the Harbinger Shares to a U.S. Person or for the account or
benefit of a U.S. Person or anyone believed to be a U.S.
Person, (b) will not engage in any efforts to sell the
Harbinger Shares in the United States, and (c) will send to a
Professional acting as agent or principal, a confirmation or
other notice stating that the Professional is subject to the
same restrictions on transfer to U.S. Persons or for the
account of U.S. Persons during the Restrictive Period as
provided herein. Buyer will not honor or register and will not
be obligated to honor or register any transfer in violation of
these provisions; to assure full compliance with the
restrictions placed on the resale of Harbinger Shares offered
pursuant to Regulation S, Buyer shall place on the
certificates representing the Harbinger Shares the following
restrictive legend:
The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under the securities laws of any state, and
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such shares may not be sold, transferred, pledged or
hypothecated unless (1) covered by an effective registration
statement under the Securities Act of 1933; or (2) in
accordance with some other transaction which is exempt from
the registration requirements of such act. Furthermore, the
shares evidenced by this certificate have been offered and
sold in reliance on the exemption from registration provided
by Regulation S and may not be sold, transferred, pledged or
hypothecated to any U.S. Person (as defined therein) except as
permitted by Regulation S. The shares represented by this
certificate were issued pursuant to a business combination
that is accounted for as a "pooling of interest" and may not
be sold, nor may the owner thereof reduce his risk relative
thereto in any way (except as permitted by SEC Staff
Accounting Bulletin No. 76), until such time as Harbinger
Corporation has published financial results covering at least
30 days of combined operations after the effective date of the
event through which the business combination was effected.
(v) A "Professional" is a "distributor" as defined in
Rule 902(c) under the Securities Act (generally any
underwriter, or other person, who participates, pursuant to a
contractual arrangement, in the distribution of the Harbinger
Shares); a dealer as defined in Section 2(12) of the
Securities Exchange Act of 1934, as amended (encompassing
those who engage in the business of trading or dealing in
Harbinger Shares as agent, broker, or principal); or a person
receiving a selling concession, fee or other remuneration in
respect of the Harbinger Shares sold.
(d) Access to Information. Seller has had access to all
material and relevant information necessary to enable Seller to make an
informed investment decision. All data requested by Seller from Buyer
or its representatives concerning the business and financial condition
of Buyer and the terms and conditions of the offering has been
furnished to Seller's satisfaction. Seller has had the opportunity to
ask questions and receive answers from Buyer concerning the terms and
conditions of this Agreement and the Harbinger Shares, and to obtain
from Buyer any additional information which Buyer possesses or may
obtain without unreasonable effort or expense. Seller understands that
there are numerous and substantial risks associated with the purchase
of the Harbinger Shares which could result in a total loss of the
Seller's investment.
(e) Understanding of Investment Risks. Seller understands
that realization of the objectives of Buyer is subject to significant
economic and business risks.
(f) No Government Recommendation or Approval. Seller
understands that no Federal, State or foreign government agency has
passed on or made any recommendation or endorsement of the Harbinger
Shares.
(g) Resales of Harbinger Shares. All subsequent offers and
sales of the Harbinger Shares shall be made in compliance with
Regulation S, pursuant to registration
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of the Harbinger Shares under the Securities Act or pursuant to another
exemption from such registration.
(h) Reliance On Representations. Seller understands that the
issuance of the Harbinger Shares to Sellers pursuant to this Agreement
is not being registered under the Securities Act. Buyer is relying on
the rules governing offers and sales made outside the United States
pursuant to Regulation S and Seller's representations hereunder.
Section 2.27. Government Grants.
The Seller Disclosure Letter contains full details of all grants
subsidies or financial assistance applied for or received by the Company or any
Company Subsidiary from any Governmental Authority or the European Community.
Neither the Company nor any Company Subsidiary has done or omitted to do any act
or thing which could result in all or part of any investment grant, employment
subsidy or other similar payment made or due to be made to it becoming repayable
or being forfeited or withheld in whole or in part and the signature or closing
of this Agreement will not have that result.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF LANCASHIRE
With such exceptions as are set forth in a letter (the "Lancashire
Disclosure Letter") signed and delivered by Lancashire to Buyer immediately
prior to the execution hereof and attached hereto as Exhibit D, Lancashire
hereby represents and warrants to Buyer as follows:
Section 3.1. Organization. Lancashire is a limited partnership
registered under the Limited Partnership Act of 1907, is duly organized and
validly existing under such act and the other laws of the jurisdiction of its
formation, and has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted.
Section 3.2. Authorization. Lancashire has power and authority to
execute and deliver this Agreement and to perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Lancashire and the performance by Lancashire
of its obligations hereunder and the consummation of the transactions provided
for herein have been duly and validly authorized by all necessary action on the
part of Lancashire. This Agreement has been duly executed and delivered by
Lancashire and constitutes the legal, valid and binding agreement of Lancashire,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency and other similar laws affecting the enforceability of
creditors' rights generally, general equitable principles and the discretion of
courts in granting equitable remedies.
Section 3.3. Ownership of Shares. Lancashire owns of record and
beneficially the number of shares of Company Shares set opposite Lancashire's
name in the Seller Disclosure Letter; Lancashire owns all rights, title and
interest in and to such shares, free and clear of all liens (including those for
estate or inheritance taxes), claims, pledges, options, rights of refusal or
similar rights or other transfer restrictions or adverse claims and charges of
any nature
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whatsoever (including any arising from existing or threatened litigation, but
excluding transfer restrictions that may arise from applicable securities laws);
and Lancashire's transfer of its shares to Buyer pursuant to this Agreement will
pass to Buyer all rights, title and interest to and in such shares free of any
lien or any adverse interest, claim or charge whatsoever. Such shares were
obtained by Lancashire in transactions in full compliance with applicable
securities laws, and Lancashire has the exclusive right to vote its shares.
Section 3.4. No Governmental Consents Required. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
governmental authority on the part of Lancashire is required in connection with
its execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
Section 3.5. Requirements of Securities Laws.
(a) Offshore Transaction.
(i) At the time the discussions regarding the
acquisition of Harbinger Shares originated, Lancashire was
outside the United States;
(ii) Lancashire is not a citizen of the United
States;
(iii) Lancashire is not a U.S. person nor is the
Lancashire acquiring the Harbinger Shares for the benefit of
a U.S. person. The term "U.S. Person," as defined in
Regulation S, means:
(A) any natural person resident in the United
States;
(B) any partnership or corporation organized or
incorporated under the laws of the United States;
(C) any estate of which any executor or
administrator is a U.S. person, unless an executor or
administrator who is not a U.S. person has sole or
shared investment discretion with respect to the assets
of the estate and the estate is governed by foreign law;
(D) any trust of which any trustee is a U.S.
person, unless a professional fiduciary (trustee) who is
not a U.S. person has sole or shared investment
discretion with respect the assets of the trust and no
trust beneficiary (and no trust settlor if a revocable
trust) is a U.S. person;
(E) any agency or branch of a foreign entity
located in the United States;
(F) any non-discretionary account or similar
account (other than an estate or trust) held by a dealer
or other fiduciary for the benefit or account of a U.S.
person;
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(G) any discretionary account or similar
account (other than an estate or trust) held by a dealer
or other fiduciary organized, incorporated or (if an
individual) resident in the United States; and
(H) any partnership or corporation if:
(1) organized or incorporated under
the laws of any foreign jurisdiction; and
(2) formed by a U.S. person
principally for the purpose of investing in
Harbinger Shares not registered under the
Securities Act, unless it is organized or
incorporated, and owned, by accredited
investors (as defined in Rule 501(a) under
the Securities Act) who are not natural
persons, estates or trusts;
With respect to any agencies or branches of U.S.
persons located outside the United States for valid business reasons
and engaged in the insurance or banking business, and subject to
substantive insurance or banking regulation (as applicable) in the
jurisdiction where located, the agency or branch is not considered to
be a U.S. person.
(b) Investment Representations. Lancashire is purchasing the
Harbinger Shares for Lancashire's own account and for investment
purposes and not with the view towards distribution. Except insofar as
its limited partners have the right to call for distribution in kind
pursuant to the terms of its limited partnership agreement dated
September 20, 1991, Lancashire does not have any contract,
understanding or arrangement with any person to sell, transfer or grant
participation to such person or any third person with respect to the
Harbinger Shares.
(c) Restrictions on Harbinger Shares.
(i) Lancashire understands that the Harbinger
Shares have not been registered under the Securities Act, any
state securities law or the laws of any foreign jurisdiction;
(ii) Lancashire understands that the Harbinger
Shares are being offered and sold to Lancashire in reliance on
the Regulation S safe harbor from the registration
requirements of the Securities Act and on the exemptions
contained in Section 4(2) of the Securities Act and Rule 506
promulgated thereunder, and that Buyer is relying upon the
truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of Lancashire
set forth herein in order to determine the applicability of
such safe harbor and the suitability of Lancashire to acquire
the Harbinger Shares;
(iii) Lancashire represents and warrants to Buyer
that Lancashire is an "accredited investor" as that term is
defined in Rule 501(a) of the Securities Act. Lancashire
understands that, except as set forth in the Registration
Rights
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Agreement (as defined in Section 6.1(j) hereof), Buyer is
under no obligation to file a registration statement under the
Securities Act covering the Harbinger Shares or to take any
other action to enable Lancashire to transfer or otherwise
dispose of the Harbinger Shares. Lancashire represents that it
has consulted with counsel in regard to the Securities Act and
that it is fully familiar with the circumstances under which
it is required to hold the Harbinger Shares and the
limitations upon the transfer or other disposition thereof.
(iv) Lancashire agrees that from the date hereof
until the forty-first (41st) day after the issuance to
Lancashire of the Harbinger Shares pursuant to Regulation S
(the "Restrictive Period"), Lancashire, or any successor, or
any Professional (as defined in Section 2.26(c)(v) hereof)
(except for sales of any Harbinger Shares registered under the
Securities Act or otherwise exempt from such registration) (a)
will not sell any of the Harbinger Shares to a U.S. Person or
for the account or benefit of a U.S. Person or anyone believed
to be a U.S. Person, (b) will not engage in any efforts to
sell the Harbinger Shares in the United States, and (c) will
send to a Professional acting as agent or principal, a
confirmation or other notice stating that the Professional is
subject to the same restrictions on transfer to U.S. Persons
or for the account of U.S. Persons during the Restrictive
Period as provided herein. Buyer will not honor or register
and will not be obligated to honor or register any transfer in
violation of these provisions; to assure full compliance with
the restrictions placed on the resale of Harbinger Shares
offered pursuant to Regulation S, Buyer shall place on the
certificates representing the Harbinger Shares the following
restrictive legend:
The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under the securities laws of any state, and such shares may
not be sold, transferred, pledged or hypothecated unless (1)
covered by an effective registration statement under the
Securities Act of 1933; or (2) in accordance with some other
transaction which is exempt from the registration requirements
of such act. Furthermore, the shares evidenced by this
certificate have been offered and sold in reliance on the
exemption from registration provided by Regulation S and may
not be sold, transferred, pledged or hypothecated to any U.S.
Person (as defined therein) except as permitted by Regulation
S. The shares represented by this certificate were issued
pursuant to a business combination that is accounted for as a
"pooling of interest" and may not be sold, nor may the owner
thereof reduce his risk relative thereto in any way (except as
permitted by SEC Staff Accounting Bulletin No. 76), until such
time as Harbinger Corporation has published financial results
covering at least 30 days of combined operations after the
effective date of the event through which the business
combination was effected.
(d) Access to Information. Lancashire has had access to all
material and relevant information necessary to enable Lancashire to
make an informed investment decision. All data requested by Lancashire
from Buyer or its representatives concerning
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the business and financial condition of Buyer and the terms and
conditions of the offering has been furnished to Lancashire's
satisfaction. Lancashire has had the opportunity to ask questions and
receive answers from Buyer concerning the terms and conditions of this
Agreement and the Harbinger Shares, and to obtain from Buyer any
additional information which Buyer possesses or may obtain without
unreasonable effort or expense. Lancashire understands that there are
numerous and substantial risks associated with the purchase of the
Harbinger Shares which could result in a total loss of the Lancashire's
investment.
(e) Understanding of Investment Risks. Lancashire understands
that realization of the objectives of Buyer is subject to significant
economic and business risks.
(f) No Government Recommendation or Approval. Lancashire
understands that no Federal, State or foreign government agency has
passed on or made any recommendation or endorsement of the Harbinger
Shares.
(g) Resales of Harbinger Shares. All subsequent offers and
sales of the Harbinger Shares shall be made in compliance with
Regulation S, pursuant to registration of the Harbinger Shares under
the Securities Act or pursuant to another exemption from such
registration.
(h) Non-Contravention. The execution and delivery of the
Subscription Agreement and the consummation of the purchase of the
Harbinger Shares and the transactions contemplated by this Subscription
Agreement do not and will not conflict with or result in a breach by
Lancashire of any of the terms or provision of, or constitute a default
under, the organization documents (i.e., articles of incorporation and
bylaws, partnership agreement, trust indenture, or similar documents)
of Lancashire or any indenture, mortgage, deed of trust or other
material agreement or instrument to which Lancashire is a party or by
which its or any of its respective properties or assets are bound, or
any existing applicable law, rule or regulation or any applicable law,
rule or regulation or any applicable decree, judgment or order of any
court or regulatory body, administrative agency or other governmental
body having jurisdiction over Lancashire or any of its properties or
assets.
(i) Reliance On Representations. Lancashire understands that
the issuance of the Harbinger Shares to it pursuant to this Agreement
is not being registered under the Securities Act. Buyer is relying on
the rules governing offers and sales made outside the United States
pursuant to Regulation S and Lancashire's representations hereunder.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYER
With such exceptions as are set forth in a letter (the "Buyer
Disclosure Letter") delivered by Buyer to Company immediately prior to the
execution hereof and attached hereto as Exhibit E, Buyer hereby represents and
warrants to Sellers as follows:
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Section 4.1. Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Buyer is duly qualified to transact business, and is in good standing, as a
foreign corporation in each jurisdiction where the character of its activities
requires such qualification, except where the failure to so qualify would not
have a material adverse effect on the assets, liabilities, results of operations
or financial condition, business or prospects of Buyer and its subsidiaries
taken as a whole (a "Buyer Material Adverse Effect"). Buyer has delivered to
Company accurate and complete copies of the Articles or Certificate of
Incorporation and Bylaws, as currently in effect, and has made available to
Company the minute books and stock records thereof.
Section 4.2. Authorization. Buyer has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Buyer, the performance by Buyer of
its obligations hereunder and the consummation of the transactions provided for
herein have been duly and validly authorized by all necessary corporate action
on the part of Buyer. This Agreement has been duly executed and delivered by
Buyer and constitutes the valid and binding agreement of Buyer, enforceable
against Buyer in accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies.
Section 4.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the transactions
contemplated by this Agreement, and the fulfillment of and compliance with the
terms and conditions of this Agreement do not and will not, with the passing of
time or the giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material benefit under, or
permit the acceleration of any obligation under, (i) any term or provision of
the Articles or Certificate of Incorporation or Bylaws of Buyer, (ii) any
material contract to which Buyer is a party filed as an exhibit to Buyer's Form
10-K for the year ended December 31, 1996, or any subsequent report filed under
the Exchange Act on or before the Closing Date, (iii) any judgment, decree or
order of any court or governmental authority or agency to which Buyer is a party
or by which Buyer or any of its properties is bound, or (iv) any statute, law,
regulation or rule applicable to Buyer, so as to have, in the case of
subsections (ii) through (iv) above, a Buyer Material Adverse Effect. Except for
compliance with the applicable requirements of the Securities Act, the Exchange
Act, and applicable United Kingdom securities laws, no consent, approval, order
or authorization of, or registration, declaration or filing with, any government
agency or public or regulatory unit, agency, body or authority with respect to
Buyer is required in connection with the execution, delivery or performance of
this Agreement by Buyer or the consummation of the transactions contemplated by
this Agreement by Buyer, the failure to obtain which would have a Buyer Material
Adverse Effect.
Section 4.4. Capitalization of Buyer. The authorized capital stock of
Buyer consists of 120,000,000 shares of capital stock consisting of 100,000,000
shares of common stock, $.0001
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par value and 20,000,000 shares of preferred stock, $.0001 par value. At
September 30, 1997, there were 21,500,070 shares of Buyer Common Stock issued
and outstanding, no shares of preferred stock were issued or outstanding and
options and warrants to purchase 3,731,151 shares of Buyer Common Stock (the
"Options") were outstanding. Since September 30, 1997, no shares of Buyer Common
Stock have been issued except pursuant to the exercise of Options outstanding on
September 30, 1997. All shares of Buyer Common Stock outstanding as of the date
hereof are duly authorized, validly issued, fully paid, nonassessable and free
of pre-emptive rights. The shares of Buyer Common Stock to be issued to Seller
pursuant to this Agreement will be validly issued, fully paid, nonassessable and
free of pre-emptive rights.
Section 4.5. Buyer Commission Reports. Buyer has made available to
Company (i) Buyer's Annual Report on Form 10-K for the year ended December 31,
1996, including all exhibits thereto and items incorporated therein by
reference, (ii) Buyer's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997, including all exhibits thereto and items
incorporated therein by reference, (iii) the proxy statement relating to Buyer's
Annual Meeting of Stockholders held on May 25, 1997 and (iv) all Current Reports
on Form 8-K filed by Buyer with the Securities and Exchange Commission (the
"Commission") since January 1, 1997, including all exhibits thereto and items
incorporated therein by reference (items (i) through (iv) in this sentence being
referred to collectively as the "Buyer Commission Reports"). As of their
respective dates, the Buyer Commission Reports did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since August 22, 1995,
Buyer has filed all forms, reports and documents with the Commission required to
be filed by it pursuant to the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder, each of which complied as to form, at
the time such form, document or report was filed, in all material respects with
the applicable requirements of the Securities Act and the Exchange Act and the
applicable rules and regulations promulgated thereunder.
Section 4.6. Absence of Certain Changes. Since June 30, 1997, there has
not been (i) any change in the assets, liabilities, results of operations,
financial condition or, to the best knowledge of the Buyer Executives (as
hereinafter defined), business or prospects of Buyer and its subsidiaries taken
as a whole that has had a Buyer Material Adverse Effect, (ii) any damage,
destruction, loss or casualty to property or assets of Buyer or any of its
subsidiaries, whether or not covered by insurance that has had a Buyer Material
Adverse Effect, (iii) any declaration, setting aside or payment of any dividend
or distribution (whether in cash, stock or property) in respect of the capital
stock of Buyer or any redemption or other acquisition of any of the capital
stock of Buyer or any of its subsidiaries (except for the acquisition of Buyer
Common Stock in payment of the purchase price and related taxes upon the
exercise of stock options) or any split, combination or reclassification of
shares of capital stock declared or made by Buyer, or (iv) any agreement to do
any of the foregoing.
Section 4.7. Brokers, Finders and Investment Bankers. Neither Buyer nor
any of its officers, directors or employees, has employed any broker, finder or
investment banker or
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incurred any liability for any investment banking fees, financial advisory fees,
brokerage fees or finders' fees in connection with the transactions contemplated
hereby.
Section 4.8. Disclosure. No representation, warranty or covenant made
by Buyer in this Agreement, the Buyer Disclosure Letter or the Exhibits hereto
contains any untrue statement of a material fact or omits to state a material
fact required to be stated herein or therein or necessary to make the statements
contained herein or therein not misleading.
ARTICLE 5.
POST-CLOSING COVENANTS AND ADDITIONAL AGREEMENTS OF
SELLER AND BUYER
Section 5.1. Confidentiality. All non-public information obtained by
Buyer or Sellers or any of their representatives pursuant to this Agreement or
in connection with the matters contemplated hereby concerning the business,
operations or affairs of the other (including the Company) will be kept
confidential and will not be used for any purpose other than the consummation of
the transactions contemplated hereby, or be disclosed to any other person or
entity, except for such disclosure to its employees, agents and representatives
who have a need to know the same and who have been advised of the confidential
nature of such information and who agree to abide by the terms hereof and except
for such disclosure as may be required by applicable law, court order or
governmental agency request. The obligations of confidentiality hereunder shall
continue for a period of five years from the date of this Agreement, provided
that, with respect to any item provided hereunder which constitutes a trade
secret under applicable law, such period of confidentiality shall continue for
so long as such item constitutes a trade secret under applicable law.
Section 5.2. Employees. It is Buyer's current intention to retain the
current employees of the Company who have received satisfactory or better
reviews over the prior six months under the existing arrangements; provided that
the Management Sellers will execute new employment agreements containing
customary non-competition, non-disclosure and non-solicitation arrangements. It
is agreed that no third party beneficiary rights are conferred by this
Agreement.
Section 5.3. Reasonable Efforts; Further Assurances; Cooperation. At
any time and from time to time after the Closing, Sellers shall, at the request
of Buyer, take any and all actions and execute and deliver such documents as may
be necessary or reasonable to put Buyer in actual possession and operating
control of the Company and its assets, or to otherwise effectuate or consummate
any of the transactions contemplated hereby.
Section 5.4. Noncompete and Nonsolicitation.
(a) Coverage. The parties hereto acknowledge and agree that
Company is engaged in the Business throughout the world (the "Territory").
Management Sellers acknowledge to adequately protect the interests of Buyer in
Company, it is essential that any noncompete and nonsolicitation covenant with
respect to Company cover all of the activities currently or reasonably expected
to be undertaken by Company ("Company Activities"), all Affiliates of the
Management Sellers and the entire Territory. For purposes of this Agreement,
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the term "Affiliate" shall mean any person or entity that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under control with a party hereto.
(b) Seller Covenants. Management Sellers hereby covenant and
agree that Management Sellers and their Affiliates shall not, in any manner for
the three (3) years following the Closing Date, directly or indirectly engage
in, have any equity or profit interest in, make any loan to or for the benefit
of, or render services to, any business which engages in Company Activities in
the Territory without the prior written consent of Buyer, which consent shall be
granted or withheld in Buyer's sole discretion, except for investments in
publicly quoted stocks in which the Management Sellers' aggregate interest does
not exceed 5%.
(c) Employee Nonsolicitation. Management Sellers hereby
covenant and agree that, for a period of three (3) years after the Closing Date,
neither Management Sellers nor any of their Affiliates shall in any manner,
directly or indirectly, employ or contract with or seek to employ or contract
with on behalf of Management Sellers or their Affiliates, or on behalf of any
other person, firm or corporation, any person who was an employee of or
independent contractor to the Company during the period twelve (12) months prior
to the Closing Date or during the twelve (12) month period after the Closing
Date, without Buyer's prior written consent which may be given or withheld in
Buyer's sole discretion.
Section 5.5. Notification. Sellers shall notify the Buyer immediately
if they become aware of any circumstances whereby there may be a breach of any
representations and warranties.
ARTICLE 6.
DELIVERIES AT CLOSING
Section 6.1. Deliveries by Seller. Sellers have delivered or have
caused to be delivered to Buyer:
(a) Duly completed and signed share transfers in favor of
Buyer or as it may direct in respect of all of the Shares together with the
relative share certificates;
(b) A certificate as of the Closing Date of the Secretary of
the Company containing true and correct copies of the Memorandum and Articles of
Association (which contains or incorporates a copy of every resolution or
agreement as is referred to in the Companies Act of 1985) of each of Company and
each Company Subsidiary, and true and correct copies of the other governing
documents of the Company and each Company Subsidiary, and such other matters as
reasonably requested by Buyer;
(c) Letters of resignation effective at the Closing executed
by the officers and directors of Company listed on Exhibit F;
(d) Employment Agreements in the forms agreed by the parties
hereto;
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(e) Noncompetition Agreements executed by Gray, Bird, Xxxxxxxx
and Xxxxxxx, in substantially the form attached hereto as Exhibit H;
(f) The Escrow Agreement executed by the Management Sellers;
(g) Affiliate's Agreements executed by each of the Sellers in
substantially the form attached hereto as Exhibit I;
(h) A registration rights agreement substantially in the form
attached hereto as Exhibit K (the "Registration Rights Agreement").
Section 6.2. Deliveries by Buyer. Buyer has delivered or caused to be
delivered to Sellers:
(a) A Good Standing Certificate relating to Buyer from the
State of Georgia;
(b) A Secretary's Certificate attesting to the incumbency of
the officers executing this Agreement, resolutions authorizing the transaction
and the other certificates and agreements delivered by Buyer at the Closing;
(c) Stock Certificates representing the Harbinger Shares;
(d) The Escrow Agreement, executed by Buyer and the Escrow
Agent;
(e) A letter from KPMG Peat Marwick, LLP, independent public
accountants, advising Buyer that, in accordance with generally accepted
accounting principles, the acquisition of the Shares qualifies to be treated as
a "pooling of interests" for accounting purposes; and
(f) The Registration Rights Agreement, executed by Buyer.
ARTICLE 7.
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES AND INDEMNIFICATION
Section 7.1. Survival of Representations and Warranties.
(a) All representations, warranties, agreements and covenants
made or undertaken by the parties in this Agreement or the other agreements to
be executed and delivered pursuant to this Agreement (the "Other Agreements")
(i) are material, have been relied upon by the other parties hereto, shall
survive the Closing hereunder, and shall not merge in the performance of any
obligation by any party hereto, (ii) shall terminate and expire with respect to
any Claim for which notice has not been given on the first anniversary of the
Closing Date ("Claims Period"). As used in this Agreement, the term "Claim"
means any claim based upon, arising out of or otherwise in respect of any
inaccuracy in any representation or warranty or any breach of any covenant or
agreement made or to be performed by any party pursuant to this Agreement or the
Other Agreements.
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(b) Sellers acknowledge and agree that, except for matters
specifically disclosed in the KPMG Report or the Due Diligence Report (as
defined in the Seller Disclosure Letter), no due diligence or other
investigation of Company will diminish or obviate any of the representations,
warranties, covenants or agreements made or to be performed by Sellers pursuant
to this Agreement or the Other Agreements or Buyer's right to fully rely upon
such representations, warranties, covenants and agreements.
Section 7.2. Indemnification by the Management Sellers.
(a) Indemnification by Management Sellers. Subject to the
other provisions of this Agreement, each of the Management Sellers shall
severally (limited in proportion to each Management Seller's Allocation
Percentage (as defined below)) but not jointly indemnify and hold harmless Buyer
and its subsidiaries and affiliates, each of their respective officers,
directors, employees, agents and representatives, and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
"Buyer Indemnified Parties"), from, against and in respect of any and all
claims, liabilities, obligations, losses, costs, expenses, penalties, fines and
other judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, reasonable
attorneys' fees and expenses) arising out of or relating to:
(i) any breach of the representations, warranties,
covenants or agreements made by Management Sellers in the
Agreement which survive Closing pursuant to their terms or
Section 7.1 of the Agreement;
(ii) any breach of the representations, warranties,
covenants or agreements made by Management Sellers in any
certificate, agreement, exhibit or schedule (the "Seller
Ancillary Documents") delivered by Management Sellers pursuant
to this Agreement, which representation, warranty, covenant or
agreement survives Closing pursuant to its terms or Section
7.1 of this Agreement;
(iii) any claims arising from goods provided, services
rendered or actions taken by the Company before the Closing
Date or otherwise arising from the operations or business of
the Company as conducted at any time before the Closing Date;
and
(iv) any fraud, willful misconduct, bad faith or
intentional breach of any representation, warranty, covenant
or agreement made by Management Sellers in any Management
Seller Ancillary Document. The claims, liabilities,
obligations, losses, costs, expenses, penalties, fines,
judgments and damages of the Buyer Indemnified Parties
described in this Section 7.2(a) as to which the Buyer
Indemnified Parties are entitled to indemnification are
referred to as "Buyer Losses" in this Agreement.
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For purposes of this Article 7, each Management Seller's
Allocation Percentage shall be determined by dividing (i) such Management
Seller's Percentage Interest (as defined in Section 2.4) by (ii) the sum of all
of the Management Sellers' Percentage Interests.
(b) Time Period for Claims. No Buyer Indemnified Party is
entitled to make any claim for indemnification under this Agreement after the
appropriate Claims Period (as defined in this Agreement); provided, however,
that if prior to the close of business on the last day of the Claims Period any
of the Sellers has been notified of a claim for indemnity under this Agreement
and such claim has not been finally resolved or disposed of at such date, the
basis for such claim shall continue to survive with respect to such claim and
shall remain a basis for indemnity under this Agreement with respect to such
claim until such claim is finally resolved or disposed of in accordance with the
terms of this Agreement; provided, further, however, that the Buyer Indemnified
Party and Sellers shall be obligated under this Agreement to exercise reasonable
efforts to resolve any such claim as quickly as is reasonably practicable.
(c) Indemnification Procedure.
(i) Promptly after receipt by a Buyer Indemnified
Party of notice by a third party of any complaint or the
commencement of any action or proceeding with respect to which
indemnification is being sought under this Agreement, such
Buyer Indemnified Party shall notify the Seller Indemnitors
Representative of such complaint or of the commencement of
such action or proceeding; provided, however, that failure to
so notify such party shall not relieve Sellers from liability
for such claims arising other than under this Agreement and
such failure to so notify the such party shall relieve Sellers
from liability which Sellers may have under this Agreement
with respect to such claim if, but only if, and only to the
extent that, such failure to notify the Sellers results in the
forfeiture by Sellers of rights and defenses otherwise
available to Sellers with respect to such claim. Sellers shall
have the right, upon written notice to the Buyer Indemnified
Party from the Seller Indemnitors Representative, to assume
the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to the Buyer
Indemnified Party and the payment of the fees and
disbursements of such counsel as incurred. If Sellers do not
elect to assume control of the defense of any such claims,
Sellers shall be bound by the results otherwise obtained with
respect to such claim. In the event, however, that Sellers
decline or fail to assume the defense of the action or
proceeding or to employ counsel reasonably satisfactory to
such Buyer Indemnified Party, in either case in a timely
manner, then such Buyer Indemnified Party may employ counsel
to represent or defend it in any such action or proceeding and
Sellers shall pay the reasonable fees and disbursements of
such counsel upon receipt of an invoice; provided, however,
that Sellers shall not be required to pay the fees and
disbursements of more than one counsel for all Buyer
Indemnified Parties in any jurisdiction in any single action
or proceeding. In any action or proceeding with respect to
which indemnification is being sought under this Agreement,
the Buyer Indemnified Parties or Sellers, whichever is not
assuming the defense of such action, shall have the right to
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participate in such litigation and to retain its own counsel
at such party's own expense. The Buyer Indemnified Parties or
Sellers, as the case may be, shall at all times use reasonable
efforts to keep Sellers or the Buyer Indemnified Parties, as
the case may be, reasonably apprised of the status of the
defense of any claim the defense of which they are
maintaining, and to cooperate in good faith with each other
with respect to the defense of any such action.
(ii) No Buyer Indemnified Party may settle or compromise
any claim or consent to the entry of any judgment with respect
to which indemnification is being sought from Sellers under
this Agreement without the prior written consent of each of
the Sellers against whom indemnification is being sought,
unless such settlement, compromise or consent includes an
unconditional release of such Sellers from all liability
arising out of such claim and does not contain any equitable
order, judgment or term which affects, restrains or interferes
with the business of such Sellers. Sellers shall not, without
the prior written consent of Buyer, settle or compromise any
claim or consent to the entry of any judgment with respect to
which indemnification is being sought under this Agreement
unless such settlement, compromise or consent includes an
unconditional release of the Buyer Indemnified Party from all
liability arising out of such claim and does not contain any
equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of Buyer, any of the
Buyer Indemnified Parties or any of their respective
affiliates.
(iii) In the event that a Buyer Indemnified Party does
claim a right to payment pursuant to Section 7.2(a) of this
Agreement, such Buyer Indemnified Party shall send written
notice of such claim to each of the Management Sellers. Such
notice shall specify the basis for such claim. As promptly as
possible after the Buyer Indemnified Party has given such
notice, such Buyer Indemnified Party and the Seller
Indemnitors Representative, shall establish the merits and
amount of such claim (by mutual agreement, litigation,
arbitration, mediation or otherwise) and, within five (5)
business days of the final determination of the merits and
amount of such claim, Sellers shall deliver to the Buyer
Indemnified Party an amount of cash in immediately available
funds in either case in an amount sufficient to satisfy and
discharge in full such claim as determined under this
Agreement; provided, however, that if Sellers still hold any
of the Harbinger Shares, Sellers shall satisfy such claim to
the maximum extent possible by delivering to the Buyer
Indemnified Party Harbinger Shares (valued for these purposes
using the Average Closing Price (as defined in Section 1.2))
and paying any balance in cash.
Section 7.3. Appointment of Management Sellers Indemnitors
Representative. Each Management Seller constitutes and appoints Xxxxx X. Xxxx,
the "Management Seller Indemnitors Representative," as his true and lawful
attorney-in-fact to act for and on behalf of such Management Seller in all
matters arising out of this Article 7 and the liability or asserted liability of
such Management Seller under Section 7.2(a), including specifically, but without
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limitation, accepting and agreeing to the liability of such Management Seller
with respect to any indemnification claim for, objecting to any claim, disputing
the liability of such Management Seller, or the amount of such liability, with
respect to any claim and prosecuting and resolving such dispute as herein
provided, accepting the defense, compromise and settlement of any claim on
behalf of such Management Seller or refusing to accept the same, settling and
compromising the liability of such Management Seller hereunder, instituting and
prosecuting such actions (including arbitration proceedings) as the Management
Seller Indemnitors Representative shall deem appropriate in connection with any
of the foregoing, all for the account of the Management Seller, such Management
Seller agreeing to be fully bound by the acts, decisions and agreements of the
Management Seller Indemnitor Representative taken and done pursuant to the
authority herein granted. Each Management Seller hereby agrees to indemnify and
to save and hold harmless the Management Seller Indemnitors Representative from
any liability incurred by the Management Seller Indemnitors Representative based
upon or arising out of any act, whether of omission or commission, of the
Management Seller Indemnitors Representative pursuant to the authority herein
granted, other than acts, whether of omission or commission, of the Management
Seller Indemnitors Representative that constitute willful misconduct in the
exercise by the Management Seller Indemnitors Representative of the authority
herein granted. The death or incapacity of any Management Seller Indemnitors
Representative shall terminate the authority and agency of the Management Seller
Indemnitors Representative. In the event of the resignation of a Seller
Indemnitor Representative, the resigning Management Seller Indemnitors
Representative shall appoint a successor either from among the other Management
Sellers or who shall otherwise be acceptable to Buyer and who shall agree in
writing to accept such appointment, and the resigning Management Seller
Indemnitors Representative's resignation shall not be effective until such a
successor shall exist. If the Management Seller Indemnitor Representative is a
natural person and if such Management Seller Indemnitors Representative should
be or become incapacitated, them his successor shall be appointed within thirty
(30) days of his death or incapacity by a majority of the Management Sellers,
and such successor either shall be a Management Seller or shall otherwise be
acceptable to Buyer. The choice of a successor Management Seller Indemnitors
Representative appointed in any manner permitted above shall be final and
binding upon all of the Management Sellers. The decisions and actions of any
successor Management Seller Indemnitors Representative shall be, for all
purposes, those of a Management Seller Indemnitors Representative as if
originally named herein.
Section 7.4. Indemnification by Buyer.
(a) Subject to the other provisions of this Agreement, Buyer
shall indemnify and hold harmless Sellers and, if applicable, their subsidiaries
and affiliates, each of their respective officers, directors, employees, agents
and representatives and each of their heirs, executors, successors and assigns
(collectively, the "Seller Indemnified Parties"), from, against and in respect
of any and all claims, liabilities, obligations, losses, costs, expenses,
penalties, fines and other judgments (at equity or at law) and damages whenever
arising or incurred (including, without limitation, amounts paid in settlement,
costs of investigation and reasonable attorneys' fees and expenses) arising out
of or relating to:
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(i) any breach of the representations, warranties,
covenants or agreements made by Buyer in this Agreement which
survives Closing pursuant to its terms or Section 7.1 of this
Agreement;
(ii) any breach of the representations, warranties,
covenants or agreements made by Buyer in any certificate,
agreement, exhibit or schedule (the "Buyer Ancillary
Documents") delivered by Buyer pursuant to this Agreement,
which representation, warranty, covenant or agreement survives
Closing pursuant to its terms or Section 7.1 of this
Agreement;
(iii) unless a breach of a representation or warranty
contained in Article 2, any claim arising from goods provided,
services rendered or actions taken by the Company after the
Closing Date or otherwise arising from the operations or
business of the Company as conducted any time after the
Closing Date
(iv) any fraud, willful misconduct, bad faith or
intentional breach of any representation, warranty, covenant
or agreement made by Buyer in any Buyer Ancillary Document.
The claims, liabilities, obligations, losses, costs, expenses,
penalties, fines, judgments and damages of the Seller
Indemnified Parties described in this Paragraph 7.4(a) as to
which the Seller Indemnified Parties are entitled to
indemnification are referred to as "Seller Losses" in this
Agreement.
(b) No Seller Indemnified Party is entitled to make any
claim for indemnification under this Agreement after the appropriate Claims
Period; provided, however, that if prior to the close of business on the last
day of the Claims Period, Buyer has been notified of a claim for indemnity under
this Agreement and such claim has not been finally resolved or disposed of at
such date, the basis for such claim shall continue to survive with respect to
such claim and shall remain a basis for indemnity under this Agreement with
respect to such claim until such claim is finally resolved or disposed of in
accordance with the terms of this Agreement; provided, further, however, that
the Seller Indemnified Party and Buyer shall be obligated under this Agreement
to exercise reasonable efforts to resolve any such claim as quickly as is
reasonably practicable.
(c) Indemnification Procedure.
(i) Promptly after receipt by a Seller Indemnified
Party of notice by a third party of any complaint or the
commencement of any action or proceeding with respect to which
indemnification is being sought under this Agreement, such
Seller Indemnified Party shall notify Buyer of such complaint
or of the commencement of such action or proceeding; provided,
however, that failure to so notify Buyer does not relieve
Buyer from liability for such claim arising otherwise than
under this Agreement and such failure to so notify Buyer does
relieve Buyer from liability which Buyer may have under this
Agreement with respect to such claim if, but only if, and only
to the extent that, such failure to notify Buyer results in
the forfeiture by Buyer or any of its subsidiaries of rights
and defenses otherwise available to Buyer or any of its
subsidiaries with respect to such claim.
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Buyer will have the right, upon written notice to the Seller
Indemnified Party, to assume the defense of such action or
proceeding, including the employment of counsel reasonably
satisfactory to the Seller Indemnified Party and the payment
of the reasonable fees and disbursements of such counsel as
incurred. If Buyer does not elect to assume control of the
defense of any such claims, Buyer shall be bound by the
results otherwise obtained with respect to such claim. In the
event, however, that Buyer declines or fails to assume the
defense of the action or proceeding or to employ counsel
reasonably satisfactory to such Seller Indemnified Party, in
either case in a timely manner, then such Seller Indemnified
Party may employ counsel to represent or defend it in any such
action or proceeding and Buyer shall pay the reasonable fees
and disbursements of such counsel as incurred; provided,
however, that Buyer is not required to pay the fees and
disbursements of more than one counsel for all Seller
Indemnified Parties in any jurisdiction in any single action
or proceeding. In any action or proceeding with respect to
which indemnification is being sought under this Agreement,
the Seller Indemnified Parties or Buyer, whichever is not
assuming the defense of such action, shall have the right to
participate in such litigation and to retain its own counsel
at such party's own expense. The Seller Indemnified Parties or
Buyer, as the case may be, shall at all times use reasonable
efforts to keep Buyer or the Seller Indemnified Parties, as
the case may be, reasonably apprised of the status of the
defense of any claim the defense of which they are maintaining
and to cooperate in good faith with each other with respect to
the defense of any such action.
(ii) No Seller Indemnified Party may settle or
compromise any claim or consent to the entry of any judgment
with respect to which indemnification is being sought from
Buyer under this Agreement without the prior written consent
of Buyer, unless such settlement, compromise or consent
includes an unconditional release of Buyer and its affiliates
from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any
manner affects, restrains or interferes with the business of
Buyer, any of the Buyer Indemnified Parties or any of their
respective affiliates. Buyer shall not, without the prior
written consent of each of the Sellers, settle or compromise
any claim or consent to the entry of any judgment with respect
to which indemnification is being sought under this Agreement
unless such settlement, compromise or consent includes an
unconditional release of the Seller Indemnified Party from all
liability arising out of such claim and does not contain any
equitable order, judgment or term which in any material manner
affects, restrains or interferes with the business of the
Seller Indemnified Parties or any of their respective
affiliates.
(iii) In the event that a Seller Indemnified Party
does claim a right to payment pursuant to this Agreement, such
Seller Indemnified Party shall send written notice of such
claim to Buyer and the other Principal. Such notice shall
specify the basis for such claim. As promptly as possible
after such Seller
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Indemnified Party has given such notice, the Seller and Buyer
shall establish the merits and amount of such claim (by mutual
agreement, litigation, arbitration, mediation or otherwise)
and, within five (5) business days of the final determination
of the merits and amount of such claim, Buyer shall deliver an
amount of Buyer Common Stock, valued for these purposes using
the Average Closing Price (as defined in Section 1.2), to such
Seller Indemnified Party as appropriate to satisfy such claim.
Section 7.5. Liability Limits.
(a) Sellers shall only be liable for Buyer Losses arising
under this Agreement solely to the extent that any such Buyer Losses exceed, in
the aggregate, U.S. $30,000 (the "Seller Basket Amount"); provided, however,
that Buyer Losses arising under or pursuant to paragraph 7.2(a)(i) of this
Agreement shall not be subject to the Seller Basket Amount to the extent that
they relate to Sellers' breach of their representations and warranties in
Section 2.4 or 3.3 of the Agreement.
(b) Buyer shall only be liable for Seller Losses arising under
this Agreement solely to the extent that any such Seller Losses exceed, in the
aggregate, U.S. $30,000 (the "Buyer Basket Amount").
(c) The indemnification obligations of each Management Seller
under this Agreement shall not exceed in the aggregate an amount (the "General
Seller's Cap Amount") equal to the sum of (i) the value, as of the Closing, of
the Harbinger Shares issued to such Seller pursuant to this Agreement plus (ii)
such Management Seller's Allocation Percentage (as defined in Section 7.2(a)
hereof) multiplied by U.S. $310,350; provided, however, that Buyer Losses
arising under or pursuant to Section 7.2(a)(i) to the extent that they relate to
Management Seller's breach of its representations and warranties in Section 2.4
of this Agreement or arising from Management Seller's fraudulent conduct shall
not be subject to the General Seller's Cap Amount and there shall be no
limitation on the indemnification obligations of the Management Seller with
respect to Buyer Losses arising thereunder.
(d) Buyer's indemnification obligations under this Agreement
shall not exceed in the aggregate an amount equal to the value, as of the
Closing, of the Harbinger Shares issued to the Sellers pursuant to this
Agreement (the "Buyer Cap Amount").
(e) Once Buyer Losses exceed the Seller Basket Amount or
Seller Losses exceed the Buyer Basket Amount, as the case may be, a breach for
which a party is entitled to seek indemnification hereunder shall be deemed to
occur upon the initial Buyer Loss or series of related Buyer Losses or Seller
Loss or series of related Seller losses.
ARTICLE 8.
MISCELLANEOUS PROVISIONS
Section 8.1. Notices. All notices, communications and deliveries
hereunder shall be made in writing signed by the party making the same, shall
specify the Section hereunder
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pursuant to which it is given or being made, and shall be delivered personally
or by telecopy transmission or sent by registered or certified mail or by any
express mail service (with postage and other fees prepaid) as follows (or to
such other representative or at such other address of a party as such party
hereto may furnish to the other parties in writing):
To Buyer: Harbinger Corporation
0000 Xxxxx Xxxx Xxxx.
Xxxxxxx, XX 00000-0000
Attn: President
with a copy to Xxxxx Xxxxxxxxxxx, Esq.
Director of Legal Affairs
Telecopy No.: (000) 000-0000
To Management Sellers: c/o Xxxxx X. Xxxx
00 Xxxxxx Xxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxx, XXX 0XX, Xxxxxxx, X.X.
Telecopy No.: 01942-814712
with a copy to: Xxxxx Xxxxxxxx, Esq.
Berrymans Lace Mawer
Castle Xxxxxxxx
00 Xxxxxx Xxxxxx
Xxxxxxxxx X0 0XX, Xxxxxxx, X.X.
Telecopy No.: 0000-000-0000
To Lancashire: Lancashire Enterprises Venture Fund
Enterprise House
17 Ribblesdale Place
Preston PR1 3NA, England, U.K.
Attn: Xxxxxxx Xxxxxxx, Director of Investment
Telecopy No.: 01772-880697
with a copy to: Xxxx X. Xxxxx
Laytons Solicitors
DX 14382 Xxxxxxxxxx
XXX XXX000, Xxxxxxx, X.X.
Telecopy No.: 0000-000-0000
Section 8.2. Seller and Buyer Knowledge. As used in this Agreement, the
terms "the best knowledge of Sellers," "known to Sellers" or words of similar
import used herein with respect to Seller shall mean the actual knowledge of any
Seller, together with the knowledge a reasonable business person would have
obtained after making reasonable inquiry and after exercising reasonable
diligence with respect to the matters at hand. As used in this Agreement, the
terms "to the best knowledge of the Buyer Executives," "known to the Buyer
Executives" or
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words of similar import used herein with respect to Buyer shall mean the actual
knowledge of any Buyer Executive, together with the knowledge a reasonable
business person would have obtained after making reasonable inquiry and after
exercising reasonable diligence with respect to the matters at hand. The "Buyer
Executives" shall consist of Messrs. Xxxxx X. Xxxxx, Xxxx X. Xxxx and Xxxxx X.
Xxxxxxxxxxx.
Section 8.3. Entire Agreement; Modifications and Amendments. This
Agreement, the Schedules, the Exhibits and the Other Agreements constitute the
entire agreement between the parties relating to the subject matter hereof and
thereof and supersede all prior oral and written agreements. This Agreement may
not be amended, supplemented or otherwise modified except by an instrument in
writing signed by each of the parties hereto and no oral waiver to this sentence
shall be valid. Whenever terms defined in this Agreement are used in any Exhibit
or Schedule hereto, such terms shall have the meanings ascribed to them herein
also ascribed to them in such Exhibit or Schedules unless they are otherwise
defined in such Exhibit or Schedule. The term "Agreement" shall mean this
instrument and all Exhibits and Schedules hereto and the words "herein,"
"hereof," "hereunder," "hereto," "hereby," and words of similar tenor shall
refer to this instrument in its entirety including the Exhibits and Schedules
hereto.
Section 8.4. Assignment; Successors-in-Interest. No assignment or
transfer by Buyer or Seller of their respective rights and obligations hereunder
shall be made except with the prior written consent of the other parties hereto.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their permitted successors and assigns, but no assignment
shall relieve any party of its obligations hereunder. Any reference hereto shall
also be a reference to a permitted successor or assign.
Section 8.5. Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other gender.
Section 8.6. Captions. The titles, captions and table of contents
contained in this Agreement are inserted herein for convenience and for
reference only and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof. Unless otherwise specified to
the contrary, all references to Articles and Sections are references to Articles
and Sections of this Agreement and all references to Schedules and Exhibits are
references to Schedules and Exhibits to this Agreement.
Section 8.7. Controlling Law; Integration. This Agreement shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Georgia, U.S.A., without reference to Georgia's choice of law
rules. The parties hereto hereby agree that any legal proceeding instituted with
respect to this Agreement may be brought in Atlanta, Georgia, U.S.A. and the
parties hereby submit to personal jurisdiction therein and agree that venue
properly lies therein. This Agreement supersedes all negotiations, agreements
and understandings among the parties with respect to the subject matter hereof
and constitutes the entire agreement among the parties hereto.
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Section 8.8. Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereto waive any
provision of law which renders any such provision prohibited or unenforceable in
any respect.
Section 8.9. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.10. Enforcement of Certain Rights. Nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person, firm or corporation other than the parties hereto, and their
successors or assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement, or result in such person, firm or corporation being
deemed a third party beneficiary of this Agreement.
Section 8.11. Waiver. Any agreement on the part of a party hereto to
any extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. A waiver by one party of the performance
of any covenant, agreement, obligation, condition, representation or warranty
shall not be construed as a waiver of any other covenant, agreement, obligation,
condition, representation or warranty. A waiver by any party of the performance
of any act shall not constitute a waiver of the performance of any other act or
an identical act required to be performed at a later time.
Section 8.12. Fees and Expenses. Buyer shall pay its own fees, costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including, but not limited to, the fees, costs and expenses
of its financial advisors, accountants and counsel. At Closing, Buyer shall pay
Company's and Sellers' fees, costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, including the reasonable
fees and expenses of accountants and counsel for Company and Sellers, but such
fees, costs and expenses shall not exceed in the aggregate the sum of U.S.
$310,350. Any fees, costs and expenses of Company and/or Sellers in excess of
such amount shall be paid by the Sellers.
Section 8.13. Public Announcements. The timing and content of all
announcements regarding any aspect of this Agreement to the financial community,
government agencies, employees or the general public shall be mutually agreed
upon in advance (unless Buyer or Seller is advised by counsel that any such
announcement or other disclosure not mutually agreed upon in advance is required
to be made by law, and then only after making a reasonable attempt to comply
with the provisions of this Section).
Section 8.14. Pooling of Interests. If any provision of this Agreement
or the application of any such provision to any person or circumstance precludes
the use of "pooling of interests" accounting treatment in connection with the
Purchase Agreement, then such provision shall be of no force and effect to the
extent, and solely to the extent necessary to preserve such accounting treatment
pursuant to the Purchase Agreement, and in that event, the remainder of this
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Agreement shall not be affected, and in lieu of such provision there shall be
added as part of this Agreement a provision as similar in terms as may be
possible for the purchase pursuant to the Purchase Agreement to be treated as a
"pooling of interests" for accounting purposes.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date first above written.
"BUYER":
HARBINGER CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxxxx X. Xxxxxxx, Vice President
"SELLERS":
Lancashire Enterprises Venture Fund
By: Lancashire Enterprises General Partner
Limited
By: /s/ Xxxxxxx Xxxxxxx
--------------------------------------
Title: Director of Investment
/s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx
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TABLE OF CONTENTS
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ARTICLE 1. SALE OF SHARE CAPITAL; CLOSING.........................................................................1
SECTION 1.1. PURCHASE AND SALE....................................................................................1
SECTION 1.2. PURCHASE PRICE.......................................................................................2
SECTION 1.3. DEPOSIT OF SHARES IN ESCROW..........................................................................2
SECTION 1.4. CLOSING..............................................................................................2
SECTION 1.5. FURTHER ASSURANCES...................................................................................2
SECTION 1.6. FRACTIONAL SHARES....................................................................................2
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND MANAGEMENT
SELLERS...........................................................................................................3
SECTION 2.1. ORGANIZATION.........................................................................................3
SECTION 2.2. AUTHORIZATION........................................................................................3
SECTION 2.3. ABSENCE OF RESTRICTIONS AND CONFLICTS................................................................3
SECTION 2.4. CAPITALIZATION.......................................................................................4
SECTION 2.5. SUBSIDIARIES.........................................................................................5
SECTION 2.6. FINANCIAL STATEMENTS.................................................................................5
SECTION 2.7. ABSENCE OF CERTAIN CHANGES...........................................................................6
SECTION 2.8. LEGAL PROCEEDINGS....................................................................................7
SECTION 2.9. COMPLIANCE WITH LAW..................................................................................7
SECTION 2.10. MATERIAL CONTRACTS..................................................................................7
SECTION 2.11. COMPANY CLIENT CONTRACTS............................................................................9
SECTION 2.12. TAX RETURNS; TAXES..................................................................................9
SECTION 2.13. OFFICERS, DIRECTORS AND EMPLOYEES..................................................................10
SECTION 2.14. EMPLOYEE BENEFIT PLANS.............................................................................11
SECTION 2.15. EMPLOYMENT TAXES...................................................................................13
SECTION 2.16. LABOR RELATIONS....................................................................................13
SECTION 2.17. INSURANCE..........................................................................................14
SECTION 2.18. TITLE TO PROPERTIES AND RELATED MATTERS............................................................14
SECTION 2.19. ENVIRONMENTAL MATTERS..............................................................................15
SECTION 2.20. PATENTS, TRADEMARKS, TRADE NAMES...................................................................15
SECTION 2.21. COMPANY COMPUTER SOFTWARE AND HARDWARE.............................................................16
SECTION 2.22. TRANSACTIONS WITH AFFILIATES.......................................................................18
SECTION 2.23. CUSTOMERS..........................................................................................19
SECTION 2.24. BROKERS, FINDERS AND INVESTMENT BANKERS............................................................19
SECTION 2.25. DISCLOSURE.........................................................................................19
SECTION 2.26. REQUIREMENTS OF SECURITIES LAWS....................................................................19
SECTION 2.27. GOVERNMENT GRANTS..................................................................................23
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF LANCASHIRE.........................................................23
SECTION 3.1. ORGANIZATION........................................................................................23
SECTION 3.2. AUTHORIZATION.......................................................................................23
SECTION 3.3. OWNERSHIP OF SHARES.................................................................................23
SECTION 3.4. NO GOVERNMENTAL CONSENTS REQUIRED...................................................................24
SECTION 3.5. REQUIREMENTS OF SECURITIES LAWS.....................................................................24
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................27
SECTION 4.1. ORGANIZATION........................................................................................28
SECTION 4.2. AUTHORIZATION.......................................................................................28
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SECTION 4.3. ABSENCE OF RESTRICTIONS AND CONFLICTS...............................................................28
SECTION 4.4. CAPITALIZATION OF BUYER.............................................................................28
SECTION 4.5. BUYER COMMISSION REPORTS............................................................................29
SECTION 4.6. ABSENCE OF CERTAIN CHANGES..........................................................................29
SECTION 4.7. BROKERS, FINDERS AND INVESTMENT BANKERS.............................................................29
SECTION 4.8. DISCLOSURE..........................................................................................30
ARTICLE 5. POST-CLOSING COVENANTS AND ADDITIONAL AGREEMENTS OF SELLER AND
BUYER............................................................................................................30
SECTION 5.1. CONFIDENTIALITY.....................................................................................30
SECTION 5.2. EMPLOYEES...........................................................................................30
SECTION 5.3. REASONABLE EFFORTS; FURTHER ASSURANCES; COOPERATION.................................................30
SECTION 5.4. NONCOMPETE AND NONSOLICITATION......................................................................30
SECTION 5.5. NOTIFICATION.......................................................................................31
ARTICLE 6. DELIVERIES AT CLOSING.................................................................................31
SECTION 6.1. DELIVERIES BY SELLER................................................................................31
SECTION 6.2. DELIVERIES BY BUYER.................................................................................32
ARTICLE 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION.......................................32
SECTION 7.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........................................................32
SECTION 7.2. INDEMNIFICATION BY THE MANAGEMENT SELLERS...........................................................33
SECTION 7.3. APPOINTMENT OF MANAGEMENT SELLERS INDEMNITORS REPRESENTATIVE........................................35
SECTION 7.4. INDEMNIFICATION BY BUYER............................................................................36
SECTION 7.5. LIABILITY LIMITS....................................................................................39
ARTICLE 8. MISCELLANEOUS PROVISIONS..............................................................................39
SECTION 8.1. NOTICES.............................................................................................39
SECTION 8.2. SELLER AND BUYER KNOWLEDGE..........................................................................40
SECTION 8.3. ENTIRE AGREEMENT; MODIFICATIONS AND AMENDMENTS......................................................41
SECTION 8.4. ASSIGNMENT; SUCCESSORS-IN-INTEREST..................................................................41
SECTION 8.5. NUMBER; GENDER......................................................................................41
SECTION 8.6. CAPTIONS............................................................................................41
SECTION 8.7. CONTROLLING LAW; INTEGRATION........................................................................41
SECTION 8.8. SEVERABILITY........................................................................................42
SECTION 8.9. COUNTERPARTS........................................................................................42
SECTION 8.10. ENFORCEMENT OF CERTAIN RIGHTS......................................................................42
SECTION 8.11. WAIVER............................................................................................42
SECTION 8.12. FEES AND EXPENSES..................................................................................42
SECTION 8.13. PUBLIC ANNOUNCEMENTS...............................................................................42
SECTION 8.14. POOLING OF INTERESTS...............................................................................42
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EXECUTION COPY
EXHIBITS
Exhibit A Manner of Issuance of Harbinger Shares
Exhibit B Escrow Agreement
Exhibit C Seller Disclosure Letter
Exhibit D Lancashire Disclosure Letter
Exhibit E Buyer Disclosure Letter
Exhibit F Resigning Officers and Directors
Exhibit G [Reserved]
Exhibit H Noncompetition Agreement
Exhibit I Affiliate's Agreement
Exhibit J [Reserved]
Exhibit K Registration Rights Agreement
